ANNUAL REPORT 2015 TABLE OF CONTENTS

KEGOC, 2015: KEY OPERATIONAL INDICATORS 03 KEY FINANCIAL INDICATORS 04 ABOUT COMPANY 06 LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS 08 LETTER FROM THE CHAIRMAN OF MANAGEMENT BOARD 10 KEY EVENTS IN 2015 12 MARKET OVERVIEW 14

State Regulation and Structure of Power Industry in Kazakhstan 14 Kazakhstan Electricity Market 16 Electricity Balance 21

KAZAKHSTAN POWER SECTOR DEVELOPMENT STRATEGY 27 KEGOC DEVELOPMENT STRATEGY 27

GOAL 1. NPG RELIABILITY 30

Geography of Operations 32 Description of NPG Facilities 34 Dispatch Control Management 35

GOAL 2. NPG DEVELOPMENT 36

Investment Activity 38 Business Outlook 41

GOAL 3. EFFICIENCY IMPROVEMENT 42

Electricity Transmission 44 Technical Dispatch Control 45 Electricity Production and Consumption Balancing 47 Reliability and Energy Efficiency Improvement 48 Electricity Purchase/Sale Activities 49 Innovation Activity 50

01 ANNUAL REPORT

GOAL 4. ECONOMY AND FINANCE 52

Analysis of Financial and Economic Indicators 54 Tariff Policy 58

GOAL 5. MARKET DEVELOPMENT 60

GOAL 6. CORPORATE GOVERNANCE AND SUSTAINABILITY 64

Information on Compliance with the Principles of KEGOC Corporate Governance Code in 2015 66 Shareholders 76 General Shareholders’ Meeting 77 Report on the Board of Directors Activities 2015 77 Management Board 90 Dividend Policy 97 Internal Audit Service (IAS) 99 Risk Management and Internal Control 99 Information Policy 101 HR Policy 102 Environmental Protection 104 Operational Safety 106 Sponsorship and Charity 107

GOAL 7. INTERNATIONAL COOPERATION 108

Collaboration with Power Systems of Other States 110 Professional Association Membership 110

FINANCIAL STATEMENTS 112 APPENDICES 182

Appendix 1. Report on Management of Branches and Affiliates, and Impact of the Financial and Economic Performance of Branches and Affiliates, on KEGOC Performance Indicators in 2015 182 Appendix 2. Corporate Calendar for 2016 184 Appendix 3. Glossary 185

CONTACTS 188

02 / 2015 KEGOC 2015: Key Financial and Operational Indicators

KEGOC, 2015: KEY OPERATIONAL INDICATORS

Transformer capacity, (MVA) 35-1150 kV lines length circuit, (km)

as on 31/12/2015 36,244.55 as on 31/12/2015 24,893.46 as on 31/12/2014 36,244.55 as on 31/12/2014 24,893.53 as on 31/12/2013 35,875.05 as on 31/12/2013 24,533.03 as on 31/12/2012 35,535.65 as on 31/12/2012 24,427.74

Electricity supplied to the grid (million kWh) Technological losses of electricity for transmission in the network, (million kWh)

in 2015 40,092.9 in 2015 2,439.6 in 2014 42,812.8 in 2014 2,576.1 in 2013 43,460.3 in 2013 2,387.4 in 2012 46,244.9 in 2012 2,645.0

Technological losses of electricity for transmission Electricity transmission, (million kWh) in the network (% of electricity supplied to the network)

in 2015 6.08 in 2015 37,897.0 in 2014 6.02 in 2014 40,236.7 in 2013 5.49 in 2013 41,055.4 in 2012 5.72 in 2012 43,487.1

03 KEGOC 2015: Key Financial and Operational Indicators ANNUAL REPORT

Technical dispatching, (million kWh) Electricity balancing, (million kWh)

in 2015 82,808.9 in 2015 157,038.1 in 2014 85,418.3 in 2014 160,464.6 in 2013 83,863.4 in 2013 153,521.4 in 2012 83,511.7 in 2012 152,908.9

KEY FINANCIAL INDICATORS

Operating income , KZT million Net income, KZT million

in 2015 110,061.5 in 2015 -7,779.6 in 2014 93,519.8 in 2014 8,616.0 in 2013 73,811.7 in 2013 -14,500.3 in 2012 65,855.2 in 2012 6,941.0

EBITDA*, KZT million Total value of assets, KZT million

as on 31/12/2015 48,137 as on 31/12/2015 595,336.61 as on 31/12/2014 24,804 as on 31/12/2014 549,928.04 as on 31/12/2013 20,202 as on 31/12/2013 367,321.73 as on 31/12/2012 17,862 as on 31/12/2012 232,404.84

* EBITDA is calculated as operating income less operating expenses excluding depreciation.

04 / 2015 KEGOC 2015: Key Financial and Operational Indicators

Borrowed capital, KZT million Equity, KZT million

as on 31/12/2015 171,230.54 as on 31/12/2015 340,976.61 as on 31/12/2014 107,596.41 as on 31/12/2014 359,777.47 as on 31/12/2013 92,541.27 as on 31/12/2013 221,181.46 as on 31/12/2012 80,808.81 as on 31/12/2012 126,560.04

Change in weighted average price of share in 2015, KZT 765.83 741.56

667.15

550.95 544.34

489.84 466.86 474.78

424.68 409.14 410.39

344.48 30 Jan 27 Feb 31 Mar 30 Apr 29 May 30 June 31 July 28 Aug 30 Sep 30 Oct 30 Nov 31 Dec

Any information concerning the plans referred to in this Annual Report, is forward-looking and reflects the current views of KEGOC with respect to future events and is exposed to certain risks, uncertainties and assumptions relating to the business, financial condition, operating results, growth strategy and liquidity of KEGOC.

05 About Company ANNUAL REPORT

About company

Kazakhstan Electricity Grid Operating hereinafter referred to as People’s Company (KEGOC) joint-stock IPO Programme), KEGOC conducted company operates the National Power an initial public offering of ordinary Grid (NPG) of Kazakhstan and is the shares of the Company on the System Operator of the Kazakhstan Kazakhstan stock market through Unified Power System. subscription. The number of the KEGOC was established as a ordinary shares of KEGOC on the joint-stock company (JSC) on 28 Kazakhstan securities market was September 1996 in accordance with twenty-five million nine hundred and Resolution of the Government of ninety-nine thousand nine hundred Kazakhstan No. 1188 On Certain and ninety-nine (25,999,999). The Measures to Restructure Kazakhstan price of one ordinary share of KEGOC Power System Management. Until was five hundred and five (505) tenge. 2006, 100 % of KEGOC shares were Registered address: 59 Tauyelsizdik owned by the Government. In 2006, Ave, Astana, Kazakhstan. state share (100%) was transferred to The main services are as follows: Samruk JSC (the Kazakhstan holding • the electricity transmission via company for management of public trans-regional networks; assets) as a payment for the placed • technical dispatching of the shares. In 2008, Samruk-Kazyna electricity supply to the grid and JSC (the sovereign wealth fund) was electricity consumption; established through merger of Kazyna • balancing of electricity production JSC (the sustainable development and consumption. fund) and Samruk (Kazakhstan The above mentioned services fall holding for management of state under the sphere of natural monopoly; assets). Samruk-Kazyna became a and thus KEGOC operations are legal successor of Samruk. regulated by the Law of the Republic On 18 December 2014 under the of Kazakhstan On Natural Monopolies Programme for public offering of and Regulated Markets. shares of subsidiaries and affiliates of Samruk-Kazyna Sovereign Wealth Fund on the stock market (approved by Resolution No. 1027 of the Government of Kazakhstan dated 8 September 2011 and

06 / 2015 About Company

07 Letter from the Chairman of the Board of Directors ANNUAL REPORT

Letter from the Chairman of the Board of Directors

supports renewable energy sources in (Semey) – Aktogai – Taldykorgan – the Republic of Kazakhstan. Alma Construction Project. The company also maintains parallel The financial position of the Company operation of Kazakhstan Unified is stable. KEGOC’s management Power System with the power systems optimizes operational and of the Russian Federation and Central administrative expenses. As a result, Asian countries to increase the even in 2016 and in the medium term reliability of power supply in all the the Company expects significant country’s economic sectors. positive changes in its financial KEGOC upgrades existing and indicators. constructs new high-voltage One of the financial position networks and implements a number stabilizing activities is the cap tariffs of major investment projects aimed and tariff estimates for KEGOC’s to ensure energy independence of regulated services approved for 2016- Kuanysh Bektemirov, Kazakhstan and develop the National 2020 by the Committee on Regulation Chairman of KEGOC Board Power Grid. of Natural Monopolies and Protection of Directors Project for Construction of 500 of Competition under the Ministry of kV Second Transmission Line of National Economy of the Republic of Kazakhstan North-South Transit, Kazakhstan in 2015. They shall come The National Power Grid (NPG) is the Moinak Electricity Transmission into effect from 01 January 2016. backbone of the Kazakhstan Unified Project, Alma Electricity Transmission As a People’s IPO programme Power System (UPS). It is operated Project and Ossakarovka participant the Company fully met by Kazakhstan Electricity Grid Transmission Rehabilitation Project, the expectations of Samruk-Kazyna Operating Company (KEGOC) joint- etc. have already been implemented. major shareholder and more than stock company. KEGOC is one of key In 2016, the Company will proceed 40 thousand Kazakhstanis who power companies not only in Samruk- with the following projects: became KEGOC’s shareholders. Kazyna group, but in the Republic of Kazakhstan Electricity Transmission Minority shareholders have been paid Kazakhstan on the whole. Rehabilitation Project, Phase II, dividends twice already. KEGOC is a System Operator of Pavlodar Electricity Transmission In the reporting period the Company the Kazakhstan UPS. KEGOC deals Reinforcement Project, 500 kV launched the Business Transformation with transmission, dispatching and Ekibastuz – Shulbinsk HPP (Semey) Programme. In 2016 the Company balancing of electricity generation – Ust-Kamenogorsk Construction plans to focus on achieving the key and consumption. As an operator, it Project and 500 kV Shulbinsk HPP results of the Programme Roadmap.

08 / 2015 Letter from the Chairman of the Board of Directors

The Programme is expected to Meeting, the Board of Directors and enhance KEGOC’s performance the Management Board). This helps through improved organizational KEGOC to efficiently and promptly structure and operating model based govern the Company and achieve the on the best international practices set goals. requirements. Over the last three years KEGOC has been the best among Samruk- Kazyna’s subsidiaries on the Social Stability Rating (82%) and the Personnel Engagement Index (68%). These figures prove once again that the policy on human resources and personnel social stability is efficient. The Company is a strong leader in the Corporate Governance Rating. According to 2015 diagnostics results, KEGOC’s corporate governance rating was 85%. One of the Company’s corporate governance strengths is the efficient and experienced membership of the Board of Directors represented by six directors. Four of the directors are independent and have an extensive background in electric power industry. Such experience and expertise will help the Company to cope with different issues, facilitate more effective development and achieve strategic goals and objectives. Additionally, the Company clearly segregated the competence of bodies (General Shareholders’

09 Letter from the Chairman of Management Board ANNUAL REPORT

Letter from the Chairman of Management Board

amounting to 37,897.0 million kWh. Transmission Project. This project is This is 1,757.8 million kWh or 4.4% the largest in KEGOC’s development lower than the planned targets. The history. In 2016 the Company plans volume of technical dispatching of to disburse capital investments to electricity supplied to the grid and the amount of KZT 43.8 billion as consumption made 82,808.9 million part of the Company’s investment kWh. This is 1,600.1 million kWh or programme. 1.9% lower than the planned targets. The Company’s management also The volume of electricity generation prioritize social and labour relations. and consumption balancing made For this purpose KEGOC creates 157,038.1 million kWh. This is 3,822.6 comfortable and safe working million kWh or 2.4% lower than the environment and implements social planned targets. The planned targets programmes governed by the were not achieved due to reduced collective agreement. The employees Bakytzhan Kazhiyev, service volumes for Kazakhstan are socially supported in different Chairman of KEGOC wholesale market participants, lack ways. The Company conducts Management Board of planned electricity export to the KEGOC’s Dynasties, Best Mentor of Russian Federation and decreased the Year contests and other socially electricity generation and supply significant events to promote the The last year 2015 was challenging to network by energy producing Power Engineer profession. The for KEGOC just like for all Kazakhstan organizations. success of the conducted social policy economic sector participants. As part of KEGOC’s Long-Term is proved by a high Social Stability However, despite the negative Development Strategy, the Company Rating (82%) and the Personnel challenges KEGOC has successfully ensures the adequate interconnection Engagement Index (68%). For the met the major objective: ensured capacity and reliability. In particular, third year now KEGOC has been a reliable and uninterrupted power as instructed by the head of the state, leader by the figures among Samruk- supply to Kazakhstan enterprises and the Nurly Zhol programme covers the Kazyna subsidiaries. people as a System Operator of the construction of Ekibastuz – Shulbinsk The company will further focus on Unified Power System of the Republic HPP (Semey) – Ust-Kamenogorsk and social issues. In particular, in 2016 it is of Kazakhstan. Shulbinsk HPP (Semey) – Aktogai – planned to complete the construction The reporting period showed the Taldykorgan – Alma high-voltage of kindergarten for 240 children in actual services for transmission of lines being a part of large-scale 500 Astana. electricity via interregional networks kV North-East-South Electricity In 2015 KEGOC became public for

10 / 2015 Letter from the Chairman of Management Board

the first time, after share placement (Germany). on the Kazakhstan Stock Exchange In 2015 the Company launched the in December 2014. Currently Business Transformation Programme KEGOC’s shares are among the most initiated by Samruk-Kazyna. The marketable on the domestic stock transformation is preconditioned by market. Even though the analysts the Kazakhstan-2050 Strategy of forecasted the share price increase the head of the state, key objective up to KZT 740 in the first-half 2016 of which is to join the top thirty most only, this forecast was achieved in competitive countries in the world. November 2015 already. The business transformation requires I believe that KEGOC’s shares parallel change of business processes, are deemed to be attractive technologies and key competencies first considering the Company’s of the company’s personnel. The transparency and stability. This is, integrated development of the three in turn, results from a high corporate components is expected to ensure governance level (85%) based on the further sustainability of the company. 2015 diagnostics. The programme will improve In 2015 KEGOC successfully passed company’s operational and financial the witness audit of the Integrated profile at the level of the advanced Management System, which confirmed power operators, ensure efficient use the compliance with the requirements of latent reserves, focus resources of international standards for quality on business areas with high cost management systems (ISO 9001: increase potential, increase labour 2008), environmental management productivity and implement the systems (ISO 14001: 2004) and health advanced management practices and and safety management systems technologies. Such changes together (OHSAS 18001:2007). Moreover, are expected to help KEGOC be more in the reporting year KEGOC first sustainable and promptly respond certified its information security to potential changes in external and management system in compliance internal factors. with the requirements of the ISO/IEC 27001 international standard. The certification body is TUV NORD CERT

11 Key Events in 2015 ANNUAL REPORT

Key events in 2015

Bakytzhan Kazhiyev, the Chairman of KEGOC Management Board, met with the employees 18 February to report on the results of operations in 2014 and plans for the coming year.

The Company management and the Ministry of Energy of the Republic of Kazakhstan met 26 February with veteran engineers of the country’s power industry at KEGOC’s head office.

The first Annual General Meeting of KEGOC Shareholders took place and approved the 30 April annual financial statements, distribution of the net profit, decision to pay dividends on ordinary shares, and the amount of the dividend per one ordinary share of KEGOC for 2014.

KEGOC declared commencement of KEGOC Business Transformation Programme aimed to 13 May improve the efficiency of its activities.

Results of the KEGOC’s Dynasties contest initiated and first conducted in 2012 were 15 May summarized.

Participation in VIII Astana Economic Forum ‘Infrastructure: the Driver of Sustainable 21-22 May Economic Growth’.

KEGOC paid dividends on ordinary shares following 2014 in the amount of eight billion six 25 May hundred and thirteen million eight hundred thousand (8,613,800,000) tenge.

Participation in the 47th meeting of the CIS Electric Power Council, Yerevan (Republic of 26 May Armenia).

The Committee on Regulation of Natural Monopolies and Protection of Competition under 21 September the Ministry of National Economy of Kazakhstan approved cap tariffs of Kazakhstan Electricity Grid Operating Company (KEGOC) JSC for 2016-2020.

12 / 2015 Key Events in 2015

Participation in XII International competition to test the professional skill of electric power industry experts from CIS countries – International repair and maintenance competition for 21–26 September 110 kV and higher electricity transmission lines in Brest (Belarus). The team of Akmolinskiye MES branch took the second place.

The extraordinary general meeting of shareholders approved the new revised versions 16 October of the Regulations on the General Meeting of KEGOC Shareholders, Charter, Corporate Governance Code and the Regulations on KEGOC Board of Directors.

23 October Participation in the 48th meeting of the CIS Electric Power Council in Almaty.

Participation in the 14th Kazakhstan International Exhibition and Forum – Power 27-29 October Kazakhstan, Almaty

London held the Kazakh-British Business Council. The meeting resulted in signing 3 November Memorandum of Understanding between KEGOC JSC and Enzen Global Ltd.

Мeeting of the Board of Directors and the Management Board of KEGOC with talent pool of 27 November the company – TOP-25;

KEGOC paid dividends on KEGOC’s ordinary shares following the first-half 2015 in the amount of two hundred and forty-four million three hundred and ninety-nine thousand nine hundred and ninety tenge sixty tiyn (KZT 244,399,990.60). 7 December On 31 December 2015 KEGOC agreed with Samruk-Kazyna, the major shareholder, that KEGOC will postpone payment of two billion one hundred and ninety-nine million six hundred thousand nine tenge forty tiyn (KZT 2,199,600,009.40) of dividends for the first half of 2015 to Samruk-Kazyna on the ordinary shares of KEGOC to 31 December 2016.

13 Market Overview ANNUAL REPORT

Market overview

State Regulation and owning and managing the national The backbone grid in Kazakhstan Structure of Power companies in various spheres of UPS is the National Power Grid Industry in Kazakhstan economy, including electric power (NPG) providing electric connections industry, telecommunications, transport between the regions of the country and The Unified Power System (UPS) and national development institutes. power systems of the neighbouring of Kazakhstan is a combination of KEGOC is a subsidiary of Samruk- countries (the Russian Federation, power plants, transmission lines and Kazyna. the Kyrgyz Republic and the Republic substations, providing reliable and Electric Power Industry of Kazakhstan of Uzbekistan) and enables the power quality power supply to consumers in has the following sectors: plants to supply electricity and the country. • electricity generation; deliver it to the wholesale consumers. The main policy-maker in the electric • electricity transmission; KEGOC owns 220 kV and higher power industry is the Government of • electricity supply; voltage substations, switchgears, Kazakhstan. • electricity consumption; interregional and/or interstate The Ministry of Energy of • other activities in the sphere of the transmission lines being a part of Kazakhstan is the public authority to electric power industry. the NPG including lines used for manage the industry. connection of power plants. Supervision and control of the Electricity Electric networks of regional industry is in the hands of the Generation Sector importance provide electric public authority for state energy connections inside the regions supervision and control: the In Kazakhstan, electricity is produced and deliver electricity to the retail Committee of Nuclear and Energy by 119 power plants of different consumers and belong to and are Supervision and Control under the forms of ownership. As of 1 January being operated by the regional Ministry of Energy of Kazakhstan. 2016, the total installed capacity electric network companies (REC). The Committee on Regulation of of the power plants in Kazakhstan There are 29 RECs in Kazakhstan. Natural Monopolies and Protection is 21,307.2 MW; and the available Power transmission organizations of Competition under the Ministry capacity is 17,503.5 MW. transfer electricity using their own of National Economy of the Republic or user’s power networks (rent, of Kazakhstan is the state authority Electricity lease, trust management and other to manage and regulate the state Transmission Sector types of use) based on the contracts monopoly activities (including KEGOC with the wholesale and retail market as a natural monopoly) and manage the Electrical networks of Kazakhstan consumers or energy supplying protection of competition and restriction include 0.4 – 1150 kV substations, organizations. of monopolistic activity. switchgears and connecting power Samruk-Kazyna Sovereign Wealth lines used for transmission and/or Electricity Fund is a public holding company distribution of electricity. Supply Sector

14 / 2015 Market Overview

The power supply sector on the Kazakhstan Electricity Association and scientific-research activity with electricity market of Kazakhstan of Legal Entities. The Association the Kazakhstan community. include power supply organisations, members are the energy producing Atameken National Chamber of which purchase electricity directly organizations and consumers being Entrepreneurs of the Republic Ka- from power generators or at the the participants of the Kazakhstan zakhstan is a non-profit organization centralized auctions and further sell wholesale electricity and capacity established on 9 September 2013 by it to the end retail consumers. Some market. The main tasks of the Associ- the joint decision of the Government of power supply organisations are the ation are as follows: support all sector of Kazakhstan and Atameken Union ‘guaranteed suppliers’ of electricity. organizations; participate in elabora- to enhance the negotiation power tion of state programmes, laws and of business with Kazakhstan Gov- Other Activities in Power regulatory acts relating to power in- ernment and public authorities. The Industry dustry; support and protect its mem- Chamber of Entrepreneurs represents bers’ positions in issues where sector the interests of small, medium and For the purpose of construction and interests depend on the decisions of large businesses and covers all areas commissioning of power facilities, the Government, judicial and other of business, including internal and ex- individual installations and special authorities. ternal trade. repair services the electricity market KAZENERGY Kazakhstan Associa- The main task of the Atameken Na- entities engage construction and in- tion of Oil, Gas and Energy Organi- tional Chamber of Entrepreneurs is stallation organizations and special zations is an independent non-com- protection of the rights and interests repair enterprises. mercial union, which is challenged of the business, ensuring wide cover- Research and design institutes, such as to create favorable conditions for the age and involvement of all entrepre- KazNIPIEnergoprom, Energiya, Kaz- dynamic and sustainable develop- neurs in the process of formation of SelEnergoProyekt, Chokin KazNII ener- ment of the fuel and energy sector of legislative and other regulatory rules getiki and Almaty University of Power the Republic of Kazakhstan. Aims of for business. Engineering & Telecommunications are the Association are as follows: rep- Kazakhstan Electric Capacity Re- engaged in research and design devel- resent interests and protect rights at serve Pool (ECR Pool) was estab- opments in power industry, market re- state bodies; harmonize legislative lished by the participants of Kazakh- searches and forecasting, managing the framework; create a unified informa- stan electricity market. The main issues of adopting new energy-efficient tion network for subsoil users, power purpose of the Pool is to provide and environmentally friendly technol- generation companies, transporters contract-based capacity reserves to ogies for power generation and supply. and consumers of goods and services secure uninterrupted power supply to KEGOC is a member of Kazakhstan Elec- of the energy sector; develop and sup- the consumers, founders of the Pool, tricity Association, KazEnergy Associ- port industry-specific cooperation in case of unforeseen failures of gen- ation, Atameken National Chamber of and entrepreneurship projects; stimu- erating capacity and outages of trans- Entrepreneurs and ECR Pool. late economic, social, environmental, mission lines in Kazakhstan.

15 Market Overview ANNUAL REPORT

Kazakhstan Electricity Market

Decentralized electricity market

Retail electricity market Centralized electricity market market Real-time balancing market E lectricity

System and ancillary Wholesale electricity market service market

Capacity market

16 / 2015 Market Overview

The electricity market has two levels: market entities in order to ensure networks and buy electricity on the wholesale and retail. compliance with the state standards wholesale electricity market with The functional design of the wholesale established for reliable operation of a view to resale it in the amount electricity market in Kazakhstan Kazakhstan UPS and electric power of not less than 1 MW of the daily includes: quality. average (baseline) capacity; • Decentralized electricity market • Capacity market operating to • consumers who buy electricity (bilateral contracts for electricity attract investments in the new on the wholesale market in the purchase and sale); electrical capacity that is sufficient amount of not less than 1 MW of the • Centralized electricity market, to meet the demand for electricity daily average (baseline) capacity; which is based on purchase and sale and to maintain the forecasted • the System Operator, which of electricity for short-term (spot- level of the electric capacity in the is Kazakhstan Electricity Grid trade), mid-term (week, month) and UPS of Kazakhstan. Pursuant to Operating Company (KEGOC); long-term (quarter, year) period; Order of the Minister of Energy No. • the operator of the centralized • Real-time balancing market 676 dated 30 November 2015 the electricity trading market, which is operating for physical and capacity market is planned to be KOREM; subsequent financial settlement commissioned on 1 January 2019. • the financial settlement centre of hourly imbalances arising The physical settlement on the for support to renewable energy within the operating day between balancing market of imbalances sources; actual and contractual generation will be the responsibility of the • the national operator. and consumption of electricity System Operator, and the financial The Ministry of Energy of Kazakhstan in the Unified Power System of settlement of imbalances will be the (Order No. 61 dated 17 October Kazakhstan with the reference responsibility of the Financial Centre. 2014) assigned KEGOC the System generation and consumption The Financial Centre on the balancing Operator of UPS of Kazakhstan, with schedule approved by the System electricity market is EnergoInform the following functions: Operator. Currently the balancing JSC. • render electricity transmission electricity market in Kazakhstan The participants of the wholesale system services using the NPG; operates in simulation mode (up to electricity market are: service the NPG and ensure its 1 January 2019 in accordance with • power generating organisations operational availability; Order of the Minister of Energy No. that supply electricity to the • render centralised operational 676 dated 30 November 2015). wholesale market in the amount dispatch control system services • System and ancillary service of not less than 1 MW of the daily to control the operational modes market, where the System Operator average (baseline) capacity; of Kazakhstan UPS including renders the system services and • power transmission organizations; actual energy balance reports acquires the ancillary services • power supply organizations that and daily electricity production- from the Kazakhstan electric power do not have their own electrical consumption schedule;

17 Market Overview ANNUAL REPORT

• ensure reliability of Kazakhstan national power grid; of Kazakhstan UPS is performed UPS; • provide the participants of the by KEGOC’s branch, the National • render system services on wholesale electricity market of Dispatch Centre of the System balancing electricity generation- Kazakhstan with the information Operator (NDC SO). The centralized consumption; except for any commercially operational and dispatch control in • perform financial settlement sensitive data or any other secret Kazakhstan UPS is organised as direct of electricity imbalances as protected by the law; operational subordination of nine established by the Laws of • coordinate the dates of the repair regional dispatch centres (RDCs) to Kazakhstan; withdrawal of the main equipment NDC SO; these RDCs are the structural • determine the volume, structure of power plants, substations, subdivisions of KEGOC branches: and distribution of capacity transmission lines, relay protection Interconnection Electric Networks reserves among power generating devices and emergency control (MES branches). organisations and engagement of automatics, process management The centralized dispatch control in capacity reserves in Kazakhstan systems and ensure their UPS of Kazakhstan includes: UPS; availability; • Management of the operation • manage the operation of the real • participate in planning of the hydro modes of production, transmission time electricity balancing market, power plants operation subject to and consumption of electricity in the market of system and ancillary their water economy balances and the UPS of Kazakhstan in line with services; operational modes of Kazakhstan the contracts for electricity sale, • interact with power systems of UPS; electricity transmission, power neighbouring states in terms • develop electricity and capacity control, balancing of electricity of management and stability of balance forecasts; generation and consumption; parallel operation modes and • organize the operation of the • Control of interstate power flows; regulation of electric capacity; capacity market; • Prevention, confinement and • perform technical and methodical • carry out certification of generating elimination of disturbances in the management in forming the units electric power; UPS of Kazakhstan; unified informational system, • provide information about agreed • Operational control of the capacity commercial metering system, power delivery designs to the reserves in the UPS of Kazakhstan; related relay protection and authorized body on a quarterly • Determination of the structure, emergency automation devices for basis; principles, locations, volumes all participants of the wholesale • perform other functions as defined and settings of relay protection, electricity market; in the Law of the Republic of emergency and energy • ensure equal conditions for the Kazakhstan promoting the use of management automation participants of the wholesale renewable energy sources. systems that ensure secure and electricity market to access the The centralized dispatch control sustainable operation of the UPS

18 / 2015 Market Overview

of Kazakhstan. electricity market. established by KEGOC in accordance • Compilation and approval of the The centralised purchase and sale of with Law of the Republic of daily electricity generation and the electricity produced by renewable Kazakhstan On Support of Renewable consumption schedules in the UPS energy facilities and delivered to the Energy Sources in 2013. of Kazakhstan; electric networks of Kazakhstan UPS • Drafting of the actual electricity is ensured by Financial Settlement generation and consumption Centre for Support to Renewable balance for the wholesale Energy Sources LLP. The Centre was

Electricity production and consumption balancing

Thermal and Energy supplying gas-turbine organisations power plants

Hydro-power Energy plants transmission organizations

Wind power Large industrial plants consumers ELECTRICITY GENERATION ELECTRICITY ELECTRICITY TRANSMISSION ELECTRICITY

Foreign power Foreign power

plants CONSUMPTION AND SUPPLY DISTRIBUTION, systems

Technical dispatch of supply to the grid and consumption

19 Market Overview ANNUAL REPORT

The Market Operator of the provides open, non-discriminatory centralized electricity trading access for the electricity market responsible for the operation of the participants and unbiased current centralized trade market is KOREM electricity market price signals. JSC. The centralised trade market

The Model of the Current Wholesale Electricity Market in Kazakhstan

Committee for Regulation of Natural Monopolies Ministry of Energy and Competition Protection under Kazakhstan of the Republic of Kazakhstan Ministry of National Economy

Physical Information supplies of flows Reserve POOL electricity Centralised auction Backup for accidental operator outages KOREM JSC System Operator Management and operation of the National Power Grid and provision of system services relations relations Contractual Contractual Contractual of electricity of electricity of electricity of Physical supplies Physical supplies Physical supplies Physical Contractual relations Electricity sellers Electricity buyers

Power producing organizations Energy supplying of national importance Contractual organisations (ESO) relations Industrial power plants Distribution companies (REC) Regional power producing organisations

Power systems Direct consumers of neighbouring states

20 / 2015 Market Overview

Electricity Balance

Electricity Production

Electricity generation in 2015 in Kazakhstan was 90,796.6 million kWh, including:

thermal power plants (TPP) 74,091.8 million kWh

hydro power plants (HPP) 9,250.3 million kWh

gas-turbine power plants (GTPP) 7,279.5 million kWh

wind farms 130.2 million kWh

solar power stations (SPS) 44.8 million kWh

Electricity Generation in Kazakhstan in 2015 thermal plants power hydro power plants power hydro gas-turbine plants power wind farms solar power solar stations 100% 8.0% 10.2% 81.6% 0.14% 0.05%

21 Market Overview ANNUAL REPORT

Compared to 2014, the highest electricity generation increase was at:

Kazakhmys Energy LLP GRES power plant by 525.7 million kWh or 11.4%

Zhambyl GRES by 352.2 million kWh or 14.0 %

PavlodarEnergo JSC CHPP-3 by 307.0 million kWh or 11.6%

Kazakhmys Energy LLP Balkhash CHPP by 265.2 million kWh or 57.9%

Kazakhmys Energy LLP Zhezkazgan CHPP by 101.3 million kWh or 11.4%

Aluminium of Kazakhstan JSC CHPP-1 by 165.0 million kWh or 7.2%

Astana-Energiya JSC CHPP-2 by 178.9 million kWh or 7.8%

Arcelor Mittal Temirtau JSC plant by 80.1 million kWh or 3.1%

Overall electricity production in 2015, The electricity output at steam power as compared to 2014, decreased by plants in Kazakhstan decreased by 3,138.6 million kWh or 3.3%. 4,681.1 million kWh (5.9 %).

Compared to 2014, the highest electricity generation decrease was at:

Ekibastuz GRES-123 by 3,367.6 million kWh or 23.9%

EEK JSC by 1,733.0 million kWh or 10.6%

Ekibastuz GRES-2 power station JSC by 1,543.9 million kWh or 32.5%

3-Energoortalyk JSC by 322.4 million kWh or 42.7%

CHPP of SSGPO JSC by 172.8 million kWh or 10.8%

Power plant of KazChrome JSC Transnational by 129.3 million kWh or 11.8% Company ferrous alloy plant

22 / 2015 Market Overview

Zhambyl GRES power plant in the Zone The hydropower production in Kazakh- The gas-turbine power production in South of Kazakhstan generated 2,872.7 stan compared to 2014 increased by Kazakhstan increased by 363.3 million million kWh. The contracted electrici- 1,014.5 million kWh or 12.3% to 9,250.3 kWh or 5.3% to 7,279.5 million kWh. ty was delivered by the power plant to million kWh. The profile of Kazakhstan Kyrgyzstan in January-February to the hydropower operations is driven by wa- volume of 293.2 million kWh. ter balance and hydrological conditions.

The structure of electricity generation in Kazakhstan as compared to 2014 is as follows:

2014 2015

Total 100.0% 100.0%

Including TPP 83.8% 81.6%

Hydro 8.8% 10.2%

GTPP 7.4% 8.0%

SPS and Wind Farms 0% 0.2%

Electricity Consumption by 813.7 million kWh or 0.9% and million kWh (2.3 %) and in Zone amounted to 90,847.2 million kWh. North it decreased by 465.7 million In 2015, the consumption of Consumption increased in Zone kWh (0.8%). electricity in Kazakhstan in West by 114.8 million kWh (1.0 %), comparison with 2014 decreased in Zone South it decreased by 462.8

Compared to 2014 consumption increased at:

Kazakhmys Smelting LLP by 274.1 million kWh or 36.8%

Aktobe ferrous alloy plant Transnational Company Kazchrome JSC by 381.1 million kWh or 24.5%

Kazakhstan electrolytic plant by 164.4 million kWh or 5.4%

Aluminium of Kazakhstan JSC by 9.0 million kWh or 1.0%

23 Market Overview ANNUAL REPORT

Electricity consumption decreased at:

Kazphosphate LLP by 195.3 million kWh or 9.2%

Aksu ferrous alloy plant Transnational Company Kazchrome JSC by 85.5 million kWh or 1.5%

Ust-Kamenogorsk Titanium-Magnesium Plant (UKTMK) by 10.8 million kWh or 2.4%

Corporation Kazakhmys LLP by 52.0 million kWh or 3.2%

KazZink JSC by 32.1 million kWh or 1.2%

Sokolovsk-Sarbai mining and processing production enterprise JSC by 571.3 million kWh or 24.3%

Arcelor Mittal Temirtau JSC by 63.2 million kWh or 1.7%

Electricity consumption by zones:

Zone North 60,399.2 million kWh or 66.5%

Zone South 19,393.3 million kWh or 21.3%

Zone West 11,054.7 million kWh or 12.2%

In 2015, compared to 2014, the most newly operated Kazakhmys Smelting (by 253.7 million kWh or 2.8%). significant consumption increase was copper-smelting plant. The electricity consumption dynamics registered in Aktyubinskaya Oblast Maximum consumption reduction by zones and power centres of (by 565.9 million kWh or 13.4%). was registered in Kostanai Oblast (by Kazakhstan compared to the previous One of the reasons is the furnaces 785.6 million kWh or 14.4%) mainly year is given above. put into operation in a new steel due to reduction in consumption melting shop at Aktobe ferrous alloy of Sokolovsk-Sarbai mining and plant. The consumption increased processing production enterprise JSC, at the Zhezkazgan power centre (by Pavlodar Oblast (by 387.6 million 221.4 million kWh or 3.5%) due to kWh or 2.2%), Almaty power centre

24 / 2015 Market Overview

Generation and consumption of electricity, billion kWh

100 generation consumption

93.9 95 91.6 91.9 90.8 90.8 89.6 90

85

80

2013 2014 2015

Power Flows Pursuant to Minutes of 5th supply. In December-February the Meeting of Kazakhstan-Kyrgyz supply amounted to 411.9 million kWh. In 2015, electricity consumption ex- Intergovernmental Council held on On 1 March the supply ceased. ceeded production by 50.6 million kWh. 13 October 2014 to reduce the risk Ekibastuz GRES-1 power plant and The balance flow from Russia made of unstable operation in the power Electric Power Plants OJSC (Kyrgyz 471.4 million kWh (in 2014 the flow supply system of the southern regions Republic) signed electricity purchase to Russia made 1,503.6 million kWh). of Kazakhstan and accumulate water and sale contract in March 2015. The The electricity purchased from Russia in Toktogul water reservoir and in electricity was supplied to Kyrgyzstan made 1,506.0 million kWh, this lower accordance with the agreement of from 17 March to 10 April to the than the 2014 level by 118.4 million the Supreme Interstate Council dated amount of 107.5 million kWh. kWh or 7.3%). The electricity sold to 7 November 2014, Zhambyl GRES Total electricity sold to Kyrgyzstan Russia in 2015 was 1,034.6 million power plant and Electric Power from December 2014 to April 2015 kWh, which is less than in 2014 by Plants OJSC (Kyrgyz Republic) signed made 519.4 million kWh. 2,093.4 million kWh or 66.9%. electricity sale contract for December The Minutes dated 24 June 2015 No unscheduled electricity was 2014, with subsequent extension between the representatives of water- supplied from KEGOC to Uzbekenergo in the coming months. Electricity economy and power authorities in 2015 (vs. 652.029 million kWh in supplies to Kyrgyzstan began on of the Republic of Kazakhstan and 2014). 1 December equivalent to the gas the Kyrgyz Republic provided for

25 Market Overview ANNUAL REPORT

electricity supply from Kyrgyzstan to electricity from Kyrgyzstan with Kazakhstan up to 400 million kWh further return, to the amount of 249.5 to additionally discharge water from million kWh. Toktogul water reservoir for irrigation needs in south of Kazakhstan. From 1 July to 11 August the consumers of Kazphosphate OJSC, ZhambylZharykSauda-2030 LLP and Temirzholenergo LLP received

Export and import of electricity, billion kWh

5

4.4 export

4 import 4

3

2.1

2 1.7 1.6 1.7

1

2013 2014 2015

* Dynamics data for electricity export-import for 2013 and 2014 adjusted depending on balancing market volumes from the Russian Federation.

26 / 2015 Kazakhstan Power Sector Development Strategy / KEGOC Development Strategy

KAZAKHSTAN POWER SECTOR DEVELOPMENT STRATEGY

Resolution of the Government of • ensure energy security of the • intensively develop the fuel and the Republic of Kazakhstan No. 724 country by increasing self- energy sector by utilizing the dated 28 June 2014 approved the sufficiency in resources and FEC technologies of the XXI century; concept of development of the fuel products; • actively involve renewable energy and energy complex of Kazakhstan • increase geopolitical influence in and alternative energy sources in until 2030 that links into a single the region by addressing energy the energy mix; whole the development of oil and gas, consumption growth in the • energy and resource conservation, coal, nuclear and electricity industries economies of the region; energy efficiency. using the best international practices • develop the economic potential of and the latest trends in the global the country; energy industry. • develop human potential; The concept of the fuel and energy • improve safety and reliability of complex (FEC) includes the following electrical equipment and power tasks: facilities;

KEGOC development strategy

The long-term development strategy Mission of the Company is to ensure economic, environmental and of KEGOC is based on the Government the reliable operation and effective occupational health-and-safety plans and programmes and defines development of Kazakhstan Unified requirements. the key strategic goals and objectives Power System (UPS) in accordance Vision – by 2025, KEGOC will of KEGOC development. with state-of-the-art technical, become a world-class company and

27 KEGOC Development Strategy ANNUAL REPORT / 2015 KEGOC Development Strategy

the regional centre of expertise in the power industry. The long-term development strategy GOAL 3 GOAL 5 GOAL 7 of the Company defined strategic goals up to 2025: Improve performance of the Company Improve and increase the efficiency of Achieve stable partnership (PERFORMANCE IMPROVEMENT) the electricity market in Kazakhstan relations with electricity companies through the development and im- (MARKET DEVELOPMENT) through of the neighbouring countries plementation of innovations; intro- the development of the company’s (INTERNATIONAL COOPERATION) duction of advanced management functions to organize centralized i.e. cooperation with electric utilities methods; implementation of plans for electricity market and establish of the neighbouring countries; GOAL 1 energy efficiency. the financial settlement centre to protecting the interests of the UPS of support renewable energy, launch Kazakhstan in the relationship with Ensure reliable operation of the the balancing energy market with the energy of neighbouring countries; Kazakhstan National Power Grid (NPG) the implementation of the financial assistance in creation of the common in accordance with the requirements settlement of imbalances of electric energy market of the CIS countries of the country (NPG RELIABILITY), energy and launch the capacity within the framework of ongoing i.e., ensure the reliability of operation, market. integration process, the Customs modernization of the outdated, and Union and the Single Economic Space. quality maintenance and operation of the existing assets. GOAL 4

Ensure the growth of shareholder’s value (ECONOMICS AND FINANCE) by optimizing costs, taking an active GOAL 6 part in tariff setting process, and by improving the customer service. Develop corporate governance and ensure sustainable development (CORPORATE GOVERNANCE. SUSTAINABLE DEVELOPMENT). GOAL 2 i.e. secure and protect the rights of shareholders, develop professional Develop the National Power Grid capacity of the staff, ensure safe for the growth of the Company’s working environment, minimize business and in accordance with the the environmental impact. Being needs of the economy of Kazakhstan the member and supporting (NPG DEVELOPMENT) through the the principles of the UN Global construction of new transmission lines Compact, our Company is aware and substations to meet the growing of its responsibility to society, its electricity demand of the economy and employees and future generations. population.

28 29 NPG Reliability ANNUAL REPORT / 2015

The high voltage lines and electric power substations ensure the cross- Goal 1 border electric power flows, transmit electric power from power plants and connect the regional power companies and major consumers NPG RELIABILITY

The main asset of the Company is a / National Power Grid comprising 24,893.46 km of 35-1150 kV high voltage electricity transmission lines and 77 electric power substations with the installed transmission capacity of 36,244.55 MVA Goal 1 NPG Reliability ANNUAL REPORT

Kurgan Tavricheskaya Geography of Operations Chelyabinsk

Barnaul Irtyshskaya KEGOC operates throughout the territory OHTL 10-1150 kV of the Republic of Kazakhstan. The Altay 4,230 km of OHTL Company’s structure includes nine MES Russia OHTL 0,4-1150 kV branches located throughout Kazakhstan Rudniy 3,379 km of OHTL and NDC SO (National Dispatch Centre of Akmolinskiye MES the System Operator). BAES OHTL 6-1150 kV 2,444 km of OHTL Severnye MES MES branches render system services in Rubtsovsk operational control of the branch. 10 SS 220-1150 kV Ekibastuz N. Troitsk Sarbaiskiye The NDC SO performs the centralized 8,137 MVA dispatch control of the Unified Power System MES 8 SS OHTL 10-500 kV OHTL 0,4-500 kV (UPS) of the Republic of Kazakhstan. The 110-1150 kV 967 km of OHTL Astana 1,045 km of OHTL centralized operational and dispatch control Aktobe 3,521 MVA in Kazakhstan UPS is organised as direct 8 SS operational subordination of nine regional 220-1150 kV Ust-Kamenogorsk 6,820 MVA dispatch centres (RDCs) to NDC SO; these Aktyubinskiye MES RDCs are the structural subdivisions of Karaganda Vostochnye MES KEGOC MES branches.

5 SS Zapadnye MES OHTL 10-500 kV The main asset of the Company is the 7 SS 220-500 kV National Power Grid comprising 24,893.46 Atyrau 220-500 kV 3,482 km of OHTL Tsentralnye MES 3,027 MVA km of 35-1,150 kV high voltage electricity 2,426 MVA transmission lines 10 SS 220-500 kV 35-1150 kV 3,742 MVA 24,893.46 km OHTL 0,4-500 kV OHTL 6-330 kV and 77 electric power substations with the 967 km of OHTL 1,682 km of OHTL installed transmission capacity of 36,244.55 OHTL 220-500 kV MVA 4,201 km of OHTL Almatinskiye 11 SS 5 SS Yuzhnye MES 35-500 kV 77 SS 220 kV MES 4,229 MVA 36,244.55 МVА 950 MVA 13 SS 220-500 kV Almaty They are designed to ensure the cross-border UZbekistan 3,395 MVA China electric power flows, transmit electric power from power plants and connect the regional power companies and major consumers. Shimkent

Kyrgyzstan

Turkmenistan

32 33 Goal 1 NPG Reliability ANNUAL REPORT

BRANCHES

Akmolinskiye MES

Aktyubinskiye MES

Almatinskiye MES

Vostochnye MES

Zapadnye MES

Sarbaiskiye MES

Severnye MES

Tsentralnye MES

Yuzhnye MES

NDC SO

Branches and Affiliates

EnergoInform 100%

FSC RES

Batys Transit 20%

Representative office in Almaty

Description of NPG Facilities

5 МVА 1 Quantity 110 kV SS 2 54 and capacity of KEGOC 23 МVА 3 substations as 35 kV SS 17 of 31 December 2015 9,384 МVА 500 kV SS

15,446 МVА 11,386 МVА 500 kV SS 220 kV SS

34 / 2015 NPG Reliability

Lenght of KEGOC OHTLs, km

35 kV 44

110 kV 353

220 kV 14,511

330 kV 1,759

500 kV 6,805

1150 kV 1,421

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

KEGOC substations have in total: kV (air-blast, oil, SF6, vacuum) regions of the Kazakhstan UPS in • 271 power transformers and (including 94 on the balance sheet cooperation with the dispatchers of SO autotransformers of 1,150-10 kV of third party organisations); UPS of Siberia Dispatch Control, Ural (including six transformers on the • 115 devices and tools for the Dispatch Control, Mid-Volga Dispatch balance sheet of Batys Transit JSC, treatment of solid insulation and Control, Southern Dispatch Control, one on the balance sheet of PO transformer oil. the dispatcher of Russia UPS and in the Kokshe-Tsement LLP, and one on In total, there are 310 electricity Southern region – in cooperation with the balance sheet of KCP LLP); transmission lines of 35 – 1,150 kV the dispatcher of Energiya Coordinating • 169 shunt reactors of 1,150-35 kV with the total length of 24,893.46 km Dispatch Centre. (nine are on the balance sheet of (circuits) on the balance sheet of KEGOC. NDC ensures the continuous operational Batys Transit and one is on the and dispatch control of Kazakhstan balance sheet of KCP LLP); Dispatch Control UPS in cooperation with the regional • 1,530 phases of 1,150-35 kV voltage Management control centres: Akmolinskiy RDC, transformers (including 75 on Aktyubinskiy RDC, Almatinskiy the balance sheet of third party The operational and dispatch control in RDC, Vostochny RDC, Zapadny RDC, organisations); Kazakhstan UPS functions through the Kostanaiskiy RDC, Severny RDC, • 3,611 phases of 1,150-35 kV current direct operational subordination of nine Tsentralny RDC, Yuzhny RDC. transformers (including 229 on regional dispatch centres (RDC) being The National Dispatch Centre of the the balance sheet of third party the structural subdivisions of KEGOC System Operator jointly with the RDC organisations); branches – Interconnection Electric ensures the compliance with the daily • 110 storage batteries (including 2 on Networks, to NDC SO. load schedule of the wholesale electricity the balance sheet of Batys Transit); The NDC SO dispatcher regulates the and capacity market participants, • 66 compressor units; operation of power plants and electric including interstate and interregional • 1,542 circuit breakers of 1,150-35 networks of the Northern and Western power flows.

35 NPG Development ANNUAL REPORT / 2015

The power industry for the economy of the Republic of Kazakhstan is of Goal 2 great importance as the key national industries such as metallurgy and oil and gas production are the highly energy intensive industries NPG development

Taking into account the development / prospects of the interregional network and power delivery, the scheduled commissioning of new generating capacities, the Company pursues the active investment policy aimed at the upgrading of the national power grid, the construction of new electric power facilities to meet the consumer needs in electricity in the country, and create the export and transit potential Goal 2 NPG Development ANNUAL REPORT

Investment The project implementation period: inclusive of VAT. Activity 2010 – 2016. The project is financed out of The project cost: KZT 49.4 billion KEGOC’s own funds. Taking into account the development inclusive of VAT. The project was At present, under the 500 kV OHTL prospects of the interregional network financed out of KEGOC’s own funds Ekibastuz – Shulbinsk HPP (Semey) and power delivery, the scheduled and out of the funds borrowed from – Ust-Kamenogorsk construction commissioning of new generating EBRD amounting to EUR 228.4 project 348 km of the line, including capacities, the Company pursues the million. 218 km built in 2015, have been active investment policy aimed at the Construction and installation works constructed with the total length of upgrading of the national power grid, at the rehabilitated substations 600 km. Regarding 220 kV OHTL the construction of new electric power have been fully completed and all Semey – Shulbinsk HPP with cross- facilities to meet the consumer needs 55 substations have been put into connection lines to 500 kV Semey in electricity in the country, and create operation. SS, 33 km out of the total length the export and transit potential. With regard to stage II of the of 106 km have been built. The In 2015, KEGOC proceeded with the project the Company completed construction and erection works are implementation of the following the engineering surveys, developed in progress at 500 kV Semey SS, 500 projects: design and estimate documentation kV Ust-Kamenogorsk SS and 1150 kV for 220 kV OHTL Tulkubas – Burnoye Ekibastuz SS. Kazakhstan Electricity and in 2015 obtained a positive Transmission Rehabilitation opinion of GosExpertiza. Project, Phase II 500 kV OHTL Shulbinsk HPP 500 kV OHTL Ekibastuz – (Semey) – Aktogai – Taldykorgan The aim of the project was to improve Shulbinsk HPP (Semey) – – Alma Construction Project the operation of electricity market, Ust-Kamenogorsk Construction provide the long-term sustainable Project The project shall increase the development of Kazakhstan’s transmission capacity of the NPG economy, ensure effective and stable The project goal is to increase in North-South direction, cover operation of electrical equipment in transmission capacity in North – the needs of electrified railroads, market conditions, increase reliability East direction, cover deficits in the energy intensive facilities of metal and quality of electricity supply to East Kazakhstan oblast by making mining industry, create conditions consumers, improve the technical it independent of the electricity for development of cross-border and environmental safety of high- transported through the Russian territories and large scale development voltage equipment, reduce the costs of networks, and ensure delivery of all of renewable energy potential, and maintenance and repair of equipment, power generated at Shulbinsk HPP strengthen the link with Zone East of improve the technical level and reliability after the Bulak HPP, the counter the Kazakhstan unified power system. of the national power grid (NPG) of regulator of Shulbinsk HPP, is put into The project implementation period: Kazakhstan. The project provided for operation. 2012-2018. the equipment rehabilitation at 55 The project implementation period: The project cost: KZT 76.8 billion substations and the construction of 220 2011-2017. inclusive of VAT. kV transmission lines. The project cost: KZT 43.3 billion The project is financed out of KEGOC’s

38 / 2015 NPG Development

own funds and loan funds. contractor to implement the project. To the present moment, the The Company has alienated land plots engineering surveys have been for construction from land owners and completed. The design estimates are land users for the construction period. due to be completed. Under the project implementation the construction and erection works at the Pavlodar Electricity Transmission facility ‘Replacement of conventional Reinforcement Project ground wire with the composite ground wire cable with optical fibres (OPGW) The project goal is to secure the of 500 kV OHTL EGRES-1 – EEC power electricity supply to Pavlodar plant’ have been completed. consumers and power delivery from Pavlodar power plants to the Disbursement of Capital Kazakhstan UPS. Investments The project implementation period: 2011-2016. In 2015, over KZT 24,486 million The project cost: KZT 5.5 billion were disbursed, including KZT inclusive of VAT. 19,755 million – for major strategic The project is financed out of KEGOC’s projects, and KZT 4,456 million – for own funds. renovation and replacement of the EPC contract was signed with a existing assets.

Capital investments in 2015, KZT million

500 kV OHTL Ekibastuz - Shulbinsk HPP(Semey) - Ust-Kamenogorsk Construction Project 78.51%

Alma Electricity Transmission Project 0.17%

Kazakhstan Electricity Transmission Rehabilitation Project, Phase II 0.23%

500 kV OHTL Shulbinsk HPP(Semey) - Aktogai - Taldykorgan - Alma Construction Project 0.52%

Construction of the kindergarten for 240 children in Astana 1.12%

Pavlodar Electricity Transmission Reinforcement Project 1.25%

Costs for maintaining the current level of operations 18.2%

39 Goal 2 NPG Development ANNUAL REPORT

40 / 2015 NPG Development

Business Outlook supply to consumers in Zone West of Kazakhstan UPS and integrate The power industry in the Republic Zone West with Kazakhstan UPS of Kazakhstan is of great importance with the lines in the territory of as the key national industries such as Kazakhstan; metallurgy and oil and gas production • Torgai Electricity Transmission are highly energy intensive industries. Project is required to ensure Accordingly, the competitiveness power delivery from the base load of the production industries in power plant of Torgai TPP planned Kazakhstan and the living standards for construction; are highly dependent on the reliability • National Power Grid Rehabi- and quality of energy supply to litation Project is to reproduce consumers. technical characteristics and To ensure stable growth of national extend the service life of economy, faster development of transmission lines; the whole electric power industry is • Construction of 220 kV OHTLs required. Uralsk – Atyrau and Kulsary – To ensure balanced and sustainable Tengiz is to strengthen electric growth of the power industry in connections between the oblasts Kazakhstan with due account for the of West Kazakhstan. strategic interests of the government, which shall take into account the necessity in further economic growth, improvement of the living standards and energy security in Kazakhstan, KEGOC plans the following future projects: • Balkhash Electricity Transmission Project is required to ensure power delivery from Balkhash TPP (1320 MW); • 500 kV OHTL YuKGRES – Zhambyl Construction Project will improve the reliability of power supply in Zone South of Kazakhstan; • Integration of the Power System of the Western Kazakhstan with Kazakhstan UPS, which shall improve the reliability of power

41 Efficiency Improvement ANNUAL REPORT / 2015

Due to the measures on loss reduction implemented in 2015 the decrease in Goal 3 electricity losses amounted to 4.389 million kWh Efficiency improvement

In 2015, the Company’s employees / submitted 60 applications with rationalization proposals Goal 3 Efficiency Improvement ANNUAL REPORT

KEGOC service consumers include JSC by 351.4 million kWh or 30.6%, kWh, which is by 453.514 million kWh legal entities: power generators, Arcelor Mittal Temirtau by 577.7 higher than in 2014. power transmission entities, power million kWh or 52.5%, KazPhosphate suppliers and industrial enterprises. LLP by 149.0 million kWh or 6.7%, TemirZholEnergo LLP by 333.1 million Electricity Transmission kWh or 9.7%, ShygysEnergoTrade LLP by 106.6 million kWh or 5.9%, The actual volume of services for AktobeEnergoSnab LLP by 213.6 electricity transmission via trans- million kWh or 38.3%, Shiyeli Zharygy regional networks in 2015 amounted LLP by 41.3 million kWh or 16.7%, and to 37,897.0 million kWh. In comparison ZhezkazganEnergoSbyt LLP by 88.0 with 2014, this index decreased by million kWh or 12.5%. 2,339.7 million kWh or 5.8% as there In 2015, KEGOC and FGC UES was reduction in the services rendered arranged for transmission (transit) of to the Kazakhstan wholesale market electricity via KEGOC’s networks from participants by 931.0 million kWh or the Russian Federation through the 2.6%, and no export of electricity was Republic of Kazakhstan back to the provided to the Russian Federation. Russian Federation. The volume of The following entities had the services rendered by KEGOC via this highest rates of decrease: SSGPO transit amounted to 3,661.538 million

Electricity transmission via KEGOC networks, billion kWh

45 41.06 40.24

40 37.90

35

30

25

2013 2014 2015

44 / 2015 Efficiency Improvement

Major Customers 2015, million kWh

Federal Grid Company of Unified Energy System (FGC UES) PJSC 3,661.538

TemirZholEnergo LLP 3,109.989

AlmatyEnergoSbyt LLP 2,791.704

Kazphosphate LLP 2,061.047

KazZinc LLP 1,714.238

ShygysEnergoTrade LLP 1,702.201

Transnational Company KazChrome JSC 1,314.056

AstanaEnergoSbyt LLP 1,133.197

Ontustik Zharyk LLP 1,179.395

Almaty Power Stations JSC 844.834

Technical Dispatch 2,609.4 million kWh or 3.1%, which network was at the following power Control was due to reduction in the generation generation entities: Eurasian Energy and electricity supply to the grid by Corporation JSC by 1,647.2 million The actual volume of technical energy producing organizations as kWh or 10.6% and Nurzhanov dispatching services of electricity the participants of the wholesale Ekibastuz GRES-1 LLP by 3,249.7 supply to the grid and consumption electricity market of the Republic million kWh or 24.3%. in 2015 amounted to 82,808.9 million of Kazakhstan reduced electricity kWh. The volume of services in consumption. The most substantial comparison with 2014 decreased by decrease in electricity supply to

45 Goal 3 Efficiency Improvement ANNUAL REPORT

Technical dispatch control, billion kWh

86 85.42

84 83.86

82.81

82

80

2013 2014 2015

Major Customers 2015, million kWh

Eurasian Energy Corporation JSC 13,902.682

Nurzhanov Ekibastuz GRES-1 LLP 10,117.160

Kazakhmys Energy LLP 5,969.269

Almaty Power Stations JSC 4,456.529

MAEK-KazAtomProm LLP 4,175.815

PavlodarEnergo JSC 3,142.476

CHPP-3 Karaganda Energocenter LLP 3,104.933

46 / 2015 Efficiency Improvement

Major Customers 2015, million kWh

Ekibastuz GRES-2 Power Station JSC 3,015.675

KazZinc LLP 2,951.704

Baturov Zhambyl GRES JSC 2,683.088

Electricity The volume of services as compared to Production 2014 decreased by 3,426.5 million kWh and Consumption or 2.1% due to the common decline in Balancing electricity production and consumption on the wholesale market of the Republic The actual balancing of electricity of Kazakhstan. generation and consumption in 2015 amounted to 157,038.1 million kWh.

Balancing, billion kWh

162

160.46 160

157.04 158

156 153.52 154

152

150

2013 2014 2015

47 Goal 3 Efficiency Improvement ANNUAL REPORT

Major Customers 2015, million kWh

Eurasian Energy Corporation JSC 22,995.616

Nurzhanov Ekibastuz GRES-1 LLP 10,119.703

Kazakhmys Energy LLP 6,036.604

ArcelorMittal Temirtau JSC 5,863.843

AlmatyEnergoSbyt LLP 5,771.755

KazZinc LLP 5,624.710

Astana – Regional Electricity Network Company JSC 5,284.109

MAEK-KazAtomProm LLP 4,897.649

Almaty Power Stations JSC 4,525.116

Pavlodar REC JSC 4,465.209

Consumer Satisfaction particularly the satisfaction with the Reliability and Energy KEGOC’s personnel performance, Efficiency Improvement In order to improve the quality reliability of provided business and of the services provided, KEGOC technical information, promptness The power consumption by the Com- conducted a questionnaire survey on of customers’ requests processing, pany comprises two components: the 2015 performance results to assess quality of services, and the quality technological losses for transmission consumer satisfaction. of RDC operation with respect to which represents the largest share of The average annual score of operational dispatch management the Company’s power consumption; consumer satisfaction in 2015, was 4.5 out of five. and the auxiliary consumption.

48 / 2015 Efficiency Improvement

The most effective, in terms of energy during the electricity transmission networks in 2015 amounted to saving, are the measures on reduction across transmission lines. Thus, the 2,439.637 million kWh or 6.08 % of of technological losses in transmission main goal of planning and introducing electricity supply to the grid. lines. It should be understood that the measures on reduction of electric Due to the measures on loss reduction technological losses mean the loss power losses is to reduce the actual implemented in 2015 the decrease in of electric power resulting from the amounts of technological losses to its electricity losses amounted to 4.389 physical processes in conductors and optimal level. million kWh. electrical equipment, which occur The actual process losses in KEGOC

Power saving measures in 2015 Outcomes, million kWh

Line tripping under low-load condition 0.187

Shutdown of power transformers under low-load conditions 4.202

Total for KEGOC 4.389

Electricity Purchase/Sale According to the data on the actual balance flows versus the scheduled Activities balance of the electricity generation one and to compensate technical and consumption on the wholesale transmission losses. Electricity In 2015, as per the contract between energy market of Kazakhstan, the received from the Russian Federation KEGOC and Inter RAO UES (Russia) actual volume of the electricity under the contract amounted to KEGOC sold electricity to the Russian purchased to compensate the 977.224 million kWh. In 2015, KEGOC Federation to cover hourly deviations 2015 technical transmission losses and Inter RAO PJSC arranged for of the actual interstate electricity amounted to 2,449.049 million kWh. transmission of electricity from the balance flows versus the scheduled In 2015, the volume of the electricity Russian Federation to the Republic of one. The volume of electricity supplied purchased to cover the losses Kazakhstan to compensate technical to the Russian Federation under the decreased by 127.891 million kWh as transmission losses in Mynkul- contract amounted to 989.666 million compared to 2014. Valikhanovo power region. The actual kWh. In 2015, as per the contract between volume of the electricity purchase was In 2015, the Company purchased KEGOC and Inter RAO UES, KEGOC 6.164 million kWh. electricity for compensation of purchased electricity from the Russian In addition, electricity was purchased technical transmission losses and for Federation to cover hourly deviations for economic needs of MES branches auxiliary needs of the NPG. of the actual interstate electricity in the amount of 32.488 million kWh,

49 Goal 3 Efficiency Improvement ANNUAL REPORT

which is 0.164 million kWh higher than Innovation Activity in 2014. In 2015 KEGOC purchased electricity In the longer term the innovative from Kazakhmys Energy LLP to technological development is one of manage unscheduled electricity flows the main competitive differentiator due to unauthorised consumption of of any company, as it ensures the electric power by Kyrgyzstan Power improvement of efficiency and System from Kazakhstan UPS in reliability of rendered services. November-December 2015 in the In 2015, the Company implemented the amount of 7.3 million kWh. following innovative projects:

Description Brief Description

Satellite monitoring The system provides a permanent real time monitoring (online monitoring) of KEGOC vehicles, a device for vehicles simultaneous display of controlled vehicles, traffic routes in the online monitoring mode for the (GPS-sensors) requested time period. You can create and upload various forms of analytical reports and graphs: by vehicles, groups of vehicles for various time intervals, and export data in different formats, including Excel. The reports contain data on a route trail, distance, speed, parking, stops, engine running time, voltage sensor readings, and others. The vehicle positioning error does not exceed 100 m.

Foundations with In 2013, an invention patent was obtained under this project. At the present time ПА-3-1Н above-ground anchor plates and A3-1 U-bolts to be installed under the ground (3 meters deep) are used to anchoring assemblies fix guy wires of 1,150 kV suspension towers of ПОГ-1150-1, ПОГ-1150-5, and ПОГ-1150-11 types. for the guy wires of Deep underground, aggressive environment (water, salt) and current leakage cause the so- suspension towers called mechanical and electrochemical corrosion in the bolt and eyes connection. Over time, the corrosion process completely destroys the connection, which in its turn makes the tower less stable and causes its fall. According to the Rules of Technical Operation of Power Plants and Networks of the Republic of Kazakhstan, anchor assemblies, installed under the ground, shall be inspected every 6 years. The inspection of anchor guy wire assemblies provides for excavation of anchor assemblies, located under the ground, using the special equipment. The above-the-ground anchoring assemblies for guy wire of suspension towers at 1150 kV lines will reduce the corrosion of metal parts of the anchoring assemblies when located underground and will simplify their inspection.

50 / 2015 Efficiency Improvement

Pursuant to the Memorandum of Company participated in the annual Cooperation between Samruk- republican contest of rationalization Kazyna and Nazarbayev University a proposals INNOVATOR.KZ in the long-term agreement was concluded categories The Best System of with the Nazarbayev University Support for Innovators at Enterprises Research and Innovation System and The Best Rationalization private institution (NURIS PI) to Proposal. perform research, development The KEGOC’s Scientific and Technical and technological works relating to Council (STC), operating on a Feasibility Study of Corona Losses permanent basis, was established Mitigation in Kazakhstan NPG. to make decisions on: KEGOC The project goal is to assess the development, implementation of equipment capabilities and economic the Innovation and Technology feasibility of the corona losses Development Strategy, development mitigation project at the electrical and introduction of new methods networks of the Company. R&D and technologies in projects related are planned to be implemented in to new construction, rehabilitation, two stages: the first stage (2015) is technical upgrade of grid facilities, a research work on corona losses improvement of the NPG operation mitigation in Kazakhstan NPG. If modes, aimed to enhance the further implementation of the project reliability and efficient operation of is proved to be expedient based on the NPG and reduce its operational the first stage results, the second costs, development of domestic stage provides for the performance of scientific and production potential. development works. In 2015, STC held five meetings In 2015, the Company’s employees where about 19 issues were reviewed. submitted 60 applications with In addition, the Innovation and rationalization proposals; the Technology Development Committee Innovation and Technology operates on a permanent basis under Development Committee under the STC at KEGOC. Its main objective the STC of KEGOC acknowledged is to review and prepare conclusions 25 of them as rationalization on the information proposed for proposals. As compared to 2014 review by the STC, take decisions (43 applications), the total quantity on rationalisation proposals of the of submitted applications in 2015 Company’s employees. In 2015 the increased by 40%, and the number of Committee held four meetings. rationalization applications increased by 56% (as compared to 2014 with 16 rationalization proposals). In 2015, the rationalization applications of the

51 Economy and Finance ANNUAL REPORT / 2015

Compared to 2014 the revenues increased by 28.0% or by KZT 36,670.7 Goal 4 million, including operating revenues increase by 17.7% or by KZT 16,541.7 million Economy and finance

KEGOC service consumers include / legal entities: power generators, power transmission entities, power suppliers and industrial enterprises Goal 4 Economy and Finance ANNUAL REPORT

Analysis of Financial and Economic Indicators

Revenues behaviour, KZT billion

167.73 180

160 131.06 140

120

100 80.57

80

60

40

20

0

2013 2014 2015

Consolidated revenues for 2015 decrease in the amount of rendered Other 2015 revenues totalled KZT amounted to KZT 167,733.4 million, services (KZT 4,107.2 million) and 57,672.0 million, which is higher than which is 29.4% or KZT 38,133.8 million lower electricity transmission tariff planned by KZT 56,386.0 million, and higher than expected. At the same time as compared to the planned one (KZT was mainly caused by the growth in the the operating revenue was less than 192.3 million). foreign exchange gain to the amount planned by 14.2 % or KZT 18,252.2 The revenue from the sale of electricity of KZT 50,830.6 million and growth million. to compensate for deviations of the of revenue related to disposition and The revenue from the sale of the actual hourly amounts of interstate sale of fixed assets amounting to purchased electricity was less than electricity balance flows was less than KZT 1,965.7 million as a result of the planned by KZT 7,687.4 million as expected by KZT 3,439 million due to sale of old office building of KEGOC’s there was no unscheduled electricity decrease in sales (KZT 1,798 million) Executive Administration, the growth consumption from the Kazakhstan and the weighted average price (KZT of revenues from deposit operations UPS. 1,641 million) as compared to the by KZT 1,760.5 million, as well as the The regulated services revenue was expected level. The revenue from the accrual of revenues due to the change less than expected by KZT 4,299.5 sale of power control services was less in the fair value of long-term trade million or by 4.1%, which was due to than expected by KZT 3,091.7 million. receivables by KZT 943.4 million.

54 / 2015 Economy and Finance

Compared to 2014 the revenues services, the revenues decreased by accrual of revenues due to the change increased by 28.0% or by KZT KZT 2,237.3 million. At the same time, in the fair value of long-term trade 36,670.7 million, including operating as compared to 2014 the revenues receivables by KZT 507.6 million. revenues increase by 17.7% or by from the sale of purchased electricity Therewith, in 2015 there was no KZT 16,541.7 million. The growth of decreased by KZT 7,277.1 million. accrual of revenues from recoverable regulated services revenues by KZT Compared to 2014, other revenues impairment losses of PPE as Facilities 22,922.6 million was mainly caused by increased by KZT 20,129.0 million. This to the amount of KZT 15,834.0 million. the increased tariffs. Thus, due to the was mainly due to the growth in the increased tariffs the revenues grew foreign exchange gain to the amount by KZT 25,159.9 million; however, due of KZT 33,041.1 million and the deposit to the reduced volume of rendered operations by KZT 1,476.2 million, the

Expenses behaviour, KZT billion

177.7 180

160

140 119.5

120 98.26 100

80

60

40

20

0

2013 2014 2015

Total consolidated expenditures in 2015 Decrease by KZT 15,127.4 million was technological losses to the amount amounted to KZT 177,680.5 million, mainly caused by the decrease in the of KZT 3,577.0 million, and for the which is 62.6% or KZT 68,376 million actual expenditures as compared to purchase of electricity from the power higher than the planned ones. the planned ones for the purchase system of the Russian Federation to The cost of sold services in the reported of electricity in order to compensate compensate for imbalances amounting period amounted to KZT 75,542.6 for non-contractual consumption to KZT 4,846.1 million. million or 96.4% of the planned cost. amounting to KZT 6,269.1 million, for Compared to 2014, the cost price grew

55 Goal 4 Economy and Finance ANNUAL REPORT

by KZT 1,326.3 million or 1.8%, mainly to the recovery of debt provisions of accrual of foreign exchange losses in due to increased costs for the purchase Uzbekenergo (KZT 1,888.9 million), as the amount of KZT 86,569.8 million. It of electricity generated by renewable well as reduction in the property tax was caused by increase in the foreign energy sources by KZT 4,757.7 million costs (KZT 1,078.0 million), in labour exchange rates as a result of the and for amortization – by KZT 3,269.0 costs (KZT 1,032.9 million), payment change in the monetary policy of the million. At the same time, the costs for consultancy, information and legal Government of Republic of Kazakhstan relating to the electricity purchase services (KZT 902.5 million), and for that introduced fully flexible exchange for compensation of non-contractual sponsorship (KZT 195.5 million). rate of tenge. consumption decreased by KZT The GAE decrease by KZT 4, 816.3 Other expenses compared to the same 5,149.4 million and for compensation of million compared to the same period period last year increased by KZT imbalances by KZT 1,943.1 million. in 2014 was mainly due to the decrease 60,279.3 million, which is mainly due to General and administrative expenses in the expenses related to creation of the growth of currency exchange losses (hereinafter referred to as GAE) provisions by KZT 4,721.0 million. (KZT 61, 269.6 million). in 2015 amounted to KZT 8,564.7 Other expenses for 2015 amounted to million, which is 39.3% lower than the KZT 87,667.4 million, while the planned expected ones. The GAE reduction by expenses were KZT 396.9 million. KZT 5,545.6 million as compared to The planned level was exceeded by the planned expenses was mainly due KZT 87,270.5 million mainly due to

Net profit behaviour, KZT billion 8.6 10

5

0 2013 2014 2015

-5

-10 -7.8

-15 -14.5

56 / 2015 Economy and Finance

At the end of 2015 the net loss amounted KZT 144,976.0 million of operating general and administrative costs. The to KZT 7,779.6 million, which is KZT revenues and KZT 6,939.8 million total profit expected in 2016 based on 23,847.9 million lower than the planned of non-operating revenues. the operating results amounts to KZT target and KZT 16,395.6 million lower Expenditures are estimated at the 15,789.7 million. than the value in 2014. amount of KZT 132,071.9 million, The loss made in 2015 had a negative In 2016, the revenues are expected including KZT 100,743.0 million of impact on ROACE and Profitability of to be KZT 151,915.8 million, including sale costs, and KZT 13,098.9 million of Operations ratios.

ROACE behaviour, % 2.77 3

2

1

0 2013 2014 2015

-1

-2 -1.03

-3

-4 -5.15

EBITDA margin behaviour, % 43.74 45

40

35 27.37 26.52 30

25

20

15

10

2013 2014 2015

57 Goal 4 Economy and Finance ANNUAL REPORT

Operation profitability behaviour, %

.21 10

5

0 2013 2014 2015

-5

-10 -4.38

-15 -14.76

EBITDA margin was calculated as policy for regulated services, and supply to the grid and consumption, a ratio of earnings before interest, playing an active role in activities of and electricity generation and tax, depreciation and amortisation to relative organisations to improve the consumption balancing as an operating revenue. The rate growth, tariff policy. extraordinary regulatory action, being as compared to the last year, was In accordance with the effective effective from 1 November 2014 till 31 due to the recovery of provisions for legislation KEGOC shall submit October 2015. Uzbekenergo accounts receivable and applications to the Committee on Due to the fact that the price for optimization of costs during 2015. Regulation of Natural Monopolies electricity delivered from Nurzhanov and Protection of Competition of the GRES-1 power plant reduced from Tariff Policy Ministry of National Economy of the 8.8 to 8.65 tenge/kWh, KEGOC made Republic of Kazakhstan (CRNMPC) a decision to reduce the tariff for KEGOC operations are governed by seeking approval (revision) of tariffs electricity transmission services from the Law of the Republic of Kazakhstan for regulated services referring to the 1.954 to 1.943 tenge/kWh (exclusive On Natural Monopolies and Regulated sphere of natural monopoly. of VAT), effective since 1 April 2015. Markets through: In accordance with the procedure CRNMPC by Order No.367-OД dated 9 • approval of cap tariff; established by the law the Agency September 2015 extended the validity • approval of tariffs for regulated on Regulation of Natural Monopolies of cap tariffs and tariff estimates until services; issued Order No.105-ОД dated 16 31 December 2015. • approval of temporary reduction May 2014 to approve the cap tariff factors for Company’s services and tariff estimates of KEGOC for tariffs. regulated services of electricity Since KEGOC establishment, it has transmission via the grid, technical been consistently improving the tariff dispatch control of electricity

58 / 2015 Economy and Finance

Cap tariffs in 2015

% to tariff since 01 since 01 % to tariff since 01 April since 01 November November since 01 Description 2015 November 2013 2014 October 2013 2014

Electricity transmission, tenge/kWh 1.305 1.954 49.7 1.943 -0.6

Technical dispatch control of the electricity supply to the grid and 0.134 0.182 35.8 0.182 0 electricity consumption, tenge/kWh

Electricity production and 0.060 0.083 38.3 0.083 0 consumption balancing, tenge/kWh

In accordance with the existing transmission and (or) technical in September-November 2015 at procedures KEGOC applied to dispatching of electricity supply to the rate of 0.75, in December 2015 the Committee on Regulation of the grid, and based on the orders at the rate of 0.79; Natural Monopolies and Protection of CRNMPC, KEGOC executed the • Varvarinskoye JSC: in November- of Competition for approval of the electricity transmission at the tariff December 2015 at the rate of cap tariffs and tariff estimates for with account of temporary reduction 0.997; KEGOC regulated services for the factors for the following customers: • KazZinc LLP: in October-Decem- long-term period. Based on the • Kazphosphate LLP: for the period ber 2015 at the rate of 0.98; review results, the Committee on from February to October 2015 at • TemirZholEnergo LLP: in Decem- Regulation of Natural Monopolies the rate of 0.99, in September 2015 ber 2015 at the rate of 0.94. and Protection of Competition at the 0.85 rate, and November- The Company shall annually arrange by its Order No. 388-ОД dated December 2015 at the 0.71 rate; public hearings to report on its 21 September 2015 approved the • Tau-Ken Temir LLP: in January- activities with respect to regulated cap tariffs and tariff estimates for October 2015 at the rate of 0.77; services (goods, works) to strengthen KEGOC’s regulated services for the • Transnational Company Kaz- the protection of consumers’ rights, five-year period, effective from 01 Chrome JSC: for the period ensure transparency of activities January 2016 to 31 December 2020. March-October 2015 at the rate of for consumers and other interested In accordance with the Law of the 0.9346; parties. The main principles of Republic of Kazakhstan On Natural • Temirtau Electric Steel Works JSC: conducting the annual reporting Monopolies and Regulated Markets for the period March-October 2015 hearings are to ensure publicity and Rules for approval of temporary at the rate of 0.92, in December and transparency of the Company’s reduction factors to the tariffs 2015 at the rate of 0.78; activities and preserve the balance of (prices, rates of fees) for electricity • ZhambylZharykSauda-2030 LLP: consumer interests.

59 Market Development ANNUAL REPORT / 2015

Goal 5 Market development

In accordance with the Law of the Republic / of Kazakhstan On Power Industry the System Operator is entrusted with the organization of the capacity market operation in the Republic of Kazakhstan Goal 5 Market Development ANNUAL REPORT

In accordance with the Law of the • standard contracts for provision Republic of Kazakhstan On Power of services to ensure the electric Industry the System Operator is capacity availability to bear the entrusted with the organization of load and for maintaining the the capacity market operation in the electric capacity availability. Republic of Kazakhstan. Also, the Rules for organization and Within the framework of the approved operation of the wholesale electricity The Nation Plan – 100 Specific Steps market underwent revisions with regard that provides for the introduction of the to the participation of renewable energy single purchaser model on the capacity facilities and the Financial Settlement market to carry out the centralized Centre for support to renewable purchase of services of maintaining energy sources on the wholesale the electric capacity availability and electricity market, and with regard to the centralized provision of services the transmission of electricity via the to ensure the readiness of electric regional power network connected to capacity to bear the load, the Company the national power grid based on the in 2015 carried out the preparatory incoming-outcoming scheme. work on the development of legal acts In accordance with the Law of the regulating its functioning. With regard Republic of Kazakhstan On Introducing to the electric capacity market of the Amendments to Some Laws of the Republic of Kazakhstan the following Republic Kazakhstan in the Electric rules and contracts were approved: Power Sector, the commissioning of • rules for development of electricity the electric capacity market and the and capacity balance forecasts; balancing market is scheduled for 1 • rules for certification of generating January 2019. units’ electric capacity; • the rules for determining the scope of services for maintenance of electric capacity availability for contracts on purchase of services for maintenance of electric capacity availability that shall be concluded between the single purchaser and operating generation organizations including combined heat and power plants; • rules for calculating and posting on the Internet by the single purchaser of the price for the electric capacity availability to bear the load;

62 / 2015 Market Development

63 Corporate Governance and Sustainability ANNUAL REPORT / 2015

KEGOC enjoys a leading position in the group of Samruk-Kazyna Goal 6 companies with regard to the corporate governance level, which is 85% based on the results of the diagnostics carried out in 2015 Corporate governance and sustainability

KEGOC considers corporate governance / as the means to enhance the Company’s performance, strengthen its reputation and reduce the cost of raised capital Goal 6 Corporate Governance and Sustainability ANNUAL REPORT

Information on Compliance with the Principles of KEGOC Corporate Governance Code in 2015

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

The Company’s corporate governance is based on the principle of protecting and respecting the shareholders rights and legitimate interests and shall contribute to the Company’s efficient operations, including growth of the Company’s assets and support to its financial stability and profitability. Protection of the rights and interests 1.1 Compliance The shareholders rights are set in KEGOC’s Charter and comply with the Laws of the Republic of Kazakhstan On Joint Stock of shareholders Companies.

KEGOC’s Charter sets the procedure of obtaining the information regarding the Company activity by the shareholders, including the information that affects their interests.

The Board of Directors’ operation is based on the principles of observance of legal rights and implementation of the interests of the shareholders and KEGOC to the maximum extent, and of soundness, efficiency, activeness, good faith, honesty, responsibility and accuracy.

Directors shall act efficiently, being fully informed, with good faith and in the interests of the shareholders and KEGOC.

Annually, the Board of Directors discloses the information on its operation in the KEGOC’s Annual Report.

Each member of the Board of Directors has one vote. Decisions of the Board of Directors shall be made based on the simple majority of votes of the members of the Board of Directors attending the meeting. The Chairman of the Board of Directors and the Chairman of the Management Board is not one and the same person.

The responsibilities of the Chairman of the Board of Directors and the Chairman of the Management Board shall be clearly segregated and set in the Charter. Principles of the Board 1.2 (1) Compliance Competences of the Board of Directors and the Management Board shall be clearly segregated and stated in the Charter and of Directors’ Operation the Code.

Article 25 of KEGOC’s Charter describes the functions of the Chairman of the Board of Directors: to provide management of the Board of Directors’ operation; convoke the meeting of the Board of Directors; act as a chairman thereof; arrange keeping of the minutes of meeting. Additionally the Chairman shall be held responsible for: governance of the Board of Directors; its efficient operation in all spheres of the Chairman’s responsibilities; efficient communication with the shareholders; proper dialogue with the shareholders; timely obtaining of adequate and clear information by the Directors; efficient contribution of Directors to the activity of the Board of Directors and constructive relationship of Directors and the Management Board; provision of newly elected Directors with the induction programmes.

KEGOC Board of Directors consists of six directors, and four of them are independent directors. Independence criteria are set out in the Laws, Charter and Regulation on KEGOC Board of Directors.

The Company applies the system of performance assessment of the Board of Directors, its Committees and each Director. In 2015, the Board of Directors’ performance self-assessment was made through questionnaire survey.

66 / 2015 Corporate Governance and Sustainability

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

The Company’s corporate governance is based on the principle of protecting and respecting the shareholders rights and legitimate interests and shall contribute to the Company’s efficient operations, including growth of the Company’s assets and support to its financial stability and profitability. Protection of the rights and interests 1.1 Compliance The shareholders rights are set in KEGOC’s Charter and comply with the Laws of the Republic of Kazakhstan On Joint Stock of shareholders Companies.

KEGOC’s Charter sets the procedure of obtaining the information regarding the Company activity by the shareholders, including the information that affects their interests.

The Board of Directors’ operation is based on the principles of observance of legal rights and implementation of the interests of the shareholders and KEGOC to the maximum extent, and of soundness, efficiency, activeness, good faith, honesty, responsibility and accuracy.

Directors shall act efficiently, being fully informed, with good faith and in the interests of the shareholders and KEGOC.

Annually, the Board of Directors discloses the information on its operation in the KEGOC’s Annual Report.

Each member of the Board of Directors has one vote. Decisions of the Board of Directors shall be made based on the simple majority of votes of the members of the Board of Directors attending the meeting. The Chairman of the Board of Directors and the Chairman of the Management Board is not one and the same person.

The responsibilities of the Chairman of the Board of Directors and the Chairman of the Management Board shall be clearly segregated and set in the Charter. Principles of the Board 1.2 (1) Compliance Competences of the Board of Directors and the Management Board shall be clearly segregated and stated in the Charter and of Directors’ Operation the Code.

Article 25 of KEGOC’s Charter describes the functions of the Chairman of the Board of Directors: to provide management of the Board of Directors’ operation; convoke the meeting of the Board of Directors; act as a chairman thereof; arrange keeping of the minutes of meeting. Additionally the Chairman shall be held responsible for: governance of the Board of Directors; its efficient operation in all spheres of the Chairman’s responsibilities; efficient communication with the shareholders; proper dialogue with the shareholders; timely obtaining of adequate and clear information by the Directors; efficient contribution of Directors to the activity of the Board of Directors and constructive relationship of Directors and the Management Board; provision of newly elected Directors with the induction programmes.

KEGOC Board of Directors consists of six directors, and four of them are independent directors. Independence criteria are set out in the Laws, Charter and Regulation on KEGOC Board of Directors.

The Company applies the system of performance assessment of the Board of Directors, its Committees and each Director. In 2015, the Board of Directors’ performance self-assessment was made through questionnaire survey.

67 Goal 6 Corporate Governance and Sustainability ANNUAL REPORT

Information on Compliance with the Principles of KEGOC Corporate Governance Code in 2015 (continued)

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

The Management Board is a collegial executive body of KEGOC. The Management Board is headed by the Chairman. The day- to-day operations of the Company are managed by the Management Board.

The decisions of the Management Board are based on the simple majority of votes of the members of the Management Board Principles of the Management 1.2 (2) Compliance attending the meeting. When voting, each member of the Management Board has one vote. Board’s Operation In accordance with Article 3 of the Regulation of KEGOC Management Board, the core principles of the Management Board’s operation are observance of the shareholders’ interests, honesty, fairness, soundness and regularity. The Management Board shall execute the decisions of the General Meeting of Shareholders and the Board of Directors.

The Company performs its operations independently. In accordance with Article 2 of the Charter, KEGOC is a national company and a commercial organisation, which is a legal entity under the Laws of the Republic of Kazakhstan with the main objective to generate net profit from its activity according to the Charter. KEGOC has a separately accounted property, its own Independence balance sheet, bank accounts, round seal with its name, letter-heads and other requisites, and is entitled sui juris to enter into 1.3 Compliance of Company Operations contracts, acquire and exercise property and personal non-property rights, bear obligations and be a plaintiff, a defendant and a third person in court.

Transactions and relations between KEGOC and the shareholders shall be implemented under the laws.

In order to enable reasonable decision-making by the General Meeting and to inform Stakeholders of the Company’s operations, KEGOC shall timely provide shareholders and Stakeholders with the reliable information about KEGOC, including its financial standing, economic indicators, performance results, and ownership and governance structure. KEGOC regularly informs the Board of Directors and the shareholders of KEGOC operations. The information disclosed on the Company’s Transparency and Objectivity in Disclosure of web-site covers a wide range of issues relating to: corporate governance, results of the Company operation, main corporate 1.4 Compliance Information about Company Operations documents, information about an auditor, performed transactions, affiliated persons, ownership structure, main licenses, etc.

Disclosure of any information by the Company shall be made in compliance with the Laws on commercial and other secret information protected by the Laws and the Rules of protection and preservation of confidential information in KEGOC.

In accordance with Article 2 of the Charter, KEGOC’s operations shall be governed by the Constitution and Laws of the Republic of Kazakhstan as well as by the Charter, Corporate Governance Code, and other documents of the Company, generally accepted principles (practices) of business ethics and by the Company’s contractual obligations. 1.5 Legality and ethics Compliance

The relationships between shareholders, members of the Board of Directors and the Management Board shall be built on mutual trust, respect, accountability and control.

68 / 2015 Corporate Governance and Sustainability

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

The Management Board is a collegial executive body of KEGOC. The Management Board is headed by the Chairman. The day- to-day operations of the Company are managed by the Management Board.

The decisions of the Management Board are based on the simple majority of votes of the members of the Management Board Principles of the Management 1.2 (2) Compliance attending the meeting. When voting, each member of the Management Board has one vote. Board’s Operation In accordance with Article 3 of the Regulation of KEGOC Management Board, the core principles of the Management Board’s operation are observance of the shareholders’ interests, honesty, fairness, soundness and regularity. The Management Board shall execute the decisions of the General Meeting of Shareholders and the Board of Directors.

The Company performs its operations independently. In accordance with Article 2 of the Charter, KEGOC is a national company and a commercial organisation, which is a legal entity under the Laws of the Republic of Kazakhstan with the main objective to generate net profit from its activity according to the Charter. KEGOC has a separately accounted property, its own Independence balance sheet, bank accounts, round seal with its name, letter-heads and other requisites, and is entitled sui juris to enter into 1.3 Compliance of Company Operations contracts, acquire and exercise property and personal non-property rights, bear obligations and be a plaintiff, a defendant and a third person in court.

Transactions and relations between KEGOC and the shareholders shall be implemented under the laws.

In order to enable reasonable decision-making by the General Meeting and to inform Stakeholders of the Company’s operations, KEGOC shall timely provide shareholders and Stakeholders with the reliable information about KEGOC, including its financial standing, economic indicators, performance results, and ownership and governance structure. KEGOC regularly informs the Board of Directors and the shareholders of KEGOC operations. The information disclosed on the Company’s Transparency and Objectivity in Disclosure of web-site covers a wide range of issues relating to: corporate governance, results of the Company operation, main corporate 1.4 Compliance Information about Company Operations documents, information about an auditor, performed transactions, affiliated persons, ownership structure, main licenses, etc.

Disclosure of any information by the Company shall be made in compliance with the Laws on commercial and other secret information protected by the Laws and the Rules of protection and preservation of confidential information in KEGOC.

In accordance with Article 2 of the Charter, KEGOC’s operations shall be governed by the Constitution and Laws of the Republic of Kazakhstan as well as by the Charter, Corporate Governance Code, and other documents of the Company, generally accepted principles (practices) of business ethics and by the Company’s contractual obligations. 1.5 Legality and ethics Compliance

The relationships between shareholders, members of the Board of Directors and the Management Board shall be built on mutual trust, respect, accountability and control.

69 Goal 6 Corporate Governance and Sustainability ANNUAL REPORT

Information on Compliance with the Principles of KEGOC Corporate Governance Code in 2015 (continued)

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

KEGOC’s dividend policy is based on observation of the Laws and Regulation on KEGOC Dividend Policy.

KEGOC approved the Regulation on Dividend Policy, which is based on the observance of interests of the Company and Efficient dividend policy Compliance 1.6 shareholders in determining the amount of dividend payments, the increase in investment prospects of the Company and its capitalization, the respect and strict observance of the rights of shareholders, as provided for by the laws of the Republic of Kazakhstan.

Regulation on KEGOC Dividend Policy is placed on the web-site www.kegoc.kz/corporate/documents

The Company’s labour relationships are regulated by the Collective Bargaining Agreement, Internal Labour Rules, and internal documents for labour and remuneration payment, for rendering social support, incentives and recognition of KEGOC employees. All rights and obligations of the employer and employees are also specified in employment contracts.

1.7 Efficient HR policy Compliance The fundamental principles of KEGOC HR policy include: long-term relations; compliance of employees’ qualifications with a job description and a current position; knowledge and experience succession, emphasis on development and education of employees; remuneration and promotion according to their merits and achieved results in their work.

The recruitment procedure in the Company is transparent and exercised in accordance with KEGOC rules of competitive selection for filling of vacancies.

Environmental responsibility is a key principle of KEGOC Environmental Policy.

1.8 Environmental protection Compliance The Company developed a number of documents specifying its environmental policy: the Environmental Policy, the Environmental Management System Guidelines, and the Standard on Management of Environmental Management System Planning. KEGOC’s Standard on Wastes Management and Guidelines on Assessment and Analysis of Environmental Aspects, Hazards and Risks in KEGOC provide a comprehensive management of environmental impacts from the Company’s operation.

The Company’s Board of Directors appointed the Ombudsman and approved the Ombudsman Regulations. Its main objectives and functions are to ensure compliance with the Code by authorities, officials and employees of KEGOC and, if necessary, to Policy on the regulation of corporate explain the Code provisions and participate in the resolution of disputes arising between employees, and between employees 1.9 Compliance conflicts and conflicts of interest and officials, etc. The Ombudsman shall be entitles, in accordance with the established procedure, to request and obtain from the employees, officials and the Head of Internal Audit Service the materials (information) necessary to provide clarification for the implementation of the Ombudsman’s tasks and functions.

70 / 2015 Corporate Governance and Sustainability

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

KEGOC’s dividend policy is based on observation of the Laws and Regulation on KEGOC Dividend Policy.

KEGOC approved the Regulation on Dividend Policy, which is based on the observance of interests of the Company and Efficient dividend policy Compliance 1.6 shareholders in determining the amount of dividend payments, the increase in investment prospects of the Company and its capitalization, the respect and strict observance of the rights of shareholders, as provided for by the laws of the Republic of Kazakhstan.

Regulation on KEGOC Dividend Policy is placed on the web-site www.kegoc.kz/corporate/documents

The Company’s labour relationships are regulated by the Collective Bargaining Agreement, Internal Labour Rules, and internal documents for labour and remuneration payment, for rendering social support, incentives and recognition of KEGOC employees. All rights and obligations of the employer and employees are also specified in employment contracts.

1.7 Efficient HR policy Compliance The fundamental principles of KEGOC HR policy include: long-term relations; compliance of employees’ qualifications with a job description and a current position; knowledge and experience succession, emphasis on development and education of employees; remuneration and promotion according to their merits and achieved results in their work.

The recruitment procedure in the Company is transparent and exercised in accordance with KEGOC rules of competitive selection for filling of vacancies.

Environmental responsibility is a key principle of KEGOC Environmental Policy.

1.8 Environmental protection Compliance The Company developed a number of documents specifying its environmental policy: the Environmental Policy, the Environmental Management System Guidelines, and the Standard on Management of Environmental Management System Planning. KEGOC’s Standard on Wastes Management and Guidelines on Assessment and Analysis of Environmental Aspects, Hazards and Risks in KEGOC provide a comprehensive management of environmental impacts from the Company’s operation.

The Company’s Board of Directors appointed the Ombudsman and approved the Ombudsman Regulations. Its main objectives and functions are to ensure compliance with the Code by authorities, officials and employees of KEGOC and, if necessary, to Policy on the regulation of corporate explain the Code provisions and participate in the resolution of disputes arising between employees, and between employees 1.9 Compliance conflicts and conflicts of interest and officials, etc. The Ombudsman shall be entitles, in accordance with the established procedure, to request and obtain from the employees, officials and the Head of Internal Audit Service the materials (information) necessary to provide clarification for the implementation of the Ombudsman’s tasks and functions.

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Information on Compliance with the Principles of KEGOC Corporate Governance Code in 2015 (continued)

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

In accordance with KEGOC Business Ethics Code, employees and officials shall be governed by the Laws, the Charter, the Codes and other internal documents during implementation of their obligations, and shall assume responsibility for execution of professional functions reasonably and in good faith with due care and prudence to the benefit of the Company and shareholders, avoiding conflicts. In accordance with the Policy on Settlement of Corporate Conflicts and the Policy on Settlement of Conflict of Interest of the Officials and Employees, the members of the Board of Directors and the Management Board, and the Company’s employees shall ensure that their operations fully comply with the legislative requirements, the Corporate Governance Code, ethical standards and generally accepted standards of business ethics.

To update and improve the procedures for conflict settlement, the Board of Directors approved KEGOC’s Policy on Settlement of Corporate Conflicts and the Policy on Settlement of Conflict of Interest of the Officials and Employees.

In accordance with KEGOC’s Policy on Settlement of Corporate Conflicts, the main task of the Company’s bodies during corporate conflict settlement is to make a legal and reasonable decision that meets the interests of KEGOC. To protect both the rights of shareholders and goodwill of the Company, the conflict settlement shall be performed with direct involvement of a member of the Board of Directors (representative of the General Meeting of Shareholders) by means of direct negotiations or correspondence with the involvement of the Ombudsman.

Policy on the regulation of corporate 1.9 Compliance If it is not possible to settle corporate conflicts through negotiations, they shall be settled in compliance with the Laws and conflicts and conflicts of interest internal documents of KEGOC.

In accordance with KEGOC’s Policy on Settlement of Corporate Conflicts the Chairman of the Management Board, on behalf of the Company, shall settle corporate conflicts on all the issues, unless settlement of such conflicts relate to the competence of KEGOC Board of Directors, and shall decide on the procedure for corporate conflicts settlement at his/her own discretion.

In accordance with KEGOC’s Policy on Settlement of Corporate Conflicts, the Board of Directors shall settle corporate conflicts relating to its competence. When settling corporate conflicts, the Ombudsman shall ensure that the Chairman of the Management Board/the Board of Directors is as full as possible aware of the matter of the corporate conflict and be a mediator in the Corporate Conflict Settlement.

During 2015, the Ombudsman received 5 complaints including one written and four oral complaints

In accordance with KEGOC’s Business Ethics Code and Policy on Settlement of Conflict of Interest of the Officials and Employees, the basic requirement in protecting the interests of shareholders and KEGOC and its employees is to prevent conflict of interests. All employees of the Company shall conduct their activities so as to avoid a situation when a conflict of interest can arise with respect to themselves (or related persons) or other employees.

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Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

In accordance with KEGOC Business Ethics Code, employees and officials shall be governed by the Laws, the Charter, the Codes and other internal documents during implementation of their obligations, and shall assume responsibility for execution of professional functions reasonably and in good faith with due care and prudence to the benefit of the Company and shareholders, avoiding conflicts. In accordance with the Policy on Settlement of Corporate Conflicts and the Policy on Settlement of Conflict of Interest of the Officials and Employees, the members of the Board of Directors and the Management Board, and the Company’s employees shall ensure that their operations fully comply with the legislative requirements, the Corporate Governance Code, ethical standards and generally accepted standards of business ethics.

To update and improve the procedures for conflict settlement, the Board of Directors approved KEGOC’s Policy on Settlement of Corporate Conflicts and the Policy on Settlement of Conflict of Interest of the Officials and Employees.

In accordance with KEGOC’s Policy on Settlement of Corporate Conflicts, the main task of the Company’s bodies during corporate conflict settlement is to make a legal and reasonable decision that meets the interests of KEGOC. To protect both the rights of shareholders and goodwill of the Company, the conflict settlement shall be performed with direct involvement of a member of the Board of Directors (representative of the General Meeting of Shareholders) by means of direct negotiations or correspondence with the involvement of the Ombudsman.

Policy on the regulation of corporate 1.9 Compliance If it is not possible to settle corporate conflicts through negotiations, they shall be settled in compliance with the Laws and conflicts and conflicts of interest internal documents of KEGOC.

In accordance with KEGOC’s Policy on Settlement of Corporate Conflicts the Chairman of the Management Board, on behalf of the Company, shall settle corporate conflicts on all the issues, unless settlement of such conflicts relate to the competence of KEGOC Board of Directors, and shall decide on the procedure for corporate conflicts settlement at his/her own discretion.

In accordance with KEGOC’s Policy on Settlement of Corporate Conflicts, the Board of Directors shall settle corporate conflicts relating to its competence. When settling corporate conflicts, the Ombudsman shall ensure that the Chairman of the Management Board/the Board of Directors is as full as possible aware of the matter of the corporate conflict and be a mediator in the Corporate Conflict Settlement.

During 2015, the Ombudsman received 5 complaints including one written and four oral complaints

In accordance with KEGOC’s Business Ethics Code and Policy on Settlement of Conflict of Interest of the Officials and Employees, the basic requirement in protecting the interests of shareholders and KEGOC and its employees is to prevent conflict of interests. All employees of the Company shall conduct their activities so as to avoid a situation when a conflict of interest can arise with respect to themselves (or related persons) or other employees.

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Information on Compliance with the Principles of KEGOC Corporate Governance Code in 2015 (continued)

Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

Policy on the regulation of corporate The Policy on Settlement of Conflict of Interest of the Officials and Employees provides for regulations preventing conflict of 1.9 Compliance conflicts and conflicts of interest interests.

KEGOC developed the Standard Stakeholders Relations Policy. The basic principles of cooperation with stakeholders are as follows: • responsibility; • relation continuity; • feedback from the stakeholders; • accountability; • transparency.

The procedure of compensation for stakeholders’ rights violation is stipulated by the laws and the agreements, which are 1.10 Responsibility Compliance strictly observed by KEGOC.

In accordance with KEGOC’s Charter the shareholders and the Board of Directors shall be entitled to receive any information on KEGOC’s operations, including the information constituting commercial secrets, and to study all documents of the Company pursuant to the Republic of Kazakhstan laws and the internal documents of KEGOC.

In accordance with the Rules for receipt, consideration of complaints and appeals to the Audit Committee of KEGOC Board of Directors, the concerned parties shall have the opportunity to inform of illegal and unethical acts of bodies, employees and officials of the Company. The Company has introduced a hot line for confidential messages.

The above information on compliance elaborated in compliance with Government as a shareholder of the with the principles of KEGOC the legislation of the Republic of Fund and cooperation of the Fund and Corporate Governance Code is given Kazakhstan with due regard to the organizations. The role of the Fund as in the earlier version, approved by corporate governance practices a national management holding) are the decision of the Sole Shareholder developing in Kazakhstan and in specific and describe aspects of the (Order of the Chairman of the Board the world, and the Transformation Fund management, the interaction of Samruk-Kazyna No. 36-п dated 17 Program of Samruk-Kazyna. between the Fund and the Government May 2011). This Code consists of two parts: basic of the Republic of Kazakhstan and the In October 2015 the shareholders at principles and annotations – rules and corporate governance in the Fund and the extraordinary General Meeting clarifications for the implementation Organizations. The next five chapters of Shareholders of KEGOC approved of the basic principles. The first (Sustainable development, The rights a new Corporate Governance Code two chapters of the Code (The of shareholders and fair treatment

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Principles of KEGOC’s Corporate Compliance/Non-Compliance/ Item No. Information on compliance/non-compliance with the principles Governance Code Partial Compliance

Policy on the regulation of corporate The Policy on Settlement of Conflict of Interest of the Officials and Employees provides for regulations preventing conflict of 1.9 Compliance conflicts and conflicts of interest interests.

KEGOC developed the Standard Stakeholders Relations Policy. The basic principles of cooperation with stakeholders are as follows: • responsibility; • relation continuity; • feedback from the stakeholders; • accountability; • transparency.

The procedure of compensation for stakeholders’ rights violation is stipulated by the laws and the agreements, which are 1.10 Responsibility Compliance strictly observed by KEGOC.

In accordance with KEGOC’s Charter the shareholders and the Board of Directors shall be entitled to receive any information on KEGOC’s operations, including the information constituting commercial secrets, and to study all documents of the Company pursuant to the Republic of Kazakhstan laws and the internal documents of KEGOC.

In accordance with the Rules for receipt, consideration of complaints and appeals to the Audit Committee of KEGOC Board of Directors, the concerned parties shall have the opportunity to inform of illegal and unethical acts of bodies, employees and officials of the Company. The Company has introduced a hot line for confidential messages.

of shareholders, The efficiency of relations between agencies, Annual Report for 2016. In order to the Board of Directors and executive their operation and collaboration implement the provisions of the new body, Risk management, internal principles, and improvement of their Code, the Company developed and control and audit, Transparency) performance. Another distinctive approved the Action Plan for 2016- of the Code shall be applied by the feature is an emphasis on the issues 2020, which is expected to eliminate Fund and the Company with account related to sustainable development. the non-compliance of the current of aspects described in the first two Under the new Code, the information corporate governance practices with chapters, as well as the provisions on facts and causes of non- the new Code. of the legislation of the Republic of compliance with its provisions shall Kazakhstan. be disclosed starting from 1 January Compared to the previous Code, the 2017, i.e. the information is planned new Code in more detail regulates to be disclosed in the Company’s

75 Goal 6 Corporate Governance and Sustainability ANNUAL REPORT

General shareholders` meeting

Board of Directors

Nomination and Renumeration Strategic Planning and Corporate Audit Committee Committee Governance Committee

Management board

Non-standart Operations Human Debtors and Accounting Long-term Inventory Budget Investment Resources Risk Creditors and Financial Asset Committee Committee Committee Development Committee Committee Statements Committee Committee Preparation Committee

Shareholders public offering of ordinary shares of As of 31 December 2015, the number the Company on the Kazakhstan stock of the Company’s declared and placed In December 2014 under the market through subscription. ordinary shares was 260,000,000, Programme for public offering of The number of the ordinary shares of which 90 % plus one KEGOC share shares of subsidiaries and affiliates of KEGOC placed on the Kazakhstan are owned by major shareholder of Samruk-Kazyna Sovereign organized securities market was represented by Samruk-Kazyna Wealth Fund on the stock market 10% less one share or 25,999,999 (234,000,001), the remaining 10 % (approved by Resolution No.1027 (twenty-five million nine hundred and minus one share belong to minority of the Government of Kazakhstan ninety-nine thousand nine hundred shareholders (25,999,999). dated 8 September 2011 and and ninety-nine). The price of one In 2015 there was no significant trans- hereinafter referred to as People’s IPO ordinary KEGOC share was 505 (five actions or changes to shares and share- Programme), KEGOC held an initial hundred and five) tenge. holders that own five or more per cents

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of the number of the placed shares. • Approve the KEGOC Annual Report distribution of the net income, There was no initial offering of shares, 2014; decision to pay dividends on repurchase of its own shares by the • Approve the annual financial ordinary shares and on the amount Company or their subsequent resale statements, distribution of the net of the dividends per one ordinary in 2015. income, decision to pay dividends share of KEGOC for the first half of on ordinary shares and approve the year 2015. General Shareholders’ the amount of the dividend per one Meeting ordinary share of KEGOC for 2014; Report on the Board of • Determine number of members, Directors Activities 2015 The General Shareholders’ Meeting is terms of office of KEGOC’s Board the superior body of KEGOC. of Directors, elect its members From 01 January to 30 April 2015, The General Shareholders’ Meeting and chairman, and determine the KEGOC Board of Directors included shall run its activities in accordance rates and terms of remuneration the following members: Kuanysh with the Law of the Republic and compensation of expenses for Bektemirov, Anatoliy Spitsyn, Luca of Kazakhstan On Joint-Stock the members of KEGOC’s Board of Sutera, Almassadam Satkaliyev and Companies, the Charter and the Directors in fulfilment of their duties; Bakytzhan Kazhiyev. Regulations on the General Meeting • Claims from the shareholders in On the basis of the decisions of the of KEGOC Shareholders. relation to activities of KEGOC General Shareholders’ Meeting dated The exclusive competence of the and its officers and results of 30 April 2015, due to the expiration General Shareholders’ Meeting is consideration of such claims; of the term of office of the Board defined by Article 21.1 of the KEGOC • Number of members, terms of of- of Directors as a whole, the new Charter. fice of the Counting Board of the members were elected to the Board The General Shareholders’ Meeting General Shareholders’ Meeting of of Directors. shall have the right to overrule any KEGOC and election of its members. decision of other bodies of KEGOC The Extraordinary Shareholders on the issues relating to the internal Meeting was held on 16 October 2015, operations of the Company, unless where the decisions were taken on the otherwise is stipulated in the Charter. following issues: The General Shareholders’ Meetings • Approve the Regulations on the can be annual and extraordinary. General Meeting of KEGOC’s The Annual General Shareholders’ Shareholders; Meeting shall be held no later than five (5) • Approve the new revision of months after the end of the fiscal year. KEGOC’s Charter; All meetings of the shareholders, • Approve the new revision of the except for Annual one, are Corporate Governance Code of extraordinary. KEGOC; The Annual General Shareholders’ • Approve the new revision of the Meeting was held on 30 April 2015, Regulations on KEGOC Board of where the decisions were taken on the Directors; following issues: • Approve the financial statements,

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Members of the Board of Directors of KEGOC

Kuanysh Bektemirov

45 years old citizen of the Republic of Kazakhstan

Chairman of the Board of Elected on 08 May 2012; the General • 2011-2012 – CEO at AstanaEner- Directors, representative of Shareholders’ Meeting of KEGOC goContract; major shareholder – Samruk- extended the term of office for three • 2009-2010 – Deputy, First Deputy Kazyna. years on 30 April 2015 of CEO at KazHydroMet. Shares owned in KEGOC or its counterparties, or its branches and affiliates: no.

Positions: • since 2012, Chief Asset Manage- ment Officer at Samruk-Kazyna, Chairman of the Board of Directors at Samruk Energy, Chairman of the Board of Directors at Tau-Ken Samruk National Mining Company, • member of the Board of Directors of KazAtomProm;

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Luca Sutera

44 years old citizen of Italy

Independent Director, Elected on 08 May 2012; the General • since 2012 – Member of the Board Chairman of the Audit Shareholders’ Meeting of KEGOC of Directors at Samruk Energy. Committee under the Board of extended the term of office for three Directors years on 30 April 2015. Shares owned in KEGOC or its counterparties, or its branches and affiliates: no.

Positions: • since 2015 – Chief Financial Officer and member of the Management Board at NEBRAS POWER (an international energy company in Qatar), Independent Director; • 2011-2015 – Senior Vice President and Chief Financial Officer at Global power & water business (TAQA, Abu Dhabi National Energy Company);

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Anatoliy Spitsyn

76 years old citizen of the Russian Federation

Independent Director, Elected on 08 May 2012; the General • 2010-2013 – Professor of Econom- Chairman of the Strategic Shareholders’ Meeting of KEGOC ics and Finance Department, Public Planning and Corporate extended the term of office for three Sector, IIPAM, Russian Presidential Governance Committee under years on 30 April 2015. Academy of National Economy and the Board of Directors Shares owned in KEGOC or its Public Administration; counterparties, or its branches and • since 2012 – Member of the Board affiliates: no. of Directors at Samruk Energy.

Positions: • since 2013 – Director of the Institute of Integration Problems Strategic Studies of the Eurasian Economic Community, Professor of the National Security chair, Department of the National Security of the Russian Presidential Academy of National Economy and Public Administration, Moscow;

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Dominique Fache

66 years old citizen of France

Independent Director, Elected by the General Shareholders’ Board of Directors at SUEK – Chairman of the Nomination Meeting of KEGOC’s on 30 April 2015. Siberian Energy Coal Company, and Remuneration Committee Shares owned in KEGOC or its Moscow, Russia. under the Board of Directors counterparties, or its branches and affiliates: no.

Positions: • since 2013 – Member of the Board of Directors at Sophia Antipolis Science Park; • 2008-2013 – Chairman of the Board of Directors, CEO at Enel OGK-5; • 2007-2008 – General Director for Russia and CIS, Enel; • 2006-2007 – Member of the

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Janusz Bialek

60 years old citizen of the Republic of Poland and the United Kingdom

Independent Director Elected by the General Sharehol- • 2003-2009 – Bert Whittington ders’ Meeting of KEGOC’s on 30 April Chair of Electrical Engineering, 2015. Director of master’s programmes Shares owned in KEGOC or its coun- for green energy systems, the terparties, or its branches and affili- University of Edinburgh, UK. ates: no.

Positions: • since 2014 – Director of the Skoltech Center for Energy Systems; • 2009-2013 – Chair of Electrical Power and Control, Director for research work at the School of Engineering and Computing Sciences, Durham University, UK;

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Bakytzhan Kazhiyev

51 years old citizen of the Republic of Kazakhstan

Member of the Board of Elected on 08 May 2012; the General • 2007-2008 – Head of the Capital Directors Shareholders’ Meeting of KEGOC Construction Department at extended the term of office for three KEGOC. years on 30 April 2015 Shares owned in KEGOC or its counterparties, or its branches and affiliates: no.

Positions: • since 2011 – Chairman of the Management Board at KEGOC; • 2009-2011 – Vice-President at KEGOC; • 2008-2009 – Executive Director at KEGOC;

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On the basis of the decisions of more 50% of total members of KEGOC preceding their election to the the General Shareholders’ Meeting Board of Directors. The directors are Board of Directors; of dated 30 April 2015, due to the deemed independent because they: • do not participate, and did not expiration of the term of office of the • are not, and were not an affiliate participate in the Company’s audit Board of Directors as a whole, the of the Company within three as an auditor of an audit company new members were elected to the years preceding their election to within three years prior to their Board of Directors. the Board of Directors (except election to the Board of Directors; More details regarding the members when they took the position of • do not and did not represent the of the Board of Directors (including an independent director of the shareholder at the meetings of the their qualifications) are available on Company); Company’s bodies within three KEGOC’s website at: www.kegoc. • are not an affiliate with respect to years prior to their election to the kz/ru/korporativnoe-upravlenie/ the KEGOC’s affiliates; Board of Directors; sovet-direktorov. • are not subordinated and were not • are not civil servants. The Board of Directors includes four subordinated to officials of KEGOC independent directors composing or its affiliates within three years

Attendance at the meetings in presentia by the members of the Board of Directors in 2015

Members of the Board % of Directors 15.10.2015 10.12.2015 10.07.2015 29.05.2015 20.03.2015 13. 02.2015 29.04.2015 28.08.2015

Kuanysh Bektemirov + + + + + + + + 100

Anatoliy Spitsyn + + + + + + + + 100

Luca Sutera + + + + + + + + 100

Almassadam Satkaliyev - + + the term of office has expired 66.6

Dominique Fache elected on 30.04.2015 + + + + + 100

Janusz Bialek elected on 30.04.2015 - + + - + 60

Bakytzhan Kazhiyev + + + + + + + + 100

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In 2015, the Board of Directors held • Action plan to improve KEGOC amounts of their salaries, and 8 meetings in presentia at which 129 corporate governance in 2015; election of the member of the issues were reviewed. The major • New revision of KEGOC’s Charter; Management Board; issues are as follows: • New revision of KEGOC Corporate • Individual key performance Governance Code; indicators of KEGOC executive Strategic issues: • New revision of the Regulations on employees. • Report on implementation of KEGOC Board of Directors; KEGOC Long-Term Development • New revision of the Regulations on Review of transaction Strategy, Investment Programme, the Corporate Secretary of KEGOC; issues large investment projects for 2015; • Results of corporate governance • KEGOC Development Plan for diagnostics and review of the Pursuant to KEGOC’s Charter the 2016-2020; results of self-assessment exclusive competence of the Board • KEGOC Annual Report 2014; of KEGOC for compliance of of Directors comprises making of • Roadmap for KEGOC’s Business the current practices with the decisions on conclusion of transactions Transformation Programme; provisions of the new Corporate resulting in acquiring or alienating the • Amendments to KEGOC’s Innova- Governance Code (Gap-analysis); property which costs 10% or more of the tion and Technology Strategy up • Assessment of the operations total assets of the Company and non- to 2025; of the Board of Directors and its arms length transactions, excluding • Annual Financial Statements; committees, the Chairman and those ones which have to be decided • Report on management of members of the Board of Directors, by Samruk-Kazyna Board of Directors subsidiaries, affiliates and jointly the Management Board, Internal in accordance with the Law of the controlled organisations, the Audit Service and its Head, the Republic of Kazakhstan On Sovereign influence of the results of their Corporate Secretary of KEGOC Wealth Fund. financial and economic activity on with the assistance of independent In 2015, KEGOC did not conclude any KEGOC’s performance indicators; organization. large transaction. • Determining an auditor organisa- Only Independent Directors of KEGOC’s tion for KEGOC for 2016-2018 and HR policy issues: Board of Directors can take part in the cost of its services. • Nomination of two representatives decision making with regard to non- of KEGOC Board of Directors to the arms length transactions and which are Corporate KEGOC Modernisation Council; determined as being so by the laws of governance issues: • Assessment of the remuneration the Republic of Kazakhstan. Thus, the • Action plan of the KEGOC Board of policy for executives of KEGOC; independent members of the Board Directors and its Committees for • Early termination of term of of Directors made a decision relating 2015, Annual Audit Plan of KEGOC office of a member of KEGOC to the transaction with Batys Transit Internal Audit Service for 2015; Management Board; (purchase and sale of securities) in • Action Plan for implementation of • KEGOC’s Executive Administration 2015. Samruk Kazyna’s expectations for (head office) Organisational The decisions made by the Board of 2015; Structure; Directors in 2015 contributed to the • New revision of KEGOC’s Succes- • Nomination of executive employees more efficient development of KEGOC, sion Plan; of KEGOC, determination of the the achievement of strategic goals and

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objectives determined by the Company ensuring enforcement of the laws of Moreover, the Audit Committee for short-term, medium-term and long- the Republic of Kazakhstan. members held three meetings term periods. The Board of Directors The Committee shall perform its with the representatives of Ernst plays an active role in the improvement functions in accordance with the & Young company, which was of the corporate governance at KEGOC, Regulations on Audit Committee selected to conduct the audit of 2015 analyses the efficiency of the internal under KEGOC Board of Directors. financial statements, and discussed control mechanisms and the risks On 13 February 2015, the Board of preliminary audit results of KEGOC management in respect of wide range Directors established the membership consolidated statements for 2014, of business-processes. of the Committee: the management letters on the audit • Luca Sutera – Chairman of the results, audit plan for 2015, and Committees under the Board of Committee, Independent Director; financial statements review results Directors • Anatoliy Spitsyn – Independent for the 1st quarter and the 1st half- Director; year, and 9 months of 2015. The three committees were • Almassadam Satkaliyev. established at KEGOC to review the Due to the expiration of the term of most important issues and prepare office of the Board of Directors as recommendations to the Board of a whole, on 29 May 2015 the Board Directors: of Directors established a new • Audit Committee; membership of the Committee: • Nomination and Remuneration • Luca Sutera – Chairman of the Committee; Committee, Independent Director; • Strategic Planning and Corporate • Anatoliy Spitsyn – Independent Governance Committee. Director; The Committees are an advisory body • Janusz Bialek – Independent of the Board of Directors. All proposals Director. worked out by the Committees are In 2015, the Committee held seven recommendations to be submitted to (7) meetings in presentia, where KEGOC Board of Directors for review. 51 issues were reviewed, and the The Audit Committee was appropriate recommendations were established to work out and submit submitted to the Board of Directors, recommendations to the Board of including: quarterly reports on the Directors relating to control over performance of the Internal Audit financial and economic activities Service, issues relating to financial (including completeness and accuracy statements, internal control and risk of the financial statements); reliability management, internal and external and efficiency of internal control audit, HR issues of the Internal Audit systems and risk management, as well Service, preliminary approval of audit as execution of corporate governance organisation to audit the Company for documents; independence of external 2016-2018, payment amount of its and internal audit, and process services and draft contract with it.

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Attendance at the meetings in presentia by the members of the Audit Committee in 2015

% Members of the Audit 15.10.2015 10.12.2015 10.07.2015 12.02.2015 19.03.2015 Committee 29.04.2015 28.08.2015

Luca Sutera + + + + + + + 100

Anatoliy Spitsyn + + + + + + + 100

elected on Almassadam Satkaliyev + + the term of office has expired 100 13.02.2015

Janusz Bialek elected on 30.04.2015 + + – + 75

In 2015, the Committee fully members of the Management Directors established the membership accomplished its goals, tasks and Board, Corporate Secretary in of the Committee: functional duties in accordance accordance with the goals, tasks • Anatoliy Spitsyn – Chairman of the with the Regulations on the Audit and the current condition of Committee, Independent Director; Committee. KEGOC and level of remuneration • Luca Sutera – Independent The Nomination and Remuneration in peer companies; Director, Committee was established to work • introduction of structured and • Almassadam Satkaliyev. out and submit to the Board of Direc- open system of remuneration to Due to the expiration of the term of tors the recommendations relating to: the directors, members of the office of the Board of Directors as • election or nomination of Management Board, Corporate a whole, on 29 May 2015 the Board candidates as independent Secretary. of Directors established a new directors, membership of the The Nomination and Remuneration membership of the Committee: Management Board, Corporate Committee shall perform its functions • Dominique Fache – Chairman Secretary taking into account in accordance with the Regulations of the Committee, Independent the provisions of the Company’s on the Nomination and Remuneration Director; internal documents; Committee. • Anatoliy Spitsyn – Independent • remuneration to the Directors, On 13 February 2015, the Board of Director;

87 Goal 6 Corporate Governance and Sustainability ANNUAL REPORT

Attendance at the meetings in presentia by the members of the Nomination and Remuneration Committee in 2015

Members of the Nomination and % Remuneration 15.10.2015 10.12.2015 10.07.2015 12.02.2015 19.03.2015 Committee 29.04.2015 28.08.2015

Dominique Fache elected on 30.04.2015 + + + + 100

Anatoliy Spitsyn + + + + + + + 100

Luca Sutera + + + the term of office has expired 100

elected on Almassadam Satkaliyev + + the term of office has expired 100 13.02.2015

Janusz Bialek elected on 30.04.2015 + + – + 75

• Janusz Bialek – Independent KEGOC Board of Directors and • priority areas of the Company’s Director. Management Board held a meeting activities, development strategies, In 2015, the Committee held seven with members of KEGOC talent pool. Development plan, implementation (7) meetings in presentia, where In 2015, the Committee fully of investment programmes and 23 issues were reviewed, and the accomplished its goals, tasks and large investment projects at appropriate recommendations were functional duties in accordance with KEGOC; submitted to the Board of Directors, the Regulations on the Nomination • improvement of corporate govern- including nomination of new and Remuneration Committee as well ance at the Company. members of the Board of Directors, as work plan of the Committee. The Committee shall perform Management Board, organisational The Strategic Planning and its functions in accordance with structure, key performance indicators Corporate Governance Committee the Regulations on the Strategic of the Management Board’s members, was established to work out and Planning and Corporate Governance remunerations. submit to the Board of Directors the Committee under KEGOC Board of In October 2015, the members of recommendations relating to: Directors.

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On 13 February 2015, the Board of • Almassadam Satkaliyev. • Anatoliy Spitsyn – Chairman of the Directors established the membership Due to the expiration of the term of Committee, Independent Director; of the Committee: office of the Board of Directors as • Dominique Fache – Independent • Anatoliy Spitsyn – Chairman of the a whole, on 29 May 2015 the Board Director; Committee, Independent Director; of Directors established a new • Luca Sutera – Independent • Luca Sutera – Independent Director, membership of the Committee: Director.

Attendance at the meetings in presentia by the members of the Strategic Planning and Corporate Governance Committee in 2015

Members of the Strategic Planning and % Corporate Governance 15.10.2015 10.12.2015 10.07.2015 12.02.2015 19.03.2015 Committee 29.04.2015 28.08.2015

Anatoliy Spitsyn + + + + + + + 100

Luca Sutera + + + + + + + 100

elected on Almassadam Satkaliyev + + the term of office has expired 100 13.02.2015

Dominique Fache elected on 30.04.2015 + + + + 100

In 2015, the Committee held seven Directors, including issues relating to accomplished its goals, tasks and (7) meetings in presentia, where development strategy, Development functional duties in accordance with 23 issues were reviewed, and the plan, implementation of investment the Regulations on the Strategic appropriate recommendations programme, innovation activities, etc. Planning and Corporate Governance were submitted to the Board of In 2015, the Committee fully Committee, as well as work plan of

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the Committee. It should be noted Board of Directors of KEGOC and/or principles of corporate governance that the Committee’s activities meet Chairman of the Management Board of the Organization for Economic the Samruk-Kazyna’s expectations of Samruk-Kazyna held beyond the Cooperation and Development and as a major shareholder of KEGOC place of permanent residence of an the UK Corporate Governance Code. regarding improved efficiency of independent director. The expenses Having reviewed the findings of the the Board of Directors and rating of shall be compensated within the limits activity assessment of the Board of KEGOC corporate governance. of reimbursement of business trip Directors and its committees, the The independent members of expenses stipulated by the internal Chairman and members of the Board the Board of Directors shall be documents of the Company. of Directors, Management Board, remunerated in accordance with In case of early termination of powers Internal Audit Service and its Head, the resolution of the General of a member of the Board of Directors, and Corporate Secretary, the Board of Shareholders Meeting , during the the annual fixed fee shall be adjusted Directors reached the conclusion that period of fulfilment of their duties, pro rata to the actual number of the work of the Board of Directors and and be compensated for the expenses days of execution of duties by such committees was at an adequate level, related to the execution of their member of the Board of Directors. and qualification of the members of functions as members of the Board of In 2015, the annual fixed fee of the Board of Directors, Management Directors of the Company. independent directors of KEGOC Board Board, Corporate Secretary, Internal The remuneration of the independent of Directors amounted to KZT 37.048 Audit Service and its Head complied directors of KEGOC includes: million, the fee for the participation with the goals and objectives of • annual fixed fee; in the meetings in presentia of the KEGOC. • additional fee. committees amounted to KZT 13.441 The annual fixed fee shall be paid to an million. Management Board independent director for the fulfilment of his/her duties as a member of Activity Assessment The day-to-day activities of KEGOC the KEGOC Board of Directors in the shall be operated by the Management amount determined by the General KEGOC Corporate Governance Code Board, an executive collegial body, Shareholders Meeting in accordance provides for annual assessment of which shall make the decisions on the with the laws of the Republic of the activity of the Board of Directors, Company business related issues that Kazakhstan. The additional fee shall be whereas no less than once every are beyond the competence of other paid to the independent members of three years, the assessment shall be bodies. the Board of Directors for participation carried out with the assistance of an The Management Board shall act in the meetings in presentia of the independent party. in accordance with the Law of committees of the Board of Directors. In 2015, the activity of the Board the Republic of Kazakhstan On An independent director shall be of Directors was assessed through Joint Stock Companies, KEGOC’s compensated for the expenses questionnaire survey based on the Charter, Corporate Governance Code associated with the trip to the methods elaborated by Samruk- and KEGOC Management Board meetings of the Board of Directors Kazyna in accordance with the laws Regulations. of KEGOC, committees under the of the Republic of Kazakhstan and Board of Directors and the meetings the best international practice for the initiated by the Chairman of the corporate governance, particularly the

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Membership of KEGOC Management Board

Since 1 January to 10 December 2015 the following membership of KEGOC Management Board was effective:

Bakytzhan Kazhiyev Chairman of Management Board, KEGOC

Bakytkhan Zhazykbayev First Deputy Chairman of Management Board

Abat Akmurzin Deputy Chairman of Management Board – Operations

Zhanabai Beksary Deputy Chairman of Management Board – Corporate Governance

Muktar Bekenov Managing Director – Branches and Affiliates

Aibek Botabekov Managing Director – Economics

Kairat Zhakipbayev Managing Director – Legal Support and Security

Askerbek Kuanyshbayev Managing Director – NPG Development and System Services

Bolat Temirbekov Managing Director – Technical Supervision and Supply

On 10 December 2015, KEGOC Board of Directors excluded Zhanabai Beksary from the Management Board due to his moving to another company, and elected a new member of the Management Board – Serik Ospanov.

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Thus, as of 31 December 2015 KEGOC Management Board consisted of:

Bakytzhan Kazhiyev born in 1964, citizen of the Republic of Kazakhstan

Education: Alma-Ata Power Engineering Institute majoring in Power Systems and Networks and Karaganda State Technical University majoring in Economics. Experience in the sector is 29 years. Shares owned in KEGOC or its Chairman of KEGOC’s counterparties: no. Management Board

Serik Ospanov born in 1973, citizen of the Republic of Kazakhstan

Education: procurement, logistical support, Semey State University majoring operational dispatch control. in Machinery and Apparatus for Experience in the sector is 15 years. Food Production, and State Kazakh Shares owned in KEGOC or its Academy majoring in Economics and counterparties: no. Management. Areas of responsibility at KEGOC: financial and economic issues, prising, First Deputy Chairman of cooperation with financial institutions, Management Board system services, interaction with power systems and power enterprises of neighbouring countries,

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Bakytkhan Zhazykbayev born in 1968, citizen of the Republic of Kazakhstan

Education: Experience in the sector is 15 years. Kazakh State Academy of Shares owned in KEGOC or its Management majoring in Marketing counterparties: no. and Commerce and Toraigyrov Pavlodar State University majoring in Power Systems and Networks. Areas of responsibility at KEGOC: repair and maintenance of business Deputy Chairman of assets, investment programme, Management Board – technical policy, cooperation with Operations branches and affiliates.

Askerbek Kuanyshbayev born in 1955, citizen of the Republic of Kazakhstan

Education: cooperation with international Alma-Ata Power Engineering organisations. Institute majoring in Power Supply Experience in the sector is 38 years. of Industrial Enterprises and Cities. Shares owned in KEGOC or its Candidate of Economic Science, counterparties: no. Associate Professor – Economics. Areas of responsibility at KEGOC: KEGOC Development Strategy, Deputy Chairman of Management Board – corporate governance, risk NPG Development and management system, integrated Corporate Governance management system, long-term NPG development, technical policy,

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Abat Akmurzin born in 1958, citizen of the Republic of Kazakhstan

Education: Shares owned in KEGOC or its Kazakh Agricultural Institute majoring counterparties: no. in Electrification and Rudny Industrial Institute majoring in Economics and Business Management. Areas of responsibility at KEGOC: branches and affiliates operation, re- pair and maintenance of business as- Managing Director – sets, investment programme, devel- Branches and Affiliates opment of information technologies, construction. Experience in the sector is 35 years.

Muktar Bekenov born in 1958, citizen of the Republic of Kazakhstan

Education: rehabilitation of relay protection Alma-Ata Power Engineering and automation of substations, and Institute majoring in Power Systems operations metrology support. and Networks. Experience in the sector is 35 years. Areas of responsibility at KEGOC: Shares owned in KEGOC or its system services, interaction with counterparties: no. power systems of neighbouring countries, operational dispatch Managing Director – and process control over the UPS System Services operation modes, custom clearance of power flows, operation and

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Aibek Botabekov born in 1976, citizen of the Republic of Kazakhstan

Education: Experience in the sector is 18 years. Buketov Karaganda State University Shares owned in KEGOC or its majoring in International Relations counterparties: no. and Economics. Areas of responsibility at KEGOC: financial and economic issues, pricing, cooperation with financial institutions and audit companies, financial Managing Director – statements, management accounting Economics system.

Kairat Zhakipbayev born in 1964, citizen of the Republic of Kazakhstan

Education: Experience in the sector is 8 years. Kirov Kazakh State University Shares owned in KEGOC or its majoring in Legal Science. counterparties: no. Areas of responsibility at KEGOC: legal issues, economic, technical and information security, documentation record management. He is a member of the Board of Managing Director – Legal Directors at EnergoInform JSC. Support and Security

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Bolat Temirbekov born in 1964, citizen of the Republic of Kazakhstan

Education: Experience in the sector is 28 years. Alma-Ata Power Engineering Institute Shares owned in KEGOC or its majoring in Electrical Power Supply counterparties: no. and Kazakhstan-Russian University majoring in Economics. Areas of responsibility at KEGOC: procurement, logistical support, tech- nical supervision and occupati- onal Managing Director – safety. Technical Supervision and Supply

In order to preliminarily review, documents (IRDs) of KEGOC: Register, Risk Map and also Key take collegial decisions and prepare 1. 10 IRDs and amendments to 12 Risks Management Action Plan recommendations on the supervised IRDs were approved; for 2015 were approved. Progress issues to KEGOC Management Board, 2. two IRDs were agreed and and actions reports with regard to the Company established the advisory submitted for consideration to key risks management are being bodies as follows: KEGOC Board of Directors and reviewed on a quarterly basis. • Investment Committee one IRD was amended. The Management Board preliminarily • Risk Committee • three decisions were made relating reviewed and submitted the reports to • Budget Committee to the single-source procurement the Board of Directors: • Human Resources Development of goods, works and services and • quarterly reports on executed Committee five decisions were made relating material transactions and non- • Debtors and Creditors Committee to conclusion of non-arm’s length arm’s length transactions. • Inventory Committee transactions; • reports on implementation of the In 2015 KEGOC’s Management Board • decisions were made on a number Action Plan of the internal control held 23 meetings and reviewed 191 of issues regarding the internal improvement in 2014; issues, namely: control and risk management • risk reports; • Regarding internal regulatory systems operation. KEGOC’s Risk • report on the Risk Committee’s

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Performance for 2014; for review by KEGOC Board of indicators which shall be developed • disclosure reports for 2015 Directors: EnergoInform, Financial through KEGOC strategic goals and report on work results of Settlement Centre for Support to cascading by specific indicators Human Resources Development Renewable Energy Sources LLP, on business processes/areas of Committee for 2014 and approval Batys Transit JSC. KEGOC operations in the form of KPI of Human Resources Development In addition, the Management Board maps. Right to remuneration for the Committee Work Plan for 2015; considered the sponsorship and year-end results shall be owned by • reports on implementation of charity issues. executive employees actually worked KEGOC Development Plan; The labour payment and during the reporting period not less • KEGOC’s annual and interim remuneration procedure for KEGOC than five (5) months, based on the financial statements; Management Board members shall KPI achievements for the reporting • report on management of be outlined in the Regulations on period. Maximum remuneration for branches, affiliates and jointly- KEGOC Management Board as well the year-end results for executive controlled entities, and impact as the Rules for labour payment employees cannot exceed three- of the financial and economic and remuneration to the executive fold annual amount of salary. At performance of branches, affiliates employees, employees of the Internal occurrence of the right to receipt of and jointly-controlled entities on Audit Service and the Corporate long-term remuneration, maximum KEGOC performance indicators; Secretary of KEGOC. Remuneration amount of short-term remuneration • reports on implementation of system for the Chairman and the shall be reduced to one annual official major investment projects in 2014; members of the Management salary. • report on implementation of Board includes salary and year-end Considering these principles, the KEGOC’s Long-term Development remuneration. Thus, the total salary remuneration will not be paid to Strategy 2025 in 2014 and imple- amounting to KZT 128.07 million was executive employees of KEGOC based mentation of the Comprehensive calculated for the members of KEGOC on the performance in 2015. action plan for KEGOC’s Long-term Management Board from 01 January Development Strategy 2025; 2015 to 31 December 2015. Dividend Policy • KEGOC Annual Report 2014; A year-end remuneration to KEGOC • report on preliminary review of executive employees shall be paid to The dividend policy of KEGOC shall claims from the shareholders in the extent of money means provided be based on the balance of interests relation to KEGOC’s activities in the budget of KEGOC upon of the shareholders in determining and its officers and results of approval of the results of the financial the amount of dividend payments, consideration of such claims. and economic performance based on the increase in the investment • reports on approval of on the audited financial statements. prospects of the Company and its membership, terms of office of The payment of remuneration is capitalization, on the respect and the Counting Board of the General mainly conditioned by consolidated strict observance of the rights Shareholders’ meeting and election total income for the reporting period. of the shareholders, as provided of its members. The remuneration is not permanent. for by the laws of the Republic of In 2015 KEGOC Management Board The performance of executive Kazakhstan. The dividends could be reviewed and submitted a number of employees shall be assessed using paid in case of the availability of net issues on subsidiaries and affiliates the motivational key performance profit of the Company for a reporting

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period, or retained profits; the of the net income for the fiscal year shall be made by the extraordinary absence of restrictions on payment or half-year, is prepared by the general meeting within three (3) of dividends envisaged by the laws Company’s Board of Directors. The months after the Company’s annual of the Republic of Kazakhstan, and amount allocated for payment of financial statements are audited for given the resolution of the General dividends should be at least 40 % the corresponding period. Shareholders’ Meeting. of the net income. Decision to pay The General Shareholders Meeting, The source of dividends shall be dividends on ordinary shares based having reviewed proposals of the net income for appropriate financial on the results of the year shall be Board of Directors, at its discretion year or half-year, or retained made by the annual general meeting shall make a decision to pay dividends profits accrued on the basis of the after the Company’s annual financial on ordinary shares, approve a rate consolidated financial statements of statements are approved. Decision of dividends on one ordinary share KEGOC prepared in accordance with to pay dividends on ordinary shares in the Company, and define a date of the IFRS. A proposal on allocation based on the results of the half-year dividend payment.

Dividend History 2013* 2014 1st half-year 2015

Amount of the dividend per one – 33.13 9.4 ordinary share, KZT

Dividend yield, % – 9.1% 1.4%

Book value per share as of the end of the period for which the dividends were 1,027 1,380 1,370 declared (as per IFRS), KZT

Amount of dividends, KZT thousand – 8,613,800 2,444,000

Share of net profit as per IFRS assigned – 99.97% 40.01% for payment of dividends, %

Name of the issuer governing body that General Shareholders’ General Shareholders’ – took decision to pay dividends Meeting Meeting

Date of the meeting of the issuer governing body where the decision was Minute No. 1 dated 30 Minute No. 2 dated 16 – taken relating to payment of dividends, April 2015 October 2015 date and number of minute

Date of preparing the list of persons – 15 May 2015 30 October 2015 having the right to dividends

*KEGOC did not declare nor pay a dividend for 2013 due to negative value of the net profit

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Internal Audit Service (IAS) checks of the Company’s branches, Risk Management and financial statements, external audit, Internal Control The IAS was established by the decision procurement, risk management, of the KEGOC Board of Directors in 2006. information technologies, projects Risk management system is As of 31 December 2015, the approved and etc. All the engagements were successfully working at KEGOC. This staff in the IAS was eight. performed. system is aimed at continuity and The mission of the IAS is to provide Moreover, within implementation stability of the activity by limiting the necessary support to the Board of the Fund’s Audit Committee impact of the external and internal of Directors and the Management instruction as well as initiative of negative factors on KEGOC’s activity. Board of KEGOC in performance of the Fund’s IAS relating to synergic IT The risk management involves the their duties to achieve the strategic audits in Samruk-Kazyna companies, Board of Directors, the Internal Audit objectives of the Company. The main the IAS took part in the following Services, the Management Board, objective of the IAS is to provide the audit engagements: structural units – the risk owners and Board of Directors with independent • audit of information technologies the structural unit responsible for the and objective information needed in branches and affiliates of risk management. to secure efficient management of Samruk-Energy: Ekibastuz GRES-1 The main principles of the risk the Company by applying a system LLP, Bogatyr Coal LLP (Ekibastuz); management system are: approach to improving the risk • audit of general IT controls • engagement of KEGOC’s management, internal control and in branches and affiliates of executives in risk management; corporate governance systems. KazMunaiGas: Atyrau Refinery • continuous improvement of the The activities of the IAS shall be LLP (Atyrau). risk management system; regulated by the Regulations on According to the 2015 results of • continuous learning and knowledge KEGOC Internal Audit Service, the performed audit engagements, the sharing by the company employees Rules of Internal Audit Management IAS submitted to the Company 291 in risk management sphere; at KEGOC, and job descriptions for the recommendations; among them 286 • transparency and fairness in IAS employees. recommendations were accepted submitting reports and risk All audit engagements were planned by the audited entities, and five (5) escalation. with respect to the mission and the ones were not accepted (i.e. heads The Company annually carries out main objective of the IAS. The risk- of the audited entities accepted risk identification and assessment, based approach was used to plan the the risk of their non-fulfilment). and develops measures on risk internal audit i.e. the priority was Audited entities together with management. KEGOC in its operations given to business processes that are the IAS prepared the Corrective takes into account a wide range of most vulnerable to negative events. Action Plans. Every quarter the IAS business-related risks in categories: The IAS annual audit plan for 2015 monitored the execution of the issued strategic risks, financial risks, was approved by the KEGOC Board recommendations. Following the operational risks, and legal risks. of Directors. The plan provides results of monitoring it was found out The activities of the Risk Committee for execution of 20 engagements. that as of 31 December 2015 KEGOC which is responsible for the preparation Themes of the audit engagements executed 60 recommendations, of recommendations to the KEGOC Man- performed by the IAS in accordance 226 recommendations are at agement Board with regard to the Com- with the plan included the combined implementation stage. pany’s risk management, were very pro-

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ductive in 2015. In 2015, the Committee to eliminate this risk the Company Board shall develop and implement held nine (9) meetings. The Committee’s carries on the correspondence with the ICS internal document approved by members reviewed the reports on the UzbekEnergo relating to timely the Board of Directors, provide reliable risk management system, Risk Register payment and settle of the arrears and efficient operation, monitoring of and Risk Map as well as Risk Manage- for the delivered electricity and the ICS, improvement of processes and ment Action Plan for 2016, etc. power regulation services. Moreo- procedures for internal control. As per Following are the material risks, ver, KEGOC carries out the claims the ICS, the Company shall build a man- which KEGOC incurred in 2015: work regarding the settle of the agement system capable to promptly • Currency risk. Currency risk arrears by UzbekEnergo under the respond to the risks, control over core occurs while fulfilling obligations contracts for power regulation ser- and supporting business processes and under loan agreements and partner vices and unscheduled electricity. daily operations, as well as immediate- contracts. This risk is becoming • Occupational safety risk. With re- ly inform the executives of appropriate the material risk for KEGOC spect to the Company’s activities the level of any material deficiencies and considering that the Company personnel is exposed to the acciden- areas to improve. In 2015, KEGOC ap- receives revenues in national tal risk during operations, as a result proved a Business Process Classifier, currency – tenge, while some of of safety regulations violation or in accordance with which two risk and debt obligations are in foreign occupational diseases. With a view control flowcharts and matrices Repair currencies (US dollar and euro). to mitigate such risk KEGOC’s spe- and Maintenance of Electric Grid Facil- To minimize the exchange rate cialists carry out visits and inspec- ities and Prevention, Confinement and dependence the Company puts its tions, assessment of working places, Elimination of Emergencies in the Ka- funds in second-tier banks’ deposits. technical training of operations and zakhstan UPS. • Decreased scope of system ser- maintenance staff, emergency pro- In accordance with KEGOC Corporate vices delivered, a risk occurring tection and fire safety trainings, pre- Governance Code, the Standard due to reduction of the electricity shift medical inspection, instruc- Internal Control System of KEGOC, transmission scope by the whole- tions, knowledge assessment in the Board of Director is obliged to sale electricity market entities in terms of safety regulations, lectures conduct at least once a year the the Republic of Kazakhstan, and and seminars on injuries prevention assessment (jointly with the Audit due to lower electricity transit and accidents in industries. Committee and the IAS) of the from the Russian Federation. Internal Control System (ICS) is imple- efficiency of internal control system This risk shall be managed by mented and functions at the Company. at the Company and report to the correction of the planned indicators. The ICS is based on the Standard ‘In- General Shareholders’ Meeting on • Risk of non-payment for unsched- ternal Control System of KEGOC’ (ICS such assessment. Such assessment uled electricity consumption and Standard) as well as the Regulations on covers all types of control, including power control services by the Arrangement and Works Performance the financial and operational, control grid operators of the IPS of Cen- on Internal Control System at KEGOC. over the observance and efficiency of tral Asia. The main factor of such In accordance with the ICS Standard, the risk management system. risk is a breach of contract obliga- the Board of Directors shall be respon- In order to assist the Board of Directors tions by UzbekEnergo with regard sible for arrangement, monitoring and in its assessment of the efficiency to payment for the electricity and assessment of the ICS’s efficiency using of the internal control system of power regulation services. In order risk-based approach; the Management KEGOC, the IAS, jointly with the Audit

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Committee, reviewed in detail those • Posting information on the • Provided information support for components on which the system of corporate website of KEGOC; projects and activities of KEGOC, in- internal control is based: • Placing information on the cluding general meetings of KEGOC 1. control environment; internal resources of the Company shareholders, launch of KEGOC Busi- 2. risk assessment; (Lotus Notes software programs, ness Transformation Programme, 3. control procedures; Microsoft Outlook, etc.); operating and dispatching personnel 4. information and its transfer; • Holding press conferences and professional skill competition (Ak- 5. monitoring. meetings with the information molinskiy RDC), XII International The assessment was carried out in recipients; competition of professional skill of accordance with the procedure for • Personal transfer of documents electric power industry experts from assessment of the internal control and other materials; CIS countries (Minsk, Belarus). system efficiency for the branches • Other methods provided by the • Developed and launched an and affiliates of Samruk-Kazyna. Laws and internal documents of updated website of KEGOC with Following the results of the KEGOC. an improved user interface and assessment, the level of KEGOC’s ICS In order to exercise the rights of technical capabilities. conformity to the best world practice shareholders, and ensure high effi- Disclosure of any information by the is 84.32% (in 2014 – 75.82%, growth ciency and availability of informa- Company shall be made in compliance – 8.5%). In 2015 KEGOC improved all tion, that is crucial for KEGOC users, with the Laws on commercial and the ICS components. in 2015 the Company provided the other secret information protected by following: the Laws and the Rules of protection Information Policy • Published operational and financial and preservation of confidential activities of the Company in the me- information in KEGOC. The fundamental principles in dia (press-releases and news at the To assess the information transparency implementation of KEGOC’s corporate website, direct e-mails to in KEGOC, to understand its activity and information policy include: mass media editors office). to reveal the efficiency of the informa- • Regularity and timeliness; • Developed brochures, reports on tion disclosure processes, in 2015 the • Openness and accessibility; the activities of KEGOC; independent party carried on a reputa- • Accuracy and completeness; • Published interview of the tion audit (a full assessment of KEGOC’s • Promptness; Company’s management on the image among the citizens, employees of • Confidentiality; activities of KEGOC; held press the Company and external experts by • Balance; conferences, speeches at meetings questioning and interviewing the ex- • Equal rights for information and public events, briefing for perts from RPCs, broker’s companies, fi- recipients. the media with the assistance nancial institutions, customers and par- Disclosure of information to of the Central Communications ticipants of the wholesale power market, shareholders, investors and other Service under the President of and famous journalists). The results of stakeholders shall be performed by: the Republic of Kazakhstan with this assessment represent a favourable • Providing access to information the participation of Chairman of perception of the activity and improve- (documents); the Board Mr B. Kazhiyev on the ment of the Company’s image both • Publishing information in the implementation of the instructions within the company and among external media; of the Head of State; experts and population of the Republic

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of Kazakhstan. Thus, we see a growth of social efficiency of human resources. • Create and develop shared values, the Company’s reputation in comparison The key priorities of HR policy are: social norms and rules governing with the results of assessment in 2014 • Employ, develop and retain highly employee behaviour; by 5% on such indicators as Influence, qualified employees; • Regulate social and labour Openness and Transparency, Company • Implement the best practices of relations; prevent labour conflicts; and Management Recognition, Aware- personnel management; • Support innovations and reforms ness of the Activity, etc. • Manage the talent pool through in KEGOC. a reasonable mix of internal As of 31 December 2015, the Compa- HR Policy personnel reserve and external ny has employed 4,826 people. resources; HR policy is aimed at ensuring the • Establish executives talent re- balance between the economic and serve;

Structure of personnel by category in 2015 Structure of personnel by age in 2015

42.1% 47.9% White collars 30-50

0.6% Pink collars 19.8% Younger than 30 16.2% Management

41% 32.3% Blue collars Over 51

A big share of the Company’s person- power engineering, and among skilled than 20.93 % have from 5 to 10 years nel has a higher education. As of 31 De- workers education in power engineering of experience in the sector. cember 2015, 61.7 % of employees have (higher and secondary specialized) have Turnover of staff for 2015 was as higher education (55.6 % of operational more than 33 % of employees. follows: Consolidated, 4.46 % (for the personnel), and 26.6 % of employees Over 51.2 % of the Company’s same period in 2014, 6.98 %). have secondary education. More than 30 employees have over ten years of work Recruitment procedure in the Com- % of employees have higher education in experience in the energy sector, more pany is exercised in accordance with

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KEGOC rules of competitive selec- The following main types of personnel defined the business needs in training tion for filling of vacancies. To ensure training are used in KEGOC to ensure of students majoring in Electrical transparency the existing procedures continuity in the process: Equipment for Electrical Stations include search and selection of highly • independent study (self-education); and Networks. The Company made qualified specialists, maintenance of • in-service training (technical indus- a decision to continue maintaining database on candidates, introduction trial study); social partnership with Karaganda of transparent competitive procedures • short-time off-job training at the Polytechnic College. while selecting the personnel to fill va- refresher courses of the specialized To improve the performance of cancies, including testing elements. training centres. the employees and assess their Adapting procedure was introduced to During the reporting period, the qualification level and quality of ensure a comfortable onboarding pro- professional training and professional functional duties performed by cess. To increase and improve the level development covered 2,172 people or them, every year KEGOC arranges of professional knowledge and skills of 45% of the staff listing (4,826 people). qualification tests for employees young operating specialists, to assist in In 2015, the actual costs of KEGOC for including some computer-based their professional development, to pre- training amounted to KZT 250.48 mil- testing elements. In the reporting serve competence of experienced op- lion, including KZT 87.6 million for ad- period, 491 employees passed the erating employees, adapt to corporate ministrative personnel, and KZT 162.8 qualification tests, including: 63 culture, traditions and rules of conduct million for operational personnel. employees from the Executive in KEGOC, the coaching system was in- KEGOC systematically develops the Administration and 12 employees from troduced. In 2015, 43 coachers among talent pool project. The pool includes KEGOC branches included in the list skilled managers and specialists were 359 people. For 2015, the number of of the Executive Administration, 416 appointed in KEGOC branches, as well as vacancies with regard to the talent employees from the branches, as well 44 trainees (new joiners and transferred pool was 52, of which 41 were the as 68 employees from EnergoInform. employees). Upon the recommendation employees from the talent pool. How- During the reporting year, the KEGOC of KEGOC qualification commissions, ever, the percentage of appointment Dynasties competition was held, the coaches received a bonus for coach- from the talent pool is 78.8 %. the winners of the competition were ing. Every year the Company holds Best In the reporting period, the Company dynasties from Almatinskiye MES Mentor of the Year competition, based proceeded to implement Talent Pool (Akylbai dynasty), Severnye MES on the results of this competition the Management project, in the process (Klopov dynasty), Zapadnye MES winner is awarded a badge, pennant, of which TOP-25 talent pool was (Suyesinov dynasty), and Strebkov diploma and presented a valuable prize. established based on the leadership dynasty. The Adamov dynasty competence model. There was a (Tsentralnye MES) participated in the Personnel Development meeting of the employees included celebration of the Labour Dynasties and Training in TOP-25 with the members of the Day at Samruk-Kazyna. Company’s Board of Directors where One of the priorities of the Company’s the key priorities for development Personnel Motivation operations is the personnel develop- were defined. and Incentives ment, i.e. the set of actions aimed at KEGOC has been continuing the work personnel selection, advanced train- on introducing a dual training system The Company’s activity on the social ing and professional growth. for operating personnel. The Company support for its employees is regulated

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by the following internal documents: are aimed at improvement of social day-to-day operations, completely • Collective bargaining agreement; and labour relations, protection understanding the necessity to keep • KEGOC’s HR policy; of employees’ rights and human environmental balance, to ensure • Rules for provision of social resources management in KEGOC. environmentally sustainable social support for KEGOC’s employees; Moreover, the Company supports and economical development of the • Rules of reward and recognition of employees in solving their housing society. merits of KEGOC’s employees. problems by partial reimbursement The goal of KEGOC environmental The Collective bargaining agreement of rent expenditures out of KEGOC policy is to minimize adverse between KEGOC and its employees for funds for a rent period of no more environmental impact, to increase 2014-2018 was amended in accordance than three years (for operational the level of environmental safety, to with the requirements of the labour staff – without limitation as to take responsibility for environmental laws of the Republic of Kazakhstan, time) based on the lease agreement security of Kazakhstan National taking into account all aspects of the concluded independently by the Grid development, to promote social and labour relations, measures employees of the Company. In 2015, energy saving and rational use of on labour conditions improvement the total amount of expenditures for environmental and energy resources as to prevent the social tension in employees housing rent was KZT 112 in the Company’s activities. the staff. The agreement provides million (123 persons). Overhead transmission lines and for agreement joining procedures, In addition, the Company annually outdoor switchgears are not the active takes into account the matters of provides voluntary medical insurance sources of environmental pollution. regulating the labour rules, including for the employees. In 2015, KEGOC’s Main sources of environmental impact rest time during leaves for social insurance covered more than 2,700 from operations of electric-power reasons, labour payment, provision of employees to the amount of KZT 169 grids and substations include: social guarantees and compensations, million. • power frequency electromagnetic specifies measures on employees One of the key indicators of field; support and human resources KEGOC’s HR policy is the personnel • operations of KEGOC branches development, determines a list of engagement index (based on the to maintain networks and jobs and positions with the additional results of employees questionnaire substations; paid leaves for work under harmful, survey and on-line questionnaire • wastes generated during heavy and hazardous conditions, for administrative and managerial substation equipment repair and the issues of health insurance and staff) and the social stability rating upgrade; entertainment and leisure events for determined among operational staff. • Company’s ongoing investment the employees. It also reflects the In 2015, the personnel engagement projects. issues of social support of veterans of index was 68 %, and the social In accordance with the labour laws the Great Patriotic War and equated stability rating was 82 %. of the Republic of Kazakhstan, EMF, persons and long-service power noise and other physical factors at the engineers registered in the Company. Environmental substations are regularly measured The Collective bargaining agreement Protection in accordance with schedules under covers all employees of KEGOC. assessment of labour conditions at In general, all amendments in the KEGOC considers environmental operational facilities. EMF and audible Collective bargaining agreement activities as an integral part of its noise are also measured in case of

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any change in standard sizes and signed contracts. The volume of gross In 2015, KEGOC branches produced design features of equipment (at the emissions from stationary sources in 3,395 tonnes of waste, where 1,343 time of replacement, upgrading, etc.), 2015 was 21.15 tonnes given that the tonnes were disposed at landfills, main electric circuits of substation, fixed standard rate was 27.57 tonnes and 539 tonnes were transferred for approaching transmission lines. p.a. recycling for the purpose of re-use. The excessive exposure levels are Depending on the type, wastes are Transformer oil and scrap metal were addressed with relevant protective divided into production and municipal sold to specialised organisations. measures. wastes (solid domestic wastes) Water consumption in the Company In order to improve working generated in the course of life activity. is insignificant, because it is not used conditions and in accordance with By hazard level, all wastes are divided in the industrial process. There are the Rules for Mandatory Certification into: no discharges into water bodies and of Production Facilities According • ‘green’ – G index (non-hazardous); relief. Water is supplied from artesian to Labour Conditions in 2015 the • ‘amber’ – А index (hazardous); wells at the facilities of 7 branches. Company performed certification • ‘red’ – R index (hazardous). Potential sources of contamination at facilities of Aktyubinskiye MES, The most dangerous wastes of the include transformer oil used in oil- Almatinskiye MES, Zapadnye MES, Company are PCB containing wastes. filled equipment, as well as waste Sarbaiskiye MES, Severnye MES, Polychlorinated biphenyls were waters resulting from domestic use Tsentralnye MES and Yuzhnye MES detected in 22 capacitors following of water. Oil-filled equipment has oil branches: measured EMF, noise, laboratory tests in accordance with receiving devices or oil soak pits that vibration and noise, determined the requirements of Rules for Handling prevent oil from spilling on the soil. harmful and hazardous working of Persistent Organic Pollutants and Environmental external services environment factors affecting Wastes Containing Such Pollutants, expenses in 2015 amounted to: the health of employees at the and approved by order of the Minister • KZT 8.27 million, for performance workplace. for the Environment of the Republic of environmental monitoring of According to maximum permissible of Kazakhstan, and refer to the ambient air, soil, water resources emissions (MPE), the MES branches ‘red’ danger level. The Company and waste water; identified stationary sources of determined places for safe storage • KZT 2.49 million, for developing harmful emissions (both organized of PCB wastes at substations of documents on environmental and unorganized emission source). Akmolinskiye MES, Vostochnye rating for four MES branches, issue In order to reduce emissions from MES, and Severnye MES branches, safety data sheets and required stationary sources, the MES branches concluded contracts with Eurasia environmental estimations; conducted the operational monitoring Insurance Company on mandatory • KZT 8.43 million, industrial waste (monitoring of the operating process), environmental insurance of facilities disposal; namely, they kept records of hours of with hazardous activity, and prepared • KZT 17 million, for assessment by operation for each item of equipment safety data sheets. external auditor of ISО 9001, ISО and consumption of materials. The The main waste products are 14001 and OHSAS 18001 (taking fact of the reduced emissions was transformer oil and scrap metal, into account the expansion of supported by the findings of the generated in the course of operation, certification scope to ISO/IEC environmental monitoring conducted repair and rehabilitation of 27001) management system by the specialized organisations under equipment. certification.

105 Goal 6 Corporate Governance and Sustainability ANNUAL REPORT

Environmental Management were conducted in all branches of breakers, and replacement of auxiliary System Operation the Company; the results of the transformers with dry-type transform- audits showed the compliance of ers allowed for decreasing the volume The environmental management the most inspected facilities of of transformer oil filled in the electrical system shall ensure that MES branches to the environmental equipment by 1,706 tonnes. environmental indicators are management and environmental Under the Investment programme, effectively reached and improved in laws. A few comments were related the EIAs for Rehabilitation of 220 accordance with the environment to waste management at certain kV outdoor switchgear bays at policy of KEGOC. It shall manage facilities; the corrective measures 500 kV Ust-Kamenogorsk SS, with environmental aspects and risks were taken within the established replacement of 220 kV equipment associated with the specific nature of deadlines. were reviewed and approved. the Company’s operations. The results of the certification audit Sections of EIA for four facilities of All environmental risks of KEGOC in of the integrated management system the 500 kV OHTL Ekibastuz – Semey 2015 are in the controlled conditions. conducted in 2015 confirmed that the – Ust-Kamenogorsk Construction The risks details were recorded in the Company’s operations with regard Project and EIA for two facilities of register of environmental aspects of to the environmental management the Pavlodar Electricity Transmission KEGOC. system met the requirements of ISO Reinforcement Project were reviewed KEGOC’s environmental programme 14001:2004. and approved. for 2015 includes a set of measures required to manage environmen- Environmental Actions Operational Safety tal risks and to achieve target and during Investment Projects planned values. The programme was Implementation Safe labour conditions, low level implemented following the year re- of operational injuries, improved sults. In 2015, the environmental as- The environmental requirements operational and sanitary-household pects such as transformer oil, used shall be included into the Terms and labour conditions of the transformer oil and metal scrap were of Reference of the proposed grid employees and low level impact of significant due to replacement of oil- development projects in order to meet harmful and adverse factors are the filled power equipment under the the requirements of environmental constant development priorities of Kazakhstan Electricity Transmission laws at the design and implementation the Company. Rehabilitation Project, Phase II. The project stages. In 2015, the following documents auxiliary transformers were replaced Replacement of oil circuit-breakers were developed in the Company: with dry-type transformers, and oil with SF6 and vacuum circuit-breakers • KEGOC programme for circuit breakers were replaced with under the Kazakhstan Electricity Trans- occupational health and safety SF6 or vacuum circuit breakers. The mission Rehabilitation Project, Phase II management system for 2015; oil free equipment is environmentally and current investment program is one • Register of hazards and risks of friendly, improves fire safety, and ex- of the main ways of introducing new KEGOC for 2015; cludes pollution of ground water and equipment in KEGOC. Following the • Register of significant hazards and soil. results of the project implementation, risks of KEGOC for 2015. In 2015, the internal audits of replacement of oil circuit breakers with A meeting was held from 31 integrated management system SF6 circuit breakers and vacuum circuit March to 1 April 2015 in order to

106 / 2015 Corporate Governance and Sustainability

improve the work of reliability occupational, labour and fire safety of order to eliminate and prevent similar and occupational health units the facilities. violations in future. in improving the grid operation In accordance with the law of In 2015, as result of the taken fire reliability and the occupational Kazakhstan On Compulsory Insurance safety measures there were no fire health of KEGOC’s personnel and to of the Employees Against Accidents and inflammation at KEGOC facilities. exchange experience in addressing at Work, the Company purchased the problematic issues. The heads insurance against accidents at Sponsorship and Charity of reliability and occupational health work for 2015. In accordance with of all MES branches, the senior the requirements of the law of KEGOC allocates considerable specialist-head of training group of Kazakhstan On Compulsory Insurance amounts as sponsor and charity NDC SO, and the head of Occupational of the Owner of the Facility Which support on an annual basis. Safety and Health Service (OSHS) of Operationally Involves the Risk of In 2015, the charity support was EnergoInform attended the meeting. Causing Harm to Third Parties, the provided in the amount of KZT 150.09 The actual occupational health Company purchased such insurance million. For instance, the employees expenses in the Company in 2015 for 2015. of Zapadnye MES branch of KEGOC amounted to KZT 284.701 million. Financing of the fire safety in KEGOC’s received assistance for recovery In 2015, the Company’s employees branches in 2015 amounted to KZT of houses flooded in the disaster. passed the scheduled medical 7.733 million. KEGOC made charitable assistance examinations, all cutting-edge In 2015, in order to maintain and to the Company’s employee for the training, qualification improvement improve the quality of fire safety treatment outside the Republic of training; and provided with personal KEGOC fulfilled the following Kazakhstan. protective equipment, including actions: treated wooden structures In addition, the Company annually electrical protection, special nutrition, of buildings with flame retardant, provides social support to veterans drugs, and safety posters. The re-examined and re-charged fire of power industry and unemployed employees exposed to hazards during extinguishers, delivered fire trainings, pensioners of KEGOC. Thus, in work process received prescribed including trainings together with the accordance with the Collective compensations based on the results public fire fighting service, briefings bargaining agreement between of their working places assessment and trainings on fire safety, basic KEGOC and its employees, 783 with regard to exposure to harmful skills of fire safety according to veterans of power industry received conditions. the HR management plan, tested charitable assistance to celebrate In all branches: the safety workshops external and internal fire fighting professional Power Engineer Day. were delivered during repair mains, internal water system, KEGOC also rendered assistance to 67 campaign including qualification tests and automated fire extinguishing unemployed pensioners veterans of of repair crew and check of availability installations. The branches set up the Great Patriotic War and equated of the individual protection devices, fire-technical committees, headed by persons registered in KEGOC. instruments, harness, and special the chief engineers of the branches. In 2015, the Company also provided cloths. The committees carry out preventive sponsorship for Kone Taraz Public The inspections were conducted in inspections on fire safety on regular Fund to prepare and hold the 550- all the branches specifically to check basis. The action plan was developed year anniversary of the Kazakh the conditions of technical operations, with respect to these violations in Khanate in the city of Taraz.

107 International Cooperation ANNUAL REPORT / 2015

The Company participates in the work of international organizations such Goal 7 as the CIS Electric Power Council, the Eurasian Economic Commission of the Eurasian Economic Union, the Coordination Electric Power Council of the Central Asia, the World Energy Council, the EURELECTRIC association, International the UNECE Committee on Sustainable Energy, the Energy Charter ‘Settlement cooperation of Investment Disputes,’ etc.

In its activities, KEGOC interacts with / power systems of other states, such as the Russian Federation, the Kyrgyz Republic, the Republic of Uzbekistan, and the Republic of Tadzhikistan Goal 7 International Cooperation ANNUAL REPORT

Collaboration deviations of the actual interstate During the reported period, the work with Power Systems net power flow balance from the on establishing contractual relations of Other States scheduled one between KEGOC with respect to other aspects of the and Inter RAO; parallel operation with power systems In its activities, KEGOC interacts with • Agreement for electricity of Central Asia continued. power systems of other states, such transmission (transit) services as: across KEGOC networks. Professional Association • The Russian Federation (Federal In 2015, KEGOC and INTER RAO under Membership Grid Company of Unified Energy the agreement arranged for purchase System, System Operator of and sale (from Russia to Kazakhstan In 2015, to develop international Unified Energy System, Inter RAO), and vice versa) of electricity to cover cooperation, KEGOC participated in • The Kyrgyz Republic (Power Plants the hourly deviations of the actual the following events: OJSC, Kyrgyzstan NPG OJSC), interstate net power flow at the • The CIS Electric Power Council: • The Republic of Uzbekistan border between power systems of 47th and 48th meetings, and (Uzbekenergo JSC), Kazakhstan and Russia. meetings of working bodies of the • The Republic of Tadzhikistan In 2015, KEGOC and FGC Executive Committee of the CIS (Barki Tochik open joint stock UES in accordance with the Electric Power Council; holding company). contract arranged for electricity • The Eurasian Economic transmission (transit) through Commission of the Eurasian The Russian Federation KEGOC’s networks from the Russian Economic Union (Armenia, Federation through the Republic Belarus, Kazakhstan, Russian In 2015, KEGOC continued the relations of Kazakhstan back to the Russian Federation, Kyrgyzstan): 5th with the Russian counterparts with Federation. The transit services meeting of the Consultative respect to agreements for parallel rendered by KEGOC totalled Committee for Electrical Energy operation signed in 2010 in pursuance 3,661.538 million kWh. at the College of the Eurasian with the Intergovernmental Economic Commission, as well as agreement on some measures to Central Asia at 5th and 6th meetings of the Sub- ensure the parallel operation of committee for common electricity power systems of Kazakhstan and The parallel operation of power market development under the Russia dated 20 November 2009. The systems of Central Asia and Eurasian Economic Union. above agreements govern the basic Kazakhstan continued in the reported • agreement with FGC UES technical and financial obligations period. (Russia) to exchange information, of the parties in parallel operation of In 2015, KEGOC purchased the power innovative technologies, Kazakhstan UPS and Russian UPS: control services from IPS of Central knowledge and experience • Agreement for parallel operation Asia (Kyrgyzstan) to the amount of in the electric power sector a of power systems of the Republic 65 MW. cooperation. of Kazakhstan and the Russian In 2015, there was no unscheduled • The Coordination Electric Power Federation; electricity consumption by the power Council of the Central Asia (CEPC • Agreements for electricity system of Uzbekistan from the CA): meeting in presentia (No. procurement to cover the hourly Kazakhstan UPS. 23) and two meetings in absentia

110 / 2015 International Cooperation

(Nos. 21, 22) of the CEPC CA and in management of Samruk-Kazyna two meetings (Nos. 26, 27) of the Sovereign Wealth Fund and KEGOC to Coordination Commission of the discuss current and planned projects. CEPC CA. • The World Energy Council (WEC); presentation of the International Energy Agency report Review of Energy Policy in Eastern Europe, Caucasus and Central Asia Countries; WEC session The Change of Power Energy Development in Europe and the Consequences for Central Asia under the X KAZENERGY Eurasian Forum; 26 session of the Energy Charter. • The EURELECTRIC association; meetings of the UNECE Committee on Sustainable Energy; activities of the round table of the Energy Charter ‘Settlement of Investment Disputes’ under the X KAZENERGY Eurasian Forum. In 2015, representatives of the International Bank for Reconstruction and Development visited KEGOC on working visit and observation mission to monitor the progress of the Alma Electricity Transmission Project (7965 KZ). The representatives of the IBRD noted the early and effective implementation of the project. All affected security policies applied in the Bank under the project are being executed. All legal obligations are met. As part of the missions held, representatives of the IBRD met with representatives of the Government of the Republic of Kazakhstan, and

111 Financial Statements ANNUAL REPORT

FINANCIAL STATEMENTS

External audit of consolidated in accordance with paragraph 139 of financial statements in KEGOC for the Rules for Procurement of goods, 2015 was carried out by independent works and services by Samruk- auditing organization Ernst and Kazyna Sovereign Wealth Fund Young LLP, the member of Chamber JSC and by organisations in which of Auditors of the Republic of Samruk-Kazyna holds fifty per cent or Kazakhstan. more of voting shares (participation In accordance with the Charter of interest) either directly in ownership KEGOC, determination of audit or indirectly under trust management. organization performing the audit The services for financial statements relates to the exclusive competence of audit for 2015 under the contract the General Meeting of Shareholders. for purchase of Audit of Financial Before the General Meeting of Statements for 2013-2015 amounted shareholders the decisions on the to KZT 38.612 million, inclusive of issues referred by the laws of the VAT. Republic of Kazakhstan and the Except audit services, Ernst & Young Charter to competence of the General LLP did not render other services to Meeting of shareholders were made KEGOC in 2015. by the Sole Shareholder of KEGOC. Ernst & Young LLP was defined by the Sole Shareholder on the basis of recommendations issued by the Unified Commission, which acted in accordance with the Procedure for the selection of an auditor for Samruk-Kazyna and organizations of which fifty per cent or more of voting shares (participation interest) belong directly or indirectly to Samruk- Kazyna on the basis of ownership or trust management. The audit services were purchased through a single source procurement procedure

112 / 2015 Financial Statements

113 Financial Statements ANNUAL REPORT

114 / 2015 Financial Statements

Consolidated statement of financial position As at 31 December 2015

In thousands of Tenge Notes 31 December 2015 31 December 2014

Assets

Non-current assets

Property, plant and equipment 7 478,699,792 477,443,676

Intangible assets 1,036,367 1,044,908

Advances paid for non-current assets 7 1,939,241 425,016

Other financial assets 11 5,968,419 3,706,710

Deferred tax asset 26 2,839 683

Investments in associates 8 266,815 282,165

Long-term receivables from related parties 27 1,320,245 154,403

Other non-current assets 24,496 40,379

489,258,214 483,097,940

Current assets

Inventories 9 1,982,353 2,030,045

Trade accounts receivable 10 23,431,376 14,671,787

VAT recoverable and other prepaid taxes 295,619 3,616,172

Income tax prepaid 2,902,770 1,365,474

Other financial assets 11 65,572,190 28,864,716

Restricted cash 12 2,349,629 2,042,349

Other current assets 13 352,190 277,435

Cash and cash equivalents 14 9,030,762 13,962,123

105,916,889 66,830,101

Assets held for sale 6 161,511 –

Total assets 595,336,614 549,928,041

115 Financial Statements ANNUAL REPORT

Consolidated statement of financial position (continued)

In thousands of Tenge Notes 31 December 2015 31 December 2014

Equity and liabilities

Equity

Share capital 15 126,799,554 126,799,554

Asset revaluation surplus 15 221,297,751 221,756,419

Other reserves 15 (170,701) (170,701)

(Accumulated loss) / retained earnings (6,949,990) 11,392,194

340,976,614 359,777,466

Non-current liabilities

Borrowings 16 149,139,660 94,714,528

Deferred tax liability 26 64,677,142 66,791,645

213,816,802 161,506,173

Current liabilities

Trade and other accounts payable 18 13,525,144 11,994,310

Borrowings 16 22,090,879 12,881,885

Construction obligation 17 683,430 683,430

Dividends payable 15 2,199,600 −

Advances received 751,166 1,024,565

Taxes payable other than income tax 559,515 605,849

Income tax payable 4,577 11,342

Other current liabilities 19 728,887 1,443,021

40,543,198 28,644,402

Total liabilities 254,360,000 190,150,575

Total equity and liabilities 595,336,614 549,928,041

Book value per ordinary share (in Tenge) 15 1,307 1,380

116 / 2015 Financial Statements

Consolidated statement of comprehensive income For the year ended 31 December 2015

In thousands of Tenge Notes 2015 2014

Revenue 20 110,061,459 93,519,759

Cost of sales 21 (75,542,604) (74,216,341)

Gross profit 34,518,855 19,303,418

General and administrative expenses 22 (8,564,705) (13,380,998)

Selling expenses (174,438) (164,773)

Reversal of / (impairment loss) 5,353 (157,775)

Gain on revaluation of property, plant and equipment 4 − 14,250,162

Operating profit 25,785,065 19,850,034

Finance income 23 3,876,505 1,894,805

Finance costs 23 (4,788,997) (4,332,763)

Foreign exchange loss, net 24 (35,739,224) (7,510,748)

Share of income of associates, net 6, 8 110,121 106,429

Other income 25 1,086,740 1,863,398

Other expenses (277,281) (291,468)

(Loss)/profit before tax (9,947,071) 11,579,687

Income tax benefit/(expense) 26 2,167,498 (2,963,667)

(Loss)/profit for the year (7,779,573) 8,616,020

Earnings per share

Basic (loss)/profit for the period attributable to ordinary 15 (29.92) 39.09 equity holders (in Tenge)

(Loss)/profit for the year (7,779,573) 8,616,020

117 Financial Statements ANNUAL REPORT

Consolidated statement of comprehensive income (continued)

In thousands of Tenge Notes 2015 2014

Other comprehensive income

Other comprehensive income not to be reclassified to profit or loss in subsequent periods

Gain on revaluation of property, plant and equipment – 138,887,289

Income tax effect – (27,777,458)

Net other comprehensive income not to be reclassified to profit or loss in subsequent – 111,109,831 periods, net of tax

Other comprehensive income for the year, – 111,109,831 net of tax

Total comprehensive (loss)/income for the year, (7,779,573) 119,725,851 net of tax

118 / 2015 Financial Statements

Consolidated statement of cash flows For the year ended 31 December 2015

In thousands of Tenge Notes 2015 2014

Operating activities

(Loss) / profit before tax (9,947,071) 11,579,687

Adjustments to reconcile (loss) / profit before tax to net cash flows

Depreciation and amortisation 22,420,041 19,058,763

Finance costs 23 4,788,997 4,332,763

Foreign exchange loss, net 45,952,373 8,147,718

(Reversal of) / provision for doubtful accounts receivable and 22 (1,969,605) 2,673,958 impairment of advances and other current assets

Provision for obsolete inventory 22 80,681 155,069

Loss from revaluation of assets held for sale 481 −

Income from sales of investment property (214,488) −

Loss from disposal of property, plant and equipment 239,545 272,453 and intangible assets

Revaluation gain on property, plant and equipment − (14,250,162)

Income from transfer of fixed assets from customer − (1,616,399)

Finance income 23 (3,876,505) (1,894,805)

(Reversal) / accrual of reserve on construction in progress (5,353) 157,775

Share of income of associates, net 6, 8 (110,121) (106,429)

119 Financial Statements ANNUAL REPORT

Consolidated statement of cash flows (continued)

In thousands of Tenge Notes 2015 2014

Working capital adjustments

Change in inventories (32,989) (268,227)

Change in trade accounts receivable (6,549,880) (9,264,504)

Change in VAT recoverable and other prepaid taxes 3,320,553 (798,420)

Change in other current assets (30,129) 159,831

Change in trade and other accounts payable (597,441) 2,115,684

Change in advances received (273,399) 234,681

Change in taxes payable other than income tax (277,921) (102,695)

Change in other current liabilities (705,175) 230,954

Cash flows from operating activities 52,212,594 20,817,695

Interest paid (4,096,789) (3,553,306)

Income tax paid (1,072,964) (48,828)

Interest received 2,932,699 1,214,999

Net cash flows from operating activities 49,975,540 18,430,560

120 / 2015 Financial Statements

Consolidated statement of cash flows (continued)

In thousands of Tenge Notes 2015 2014

Investing activities

Withdrawal of bank deposits 28,500,146 19,013,283

Placement of bank deposits (38,605,228) (28,306,613)

Change in restricted cash 1,267,838 (190,689)

Proceeds from sale of property, plant and equipment and 1,632 73,376 intangible assets

Purchase of property, plant, equipment (23,742,222) (22,171,998)

Purchase of intangible assets (134,896) (419,847)

Payment for construction of kinder garden (185,337) (375,905)

Repayment of loans given to employees 27,194 24,323

Distribution from an associate − 44,710

Net cash flows used in investing activities (32,870,873) (32,309,360)

Financing activities

Proceeds from shares issuance 15 – 13,129,999

Payment for consulting services related to IPO – (90,561)

Payment of dividends 15 (8,858,003) −

Repayment of borrowings (14,194,528) (10,951,764)

Proceeds from borrowings − 13,592,683

Net cash flows (used in)/from financing activities (23,052,531) 15,680,357

Net change in cash and cash equivalents (5,947,864) 1,801,557

Net foreign exchange difference 1,016,503 433,011

Cash and cash equivalents at 1 January 13,962,123 11,727,555

Cash and cash equivalents at 31 December 14 9,030,762 13,962,123

121 Financial Statements ANNUAL REPORT

Consolidated statement of changes in equity For the year ended 31 December 2015

Share Asset re- Other Retained Total capital valuation reserves earnings / surplus (accumu- In thousands of Tenge lated loss)

As at 1 January 2014 107,245,972 110,878,954 (170,701) 3,227,238 221,181,463

Profit for the year – – – 8,616,020 8,616,020

Gain on revaluation of property, plant and equipment, net of tax – 111,109,831 – − 111,109,831 (Note 7)

Total comprehensive income – 111,109,831 – 8,616,020 119,725,851

Transfer of asset revaluation – (232,366) – 232,366 – reserve (Note 15)

Issue of shares (Note 15) 20,246,150 − – − 20,246,150

Transaction costs attributable to (692,568) − – − (692,568) Initial Public Offering (Note 15)

Distribution to shareholder − − – (683,430) (683,430) (Note 17)

As at 31 December 2014 126,799,554 221,756,419 (170,701) 11,392,194 359,777,466

Loss for the year – – – (7,779,573) (7,779,573)

Total comprehensive income – – – (7,779,573) (7,779,573)

Dividends (Note 15) – – – (11,057,800) (11,057,800)

Transfer of asset revaluation – (458,668) – 458,668 − surplus (Note 15)

Other changes in equity of the – − – 36,521 36,521 associate

As at 31 December 2015 126,799,554 221,297,751 (170,701) (6,949,990) 340,976,614

122 / 2015 Financial Statements

123 Financial Statements ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2015

1. GENERAL INFORMATION the Government of the Republic of in energy system, provides system Kazakhstan. services and acquires auxiliary services Kazakhstan Electricity Grid Operating On 19 December 2014 the Company from wholesale entities at energy Company JSC (“the Company” or placed 25,999,999 shares (10 percent market, as well as transmits electricity “KEGOC”) was established in accordance minus one share) at 505 Tenge per share through unified power system (the with the Government Resolution on the Kazakhstan Stock Exchange “UPS”), ensures its technical support No. 1188 dated 28 September 1996 under the “People’s IPO” programme. and maintenance. The UPS consists by transferring of some assets of KEGOC is the national company which of substations, distribution devices, the former National Energy System provides electricity transmission, interregional and international power “Kazakhstanenergo”. dispatch and electricity production- transmission lines which provide As of 31 December 2015 and as of 31 consumption balancing services in the output of electricity of electrical December 2014, the Company’s major Kazakhstan. As the state-appointed stations with the voltage of 220 kW and shareholder was Sovereign Wealth system operator, the Company provides more. Fund “Samruk-Kazyna” JSC (“Samruk- centralized dispatching control, ensures The Company has stakes in the following Kazyna”) (90 percent plus one share). parallel work with energy systems of companies as of 31 December 2015 and Samruk-Kazyna is controlled by other countries, maintains the balance 31 December 2014:

31 December 31 December Companies Activities 2015 2014

Energoinform JSC Maintenance of the KEGOC’s IT system 100% 100%

Accounting and Finance Centralised sales and purchase of electricity produced Center for the support by energy producers using renewable energy sources 100% 100% of renewable energy and delivery into the electricity grid of the Republic of resources LLP Kazakhstan

124 / 2015 Financial Statements

The Company and its subsidiaries are certain classes of property, plant assessing whether it has power over hereafter referred as the “Group”. and equipment, which are stated at an investee, including: revalued amounts and available for • The contractual arrangement The Group’s operating activities are sale financial assets that have been with the other vote holders of the regulated by the Law of the Republic measured at fair value as described investee; of Kazakhstan dated 9 July 1998 No. in the accounting policies and notes • Rights arising from other 272 I On Natural Monopolies and to these consolidated financial contractual arrangements; Regulated Markets as the Group is statements. The consolidated • The Group’s voting rights and a natural monopolist in electricity financial statements are presented potential voting rights. transmission, technical dispatch and in Kazakhstan Tenge (“Tenge” or The Group re-assesses whether or electricity production-consumption “KZT”) and all values are rounded to not it controls an investee if facts and balancing services. According to the nearest thousands, except when circumstances indicate that there are the Law, the Group’s electricity otherwise indicated. changes to one or more of the three transmission, technical dispatch and elements of control. Consolidation of a electricity production-consumption Basis of consolidation subsidiary begins when the Group ob- tariffs are approved by the Committee tains control over the subsidiary and of the Republic of Kazakhstan for the The consolidated financial statements ceases when the Group loses control Regulation of Natural Monopolies (the comprise the financial statements of the subsidiary. Assets, liabilities, in- “Committee”). of the Company and its subsidiaries come and expenses of a subsidiary ac- The Company’s registered office as at 31 December 2015. Control is quired or disposed of during the year is located at 59 Tauelsyzdyk Str., achieved when the Group is exposed, are included in the statement of com- Astana, 010000, the Republic of or has rights, to variable returns from prehensive income from the date the Kazakhstan. its involvement with the investee and Group gains control until the date the These consolidated financial has the ability to affect those returns Group ceases to control the subsidiary. statements were authorised for issue through its power over the investee. Profit or loss and each component of by the Company’s Acting Chairman Specifically, the Group controls an other comprehensive income (OCI) are of the Management Board and Chief investee if and only if the Group has: attributed to the equity holders of the Accountant on 3 March 2016. • Power over the investee (i.e. parent of the Group and to the non- existing rights that give it the controlling interests, even if this results 2. BASIS OF PREPARATION current ability to direct the relevant in the non-controlling interests having activities of the investee); a deficit balance. When necessary, The consolidated financial statements • Exposure, or rights, to variable adjustments are made to the financial of the Group have been prepared returns from its involvement with statements of subsidiaries to bring in accordance with International the investee; and their accounting policies into line Financial Reporting Standards • The ability to use its power over with the Group’s accounting policies. (“IFRS”) as issued by the International the investee to affect its returns. All intra-group assets and liabilities, Accounting Standards Board (“IASB”). When the Group has less than a equity, income, expenses and cash These consolidated financial majority of the voting or similar rights flows relating to transactions between statements have been prepared on of an investee, the Group considers all members of the Group are eliminated a historical cost basis, except for relevant facts and circumstances in in full on consolidation.

125 Financial Statements ANNUAL REPORT

A change in the ownership interest for the adoption of following new relating to the definitions of perfor- of a subsidiary, without a loss of standards and interpretations mance and service conditions which control, is accounted for as an equity effective as of 1 January 2015. The are vesting conditions, including: transaction. If the Group loses control Group did not yearly adopt standards, • A performance condition must over a subsidiary, it: interpretations and amendments that contain a service condition; • Derecognises the assets (including were issued, but not yet effective. • A performance target must be met goodwill) and liabilities of the Amendments to IAS 19 Defined while the counterparty is rendering subsidiary; Benefit Plans: Employee service; • Derecognises the carrying amount Contributions • A performance target may relate of any non-controlling interests; IAS 19 requires an entity to consider to the operations or activities of an • Derecognises the cumulative contributions from employees or third entity, or to those of another entity translation differences recorded in parties when accounting for defined in the same group; equity; benefit plans. Where the contributions • A performance condition may be • Recognises the fair value of the are linked to service, they should be a market or non-market condition; consideration received; attributed to periods of service as a • If the counterparty, regardless of • Recognises the fair value of any negative benefit. These amendments the reason, ceases to provide ser- investment retained; clarify that, if the amount of the contri- vice during the vesting period, the • Recognises any surplus or deficit butions is independent of the number service condition is not satisfied. in profit or loss; of years of service, an entity is permit- IFRS 3 Business Combinations • Reclassifies the parent’s share of ted to recognise such contributions as The amendment is applied components previously recognised a reduction in the service cost in the prospectively and clarifies that in OCI to profit or loss or retained period in which the service is rendered, all contingent consideration earnings, in accordance with IFRS, instead of allocating the contributions arrangements classified as liabilities as would be required if the Group to the periods of service. This amend- (or assets) arising from a business had directly disposed of the related ment is effective for annual periods combination should be subsequently assets or liabilities. beginning on or after 1 July 2014. This measured at fair value through profit amendment will not affect the Group, or loss whether or not they fall within 3. summary of significant since none of the entities within the the scope of IFRS 9 (or IAS 39, as accounting policies Group has defined benefit plans with applicable). contributions from employees or third IFRS 8 Operating Segments New and amended standards and parties. The amendments are applied interpretations Annual improvements 2010-2012 retrospectively and clarify that: cycle • An entity must disclose the The accounting policies adopted in These improvements are effective judgements made by management the preparation of the consolidated from 1 July 2014 and did not have a in applying the aggregation financial statements are consistent material impact on the Group. They criteria in paragraph 12 of IFRS with those followed in the preparation include: 8, including a brief description of the Group’s annual consolidated IFRS 2 Share-based Payments of operating segments that have financial statements for the year This improvement is applied pro- been aggregated and the economic ended 31 December 2014, except spectively and clarifies various issues characteristics (e.g., sales and

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gross margins) used to assess prospectively and clarifies for the IFRS 9 Financial Instruments whether the segments are ‘similar’; scope exceptions within IFRS 3 that: In July 2014, the IASB issued the • The reconciliation of segment • Joint arrangements, not just joint final version of IFRS 9 Financial assets to total assets is only ventures, are outside the scope of Instruments which reflects all required to be disclosed if the IFRS 3; phases of the financial instruments reconciliation is reported to the • This scope exception applies project and replaces IAS 39 chief operating decision maker, only to the accounting in the Financial Instruments: Recognition similar to the required disclosure financial statements of the joint and Measurement and all previous for segment liabilities. arrangement itself. versions of IFRS 9. The standard IAS 16 Property, Plant and Equipment IFRS 13 Fair Value Measurement introduces new requirements for and IAS 38 Intangible Assets The amendment is applied classification and measurement, The amendment is applied prospectively and clarifies that the impairment, and hedge accounting. retrospectively and clarifies in IAS portfolio exception in IFRS 13 can be IFRS 9 is effective for annual periods 16 and IAS 38 that the asset may be applied not only to financial assets beginning on or after 1 January 2018, revalued by reference to observable and financial liabilities, but also to with early application permitted. data on either the gross or the other contracts within the scope of Retrospective application is required, net carrying amount. In addition, IFRS 9 (or IAS 39, as applicable). but comparative information is not the accumulated depreciation IAS 40 Investment Property compulsory. Early application of or amortisation is the difference The description of ancillary services previous versions of IFRS 9 (2009, between the gross and carrying in IAS 40 differentiates between 2010 and 2013) is permitted if the amounts of the asset. investment property and owner- date of initial application is before IAS 24 Related Party Disclosures occupied property (i.e., property, plant 1 February 2015. The adoption of The amendment is applied and equipment). The amendment is IFRS 9 will have an effect on the retrospectively and clarifies that a applied prospectively and clarifies classification and measurement of management entity (an entity that that IFRS 3, and not the description the Group’s financial assets, but provides key management personnel of ancillary services in IAS 40, is no impact on the classification and services) is a related party subject used to determine if the transaction is measurement of the Group’s financial to the related party disclosures. the purchase of an asset or business liabilities. In addition, an entity that uses a combination. IFRS 15 Revenue from Contracts management entity is required to with Customers disclose the expenses incurred for Standards issued, but not yet IFRS 15 was issued in May 2014 and management services. effective establishes a new five-step model Annual improvements 2011-2013 that will apply to revenue arising from cycle The standards and interpretations contracts with customers. Under IFRS These improvements are effective that are issued, but not yet effective, 15 revenue is recognised at an amount from 1 July 2014 and did not have a up to the date of issuance of the that reflects the consideration material impact on the Group. They Group’s financial statements are to which an entity expects to be include: disclosed below. The Group intends to entitled in exchange for transferring IFRS 3 Business Combinations adopt these standards, if applicable, goods or services to a customer. The The amendment is applied when they become effective. principles in IFRS 15 provide a more

127 Financial Statements ANNUAL REPORT

structured approach to measuring Amendments to IFRS 11 Joint business (of which the asset is part) and recognising revenue. The new Arrangements: Accounting for rather than the economic benefits revenue standard is applicable to all Acquisitions of Interests that are consumed through use of the entities and will supersede all current The amendments to IFRS 11 require asset. As a result, a revenue-based revenue recognition requirements that a joint operator accounting for method cannot be used to depreciate under IFRS. Either a full or modified the acquisition of an interest in a joint property, plant and equipment and retrospective application is required operation, in which the activity of the may only be used in very limited for annual periods beginning on joint operation constitutes a business circumstances to amortise intangible or after 1 January 2017 with early must apply the relevant IFRS 3 assets. The amendments are effective adoption permitted. The Group is principles for business combinations prospectively for annual periods currently assessing the impact of accounting. The amendments also beginning on or after 1 January 2016, IFRS 15 and plans to adopt the new clarify that a previously held interest with early adoption permitted. These standard on the required effective in a joint operation is not remeasured amendments are not expected to have date. on the acquisition of an additional any impact to the Group given that the IFRS 14 Regulatory Deferral interest in the same joint operation Group has not used a revenue-based Accounts while joint control is retained. In method to depreciate its non-current IFRS 14 is an optional standard that addition, a scope exclusion has been assets. allows an entity, whose activities added to IFRS 11 to specify that the Amendments to IAS 16 and IAS 41 are subject to rate-regulation, to amendments do not apply when the Agriculture: Bearer Plants continue applying most of its existing parties sharing joint control, including The amendments change the accounting policies for regulatory the reporting entity, are under accounting requirements for deferral account balances upon its common control of the same ultimate biological assets that meet the first-time adoption of IFRS. Entities controlling party. definition of bearer plants. Under the that adopt IFRS 14 must present The amendments apply to both the amendments, biological assets that the regulatory deferral accounts as acquisition of the initial interest in a meet the definition of bearer plants separate line items on the statement joint operation and the acquisition of will no longer be within the scope of financial position and present any additional interests in the same of IAS 41. Instead, IAS 16 will apply. movements in these account joint operation and are prospectively After initial recognition, bearer plants balances as separate line items in the effective for annual periods beginning will be measured under IAS 16 at statement of profit or loss and other on or after 1 January 2016, with accumulated cost (before maturity) comprehensive income. The standard early adoption permitted. These and using either the cost model or requires disclosures on the nature of, amendments are not expected to have revaluation model (after maturity). and risks associated with, the entity’s any impact to the Group. The amendments also require that rate-regulation and the effects of Amendments to IAS 16 and IAS 38: produce that grows on bearer plants that rate-regulation on its financial Clarification of Acceptable Methods will remain in the scope of IAS 41 statements. IFRS 14 is effective for of Depreciation and Amortisation measured at fair value less costs to annual periods beginning on or after The amendments clarify the principle sell. For government grants related to 1 January 2016. Since the Group is an in IAS 16 and IAS 38 that revenue bearer plants, IAS 20 Accounting for existing IFRS preparer, this standard reflects a pattern of economic benefits Government Grants and Disclosure would not apply. that are generated from operating a of Government Assistance will apply.

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The amendments are retrospectively • IFRS 7 Servicing Contracts; • There is no unconditional right to effective for annual periods beginning • IFRS 7 Applicability of the defer the settlement of the liability on or after 1 January 2016, with Amendments to IFRS 7 to for at least twelve months after the early adoption permitted. These Condensed Interim Financial reporting period. amendments are not expected to have Statements; The Group classifies all other any impact to the Group as the Group • IAS 19 Regional Market Issue; liabilities as non-current. does not have any bearer plants. • IAS 34 Disclosure of Information Deferred tax assets and liabilities are Amendments to IAS 27: Equity “elsewhere in the interim financial classified as non-current assets and Method in Separate Financial report”. liabilities. Statements The amendments will allow entities Current versus non-current Fair value to use the equity method to account classification measurement for investments in subsidiaries, joint ventures and associates in their The Group presents assets and The Group measures financial separate financial statements. Entities liabilities in statement of financial instruments, such as, available for already applying IFRS and electing position based on current/non- sale (“AFS”) financial assets at fair to change to the equity method in its current classification. An asset as value at each balance sheet date, separate financial statements will have current when it is: and non-financial assets (UPS to apply that change retrospectively. • Expected to be realized or intended assets) at fair value when fair value For first-time adopters of IFRS to sold or consumed in normal differs materially from their carrying electing to use the equity method in operating cycle; value. Also, fair values of financial its separate financial statements, they • Held primarily for the purpose of instruments measured at amortized will be required to apply this method trading; cost are disclosed in Note 28. from the date of transition to IFRS. The • Expected to be realized within Fair value is the price that would amendments are effective for annual twelve months after the reporting be received from sale of an asset periods beginning on or after 1 January period; or or paid to transfer a liability in an 2016, with early adoption permitted. • Cash or cash equivalent unless orderly transaction between market These amendments will not have any restricted from being exchanged or participants at the measurement impact on the Group’s consolidated used to settle a liability for at least date. The fair value measurement is financial statements. twelve months after the reporting based on the presumption that the Annual improvements 2012-2014 period. transaction to sell the asset or transfer cycle All other assets are classified as non- the liability takes place either: These improvements are effective current. • In the principal market for the from 1 January 2016. The Group A liability is current when: asset or liability; management is in process of • It is expected to be settled in • In the absence of a principal assessment whether these normal operating cycle; market, in the most advantageous improvements will have a material • It is held primarily for the purpose market for the asset or liability. impact on the Group. They include: of trading; The principal or the most • IFRS 5 Changes in Methods of • It is due to be settled within twelve advantageous market must be Disposal; months after the reporting period; accessible to by the Group. The fair

129 Financial Statements ANNUAL REPORT

value of an asset or a liability is For assets and liabilities that are The finance management, in measured using the assumptions recognized in the financial statements conjunction with the Group’s that market participants would use on a recurring basis, the Group external values, also compares when pricing the asset or liability, determines whether transfers each the changes in the fair value assuming that market participants act have occurred between Levels of each asset of revalued class of in their economic best interest. A fair in the hierarchy by re-assessing property, plant and equipment in value measurement of a non-financial categorization (based on the lowest accordance with Group accounting asset takes into account a market level input that is significant to the policy with relevant external sources participant’s ability to generate fair value measurement as a whole) at to determine whether the change is economic benefits by using the asset the end of each reporting period. reasonable. in its highest and best use or by selling The Group’s finance management The finance management and it to another market participant that determines the policies and external values discusses the major would use the asset in its highest and procedures for both recurring fair value assumptions used in the valuations. best use. measurement, such as UPS assets and For the purpose of fair value The Group uses valuation techniques unquoted AFS financial assets, and for disclosures, the Group has determined that are appropriate in the non-recurring measurement, if any. classes of assets and liabilities on the circumstances and for which sufficient External valuers are involved for basis of the nature, characteristics data are available to measure fair valuation of UPS assets. Involvement and risks of the asset or liability and value, maximizing the use of relevant of external valuers is decided upon the level of the fair value hierarchy as observable inputs and minimizing the annually by the finance management. explained above. use of unobservable inputs. Selection criteria include market All assets and liabilities for which fair knowledge, reputation, independence Foreign currencies value is measured or disclosed in the and whether professional financial statements are categorized standards are maintained. The The Group’s consolidated financial within the fair value hierarchy, finance management decides, after statements are presented in Tenge described as follows, based on the discussions with the Group’s external (“KZT”), which is also the parent lowest level input that is significant to valuers, which valuation techniques company’s functional currency. Each the fair value measurement as a whole: and inputs to use for each case. entity in the Group determines its • Level 1 − quoted (unadjusted) At each reporting date, the own functional currency and items market prices in active markets for finance management analyses the included in the financial statements of identical assets or liabilities; movements in the values of assets each entity are measured using that • Level 2 − valuation techniques and liabilities which are required to functional currency. for which the lowest level input be re-measured or re-assessed as per Transactions in foreign currencies are that is significant to the fair the Group’s accounting policies. For initially recorded by the Group entities value measurement is directly or this analysis, the finance management at their respective functional currency indirectly observable; verifies the major inputs applied spot rates at the date the transaction • Level 3 − valuation techniques in the latest valuation by agreeing first qualifies for recognition. for which the lowest level input the information in the valuation Monetary assets and liabilities that is significant to the fair value computation to contracts and other denominated in foreign currencies measurement is unobservable. relevant documents. are retranslated at the functional

130 / 2015 Financial Statements

currency spot rate of exchange at the in a foreign currency are translated recognized in other comprehensive reporting date. using the exchange rates as at the income or profit or loss, respectively). Differences arising on settlement or dates of the initial transactions. Exchange rates for foreign currencies translation of monetary items are Non-monetary items measured at in which the Group had significant recognized in profit or loss with the fair value in a foreign currency are transactions are represented as exception of monetary items that are translated using the exchange rates follows: designated as part of the hedge of the at the date when the fair value is Group’s net investment of a foreign determined. The gain or loss arising operation. These are recognized in on translation of non-monetary items other comprehensive income until is treated in line with the recognition the net investment is disposed of, at of gain or loss on change in fair value which time, the cumulative amount is of the item (i.e., translation differences reclassified to profit or loss. on items whose fair value gain or loss Non-monetary items that are is recognized in other comprehensive measured in terms of historical cost income or profit or loss is also

31 December 31 December Exchange rate as at the end of the period (to KZT) 2015 2014

USD 1 340.01 182.35

EUR 1 371.46 221.59

RUR 1 4.61 3.13

31 December 31 December Average exchange rate for the year (to KZT) 2015 2014

USD 1 222.25 179.12

EUR 1 246.48 238.1

RUR 1 3.62 4.76

131 Financial Statements ANNUAL REPORT

Non-current assets held for sale not corrected for adjustment with of the property, plant and equipment classification at the end of the current as a replacement if the recognition Non-current assets and disposal reporting period. criteria are satisfied. groups (which may include current Disposal groups are assets (current All other repair and maintenance and non-current assets) are or non-current) to be disposed by costs are recognized in profit or loss recognised on the balance sheet as sale or otherwise, together as a group as incurred. “held for sale” in case of its net assets in a single transaction, and liabilities UPS assets are measured at fair value value will be compensated mainly by directly associated with those less accumulated depreciation and sale during the twelve months after assets that will be transferred in the impairment losses recognized at the the reporting date. transaction. Goodwill is accounted in date of revaluation. Valuations are Assets classification is subject a disposal group in case a disposal performed with sufficient frequency to change upon all the following group includes units generating to ensure that the fair value of conditions: (a) the assets are cash flow, which has been allocated a revalued asset does not differ available for immediate sale in its goodwill. materially from its carrying amount. present condition, in accordance with Non-current assets held for sale and A revaluation surplus is recorded the conditions customary for sales disposal groups are valued at the in OCI and credited to the asset of such assets; (b) the Company’s lower of book value and fair value less revaluation surplus in equity. management approved the active costs of sell. Non-current assets held However, to the extent that it reverses program for searching a buyer and for sale are not amortized. a revaluation deficit of the same initiated an active implementation; asset previously recognized in profit (c) assets are actively marketed Property, plant and equipment or loss, the increase is recognized for a sale at a reasonable price in profit and loss. A revaluation compared to their fair value; (d) the Property, plant and equipment, deficit is recognized in statement of sale is expected within one year except for UPS assets, are stated at comprehensive income, except to and (e) the necessary actions to cost, net of accumulated depreciation the extent that it offsets an existing complete the sale plan indicate that and accumulated impairment losses, surplus on the same asset recognized it is unlikely that significant changes if any. Such cost includes the cost in the asset revaluation surplus. Upon will be made in the plan of sale or its of replacing part of the property, disposal, any revaluation surplus cancellation. plant and equipment and borrowing relating to the particular asset Non-current assets or disposal costs for long-term construction being sold is transferred to retained groups classified in the balance projects if the recognition criteria earnings. sheet in the current period as held are met. When significant parts of Depreciation is computed on a for sale are recorded in the balance property, plant and equipment are straight-line basis over the estimated sheet separately. Liabilities directly required to be replaced at intervals, useful lives set out in the following associated with disposal group the Group recognizes such parts table: transferred in the disposal, to be as individual assets with specific transferred to the category “held for useful lives and depreciates them sale” and are recognized in the balance accordingly. Likewise, when a major sheet separately. Comparative inspection is performed, its cost is information of the balance sheet are recognized in the carrying amount

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Buildings 60 years

UPS assets

Power transmission lines 50 years

Constructions 10-30 years

Machinery and equipment 12-30 years

Vehicles and other property, plant and equipment

Other machinery and equipment 7-25 years

Vehicles 11 years

Computers and other data processing equipment 4-10 years

Furniture 7 years

Other property, plant and equipment 3-15 years

Land is not depreciated. are reviewed annually and, where in the consolidated statement of Due to changes in the National applicable, adjustments are made on comprehensive income. Classifier of Fixed Assets of the a prospective basis. If expectations An item of property, plant and Republic of Kazakhstan effective differ from previous estimates, equipment is derecognized upon from 1 January 2015 “UPS Machinery the changes are accounted for as a disposal or when no future economic and equipment” class has been change in an accounting estimate in benefits are expected from its use or separated from “UPS constructions” accordance with IAS 8 Accounting disposal. Any gain or loss arising on class. Therefore, the Group renamed Policies, Changes in Accounting de-recognition of the asset (calculated “UPS constructions” into “UPS Estimates and Errors. These as the difference between the net assets” for the purposes of financial estimates may have a material impact disposal proceeds and the carrying statements. on the amounts of the carrying values amount of the asset) is included in the The useful lives and residual values of property, plant and equipment and profit or loss in the year the asset is of property, plant and equipment on depreciation expenses recognized derecognized.

133 Financial Statements ANNUAL REPORT

Investment property reliably. All other expenses on repairs generate future economic benefits; and maintenance are recorded as • The availability of resources to Investment property includes expenses when incurred. complete the asset; property of the Group which is held • The ability to measure reliably the to earn income from rent and/or Intangible assets expenditure during development. purchased for the purpose of capital Following initial recognition of the appreciation over time and is not used Intangible assets are measured on development expenditure as an by the Group. initial recognition at cost. Following asset, the asset is carried at cost Investment property is recorded initial recognition, intangible less any accumulated amortisation in the financial statements at cost assets are carried at cost less any and accumulated impairment losses. of purchase less accumulated accumulated amortisation and Amortisation of the asset begins depreciation and provision for accumulated impairment losses. when development is complete impairment, if any. Subsequent Internally generated intangible assets, and the asset is available for use. to initial recognition investment excluding capitalised development It is amortised over the period of properties are measured under cost costs, are not capitalised and expected future economic benefit. model. Earned income from rent expenditure is reflected in the profit Amortisation is recorded in cost is recognized in the statement of and loss in the period in which of sales. During the period of comprehensive income as rental expenditure is incurred. development, the asset is tested for income from investment activities. Intangible assets of the Group consist impairment annually. Gain or loss on disposal of investment primarily of licenses and software. property is determined as the Intangible assets are amortized Impairment of non-financial difference between the sales proceeds on a straight-line basis over their assets and the book value of investment estimated useful lives, generally from property. 3 to 20 years. The Group assesses, at each reporting Since the Group uses a model of date, whether there is an indication accounting for investment property Research and that an asset may be impaired. If any based on actual costs, movement development costs indication exists, or when annual between investment property, impairment testing for an asset fixed assets and inventory does Research costs are expensed as is required, the Group estimates not affect the book value of the incurred. Development expenditures the asset’s recoverable amount. property transferred and does not on an individual project are recognised An asset’s recoverable amount is affect the value of the property as an intangible asset when the Group the higher of an asset’s or cash- for the purposes of valuation and can demonstrate: generating unit’s (CGU) fair value disclosure. • The technical feasibility of less costs to sell and its value in use. Subsequent expenditures are completing the intangible asset so Recoverable amount is determined capitalized into cost of the asset that it will be available for use or for an individual asset, unless the only when it is probable that the sale; asset does not generate cash inflows Group will receive future economic • Its intention to complete and its that are largely independent of those benefits related to these costs and ability to use or sell the asset; from other assets or groups of assets. that their costs can be measured • How the intangible asset will When the carrying amount of an

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asset or CGU exceeds its recoverable For such assets, the impairment is control over those policies. amount, the asset is considered recognized in OCI up to the amount The considerations made in impaired and is written down to its of any previous revaluation. For determining significant influence recoverable amount. assets previously impaired, except are similar to those necessary to In assessing value in use, the estimated for goodwill, an assessment is made determine control over subsidiaries. future cash flows are discounted to at each reporting date to determine The Group’s investment in its their present value using a pre-tax whether there is an indication that associate is accounted for using the discount rate that reflects current previously recognised impairment equity method. market assessments of the time value losses no longer exist or have Under the equity method, the of money and the risks specific to decreased. If such indication exists, investment in an associate is the asset. In determining fair value the Group estimates the asset’s initially recognized at cost. The less costs to sell, recent market or CGU’s recoverable amount. A carrying amount of the investment transactions are taken into account. previously recognised impairment is adjusted to recognize changes in If no such transactions can be loss is reversed only if there has the Group’s share of net assets of the identified, an appropriate valuation been a change in the assumptions associate since the acquisition date. model is used. These calculations are used to determine the asset’s Goodwill relating to the associate corroborated by valuation multiples, recoverable amount since the last is included in the carrying amount quoted share prices for publicly impairment loss was recognised. of the investment and is neither traded companies or other available The reversal is limited so that the amortized nor individually tested for fair value indicators. carrying amount of the asset does impairment. The Group bases its impairment not exceed its recoverable amount, The statement of comprehensive calculation on value in use, which are nor exceed the carrying amount that income reflects the Group’s share prepared separately for each of the would have been determined, net of the results of operations of the Group’s CGUs to which the individual of depreciation, had no impairment associate. Any change in OCI of assets are allocated. These budgets loss been recognised for the asset those investees is presented as part and forecast calculations generally in prior years. Such reversal is of the Group’s OCI. In addition, when cover a period of five years. For recognized in the statement of profit there has been a change recognized longer periods, a long-term growth or loss unless the asset is carried at a directly in the equity of the associate, rate is calculated and applied to revalued amount, in which case, the the Group recognized its share of project future cash flows after the reversal is treated as a revaluation any changes, when applicable, in the fifth year. increase. statement of changes in equity. Impairment losses of continuing Unrealized gains and losses resulting operations, including impairment Investments in associate from transactions between the Group on inventories, are recognised and the associate are eliminated to the in the consolidated statement of An associate is an entity over which extent of the interest in the associate. comprehensive income in expense the Group has significant influence. The aggregate of the Group’s share categories consistent with the Significant influence is the power of profit or loss of an associate is function of the impaired asset, except to participate in the financial and shown on the face of the statement for UPS assets previously revalued operating policy decisions of the of comprehensive income outside with the revaluation taken to OCI. investee, but is not control or joint operating profit and represents profit

135 Financial Statements ANNUAL REPORT

or loss after tax and non-controlling The Group’s financial assets include Amortised cost is calculated by interests in the subsidiaries of the cash, short-term and long-term taking into account any discount associate. deposits, trade and other accounts or premium on acquisition and fee The financial statements of the receivable, quoted and unquoted or costs that are an integral part associate are prepared for the same financial instruments. of the EIR. The EIR amortisation is reporting period as the Group. When Financial assets at initial recognition included in interest income in the necessary, adjustments are made to are classified as financial assets at statement of comprehensive income. bring the accounting policies in line fair value through profit or loss, loans The losses arising from impairment with those of the Group. and receivables, held-to-maturity are recognised in the statement of After application of the equity method, investments, available-for-sale comprehensive income in finance the Group determines whether it is financial assets, or as derivatives costs for loans and operating necessary to recognize an impairment designated as hedging instruments expenses for receivables. loss on its investment in its associate. in an effective hedge, as appropriate. • Held-to-maturity investments At each reporting date, the Group All financial assets are recognised Non-derivative financial assets with determines whether there is objective initially at fair value plus transaction fixed or determinable payments evidence that the investment in costs, except in the case of financial and fixed maturities are classified the associate is impaired. If there is assets recorded at fair value through as held to maturity when the Group such evidence, the Group calculates profit or loss. has the positive intention and the amount of impairment as the Purchases or sales of financial assets ability to hold them to maturity. difference between the recoverable that require delivery of assets within a After initial measurement, held to amount of the associate and its time frame established by regulation maturity investments are measured carrying value, then recognized the or convention in the market place at amortised cost using the EIR, less loss as ‘Share of loss of an associate’ (regular way trades) are recognised impairment. in profit or loss. on the trade date, i.e., the date that the Amortised cost is calculated by Upon loss of significant influence over Group commits to purchase or sell the taking into account any discount or the associate, the Group measures and asset. premium on acquisition and fees or recognized any retained investment at Subsequent measurement costs that are an integral part of the its fair value. Any difference between The subsequent measurement of EIR. The EIR amortisation is included the carrying amount of the associate financial assets depends on their as interest income in the profit or loss. upon loss of significant influence classification as follows: The losses arising from impairment and the fair value of the retained • Loans and receivables are recognised in the statement of investment and proceeds from Loans and receivables are non- comprehensive income in finance disposal is recognized in profit or loss. derivative financial assets with fixed costs. or determinable payments that are • Available-for-sale financial Financial instruments − initial not quoted in an active market. After investments recognition and subsequent initial measurement, such financial Available-for-sale financial measurement assets are subsequently measured investments include equity at amortised cost using the effective investments and debt securities. Financial assets interest rate method (EIR), less Equity investments classified as Initial recognition and measurement impairment. available for sale are those that are

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neither classified as held for trading financial assets meet the definition of “pass-through” arrangement; nor designated at fair value through loans and receivables and the Group and either (a) the Group has profit or loss. Debt securities in this has the intent and ability to hold these transferred substantially all category are those that are intended assets for the foreseeable future or the risks and rewards of the to be held for an indefinite period until maturity. Reclassification to the asset, or (b) the Group has of time and that may be sold in held to maturity category is permitted neither transferred nor retained response to needs for liquidity or in only when the entity has the ability substantially all the risks and response to changes in the market and intention to hold the financial rewards of the asset, but has conditions. asset accordingly. transferred control of the asset. After initial measurement, available- For a financial asset reclassified When the Group has transferred its for-sale financial investments are from the available-for-sale category, rights to receive cash flows from subsequently measured at fair value the fair value carrying amount at an asset or has entered into a pass- with unrealised gains or losses the date of reclassification becomes through arrangement, it evaluates recognised as other comprehensive its new amortised cost and any if and to what extent it has retained income in the available-for-sale previous gain or loss on the asset the risks and rewards of ownership. reserve until the investment is that has been recognised in other When it has neither transferred derecognised, at which time the comprehensive income is amortised nor retained substantially all of the cumulative gain or loss is recognised to profit or loss over the remaining life risks and rewards of the asset, nor in other operating income, or the of the investment using the EIR. Any transferred control of the asset, the investment is determined to be difference between the new amortised asset is recognised to the extent of impaired, when the cumulative loss cost and the maturity amount is also the Group’s continuing involvement is reclassified from the available-for amortised over the remaining life of in the asset. In that case, the Group sale reserve to the profit or loss in the asset using the EIR. If the asset also recognises an associated finance costs. Interest earned whilst is subsequently determined to be liability. The transferred asset and holding available-for-sale financial impaired, then the amount recorded the associated liability are measured investments is reported as interest in equity is reclassified to the profit on a basis that reflects the rights income using the EIR method. or loss. and obligations that the Group has The Group evaluates whether the Derecognition retained. ability and intention to sell its available- A financial asset (or, where applicable Continuing involvement that takes for-sale financial assets in the near a part of a financial asset or part of a the form of a guarantee over the term is still appropriate. When, in rare group of similar financial assets) is transferred asset is measured at the circumstances, the Group is unable derecognised when: lower of the original carrying amount to trade these financial assets due to • The rights to receive cash flows of the asset and the maximum amount inactive markets and management’s from the asset have expired; of consideration that the Group could intention to do so significantly changes • The Group has transferred its be required to repay. in the foreseeable future, the Group rights to receive cash flows from Impairment of financial assets may elect to reclassify these financial the asset or has assumed an The Group assesses, at each reporting assets. obligation to pay the received date, whether there is objective Reclassification to loans and cash flows in full without material evidence that a financial asset or a receivables is permitted when the delay to a third party under a group of financial assets is impaired.

137 Financial Statements ANNUAL REPORT

A financial asset or a group of and collectively assesses them subsequent year, the amount of the financial assets is deemed to be for impairment. Assets that are estimated impairment loss increases impaired if there is objective evidence individually assessed for impairment or decreases because of an event of impairment as a result of one or and for which an impairment loss is, occurring after the impairment was more events that has occurred since or continues to be, recognised are not recognised, the previously recognised the initial recognition of the asset (an included in a collective assessment of impairment loss is increased or incurred ‘loss event’) and that loss impairment. reduced by adjusting the allowance event has an impact on the estimated If there is objective evidence that an account. If a write off is later future cash flows of the financial asset impairment loss has been incurred, recovered, the recovery is credited or the group of financial assets that the amount of the loss is measured to finance costs in the statement of can be reliably estimated. Evidence of as the difference between the asset’s comprehensive income. impairment may include indications carrying amount and the present Available-for-sale financial that the debtors or a group of debtors value of estimated future cash investments is experiencing significant financial flows (excluding future expected For available-for-sale financial difficulty, default or delinquency credit losses that have not yet been investments, the Group assesses at in interest or principal payments, incurred). each reporting date whether there is the probability that they will enter The present value of the estimated objective evidence that an investment bankruptcy or other financial future cash flows is discounted at or a group of investments is impaired. reorganisation and observable data the financial asset’s original effective In the case of equity investments indicating that there is a measurable interest rate. If a loan has a variable classified as available-for-sale, decrease in the estimated future cash interest rate, the discount rate for objective evidence would include a flows, such as changes in arrears or measuring any impairment loss is the significant or prolonged decline in the economic conditions that correlate current EIR. fair value of the investment below its with defaults. The carrying amount of the asset cost. ‘Significant’ is evaluated against Financial assets carried at amortized is reduced through the use of an the original cost of the investment cost allowance account and the loss is and ‘prolonged’ against the period in For financial assets carried at recognised in profit or loss. Interest which the fair value has been below its amortised cost, the Group first income continues to be accrued on original cost. When there is evidence assesses whether objective the reduced carrying amount and of impairment, the cumulative loss − evidence of impairment exists is accrued using the rate of interest measured as the difference between individually for financial assets used to discount the future cash the acquisition cost and the current that are individually significant, or flows for the purpose of measuring fair value, less any impairment collectively for financial assets that the impairment loss. The interest loss on that investment previously are not individually significant. If the income is recorded as finance income recognised in the statement of Group determines that no objective in the profit or loss. Loans together comprehensive income − is removed evidence of impairment exists for an with the associated allowance are from other comprehensive income individually assessed financial asset, written off when there is no realistic and recognised in profit or loss. whether significant or not, it includes prospect of future recovery and all Impairment losses on equity the asset in a group of financial assets collateral has been realised or has investments are not reversed through with similar credit risk characteristics been transferred to the Group. If, in a profit or loss; increases in their fair

138 / 2015 Financial Statements

value after impairment are recognised liabilities at initial recognition. lender on substantially different directly in other comprehensive All financial liabilities are recognised terms, or the terms of an existing income. initially at fair value plus, in the case of liability are substantially modified, In the case of debt instruments loans and borrowings, net of directly such an exchange or modification is classified as available for sale, attributable transaction costs. treated as the derecognition of the impairment is assessed based on The Group’s financial liabilities original liability and the recognition the same criteria as financial assets include trade and other payables, of a new liability. The difference in carried at amortised cost. However, loans and borrowings. the respective carrying amounts the amount recorded for impairment Subsequent measurement is recognised in the statement of is the cumulative loss measured as The measurement of financial comprehensive income. the difference between the amortised liabilities depends on their cost and the current fair value, less any classification as described below: Offsetting of financial impairment loss on that investment • Loans and borrowings instruments previously recognised in the statement After initial recognition, interest of comprehensive income. bearing loans and borrowings are Financial assets and financial Future interest income continues subsequently measured at amortised liabilities are offset and the net to be accrued based on the reduced cost using the EIR method. Gains amount is reported in the consolidated carrying amount of the asset, using and losses are recognised in profit statement of financial position if there the rate of interest used to discount or loss when the liabilities are is a currently enforceable legal right the future cash flows for the purpose derecognised as well as through the to offset the recognised amounts and of measuring the impairment loss. EIR amortisation process. there is an intention to settle on a net The interest income is recorded in the Amortised cost is calculated by basis, to realise the assets and settle statement of comprehensive income. taking into account any discount or the liabilities simultaneously. If, in a subsequent year, the fair premium on acquisition and fees or value of a debt instrument increases costs that are an integral part of the Inventory and the increase can be objectively EIR. The EIR amortisation is included related to an event occurring after the as finance costs in the statement of Inventories are accounted for on a impairment loss was recognised in comprehensive income. first in, first out basis. the profit or loss, the impairment loss • Trade and other payables Inventories are valued at the lower of is reversed through the profit or loss. Trade and other payables are cost and net realizable value. Financial liabilities recognized initially at fair value and Net realisable value is the estimated Initial recognition and measurement subsequently measured at amortized selling price in the ordinary course Financial liabilities at initial cost using the effective interest rate of business, less estimated costs of recognition are classified as financial method. completion and the estimated costs liabilities at fair value through profit Derecognition necessary to make the sale. or loss, loans and borrowings, or as A financial liability is derecognised derivatives designated as hedging when the obligation under the liability Cash and short-term deposits instruments in an effective hedge, as is discharged or cancelled or expires. appropriate. The Group determines When an existing financial liability is Cash and short-term deposits in the classification of its financial replaced by another from the same the statement of financial position

139 Financial Statements ANNUAL REPORT

comprise cash at banks and on hand of a past event, it is probable that recognised by reference to the stage and short-term deposits with a an outflow of resources embodying of completion. maturity of three months or less. economic benefits will be required The Group receives its revenue from For the purpose of the consolidated to settle the obligation and a reliable rendering of transmission services statement of cash flows, cash and estimate can be made of the amount of electricity from power generators cash equivalents consist of cash of the obligation. When the Group to wholesale and major customers, and short-term deposits as defined expects some or all of a provision technical dispatching of the input of above, net of outstanding bank to be reimbursed, for example, electricity into the energy system overdrafts. under an insurance contract, the and consumption of electricity, reimbursement is recognised as a organization of balancing of electricity Restricted cash separate asset, but only when the producing and consumption and reimbursement is virtually certain. ensuring a contractual power supply In accordance with loan agreements The expense relating to any provision with energy systems of neighbouring on projects financing signed with is presented in the statement of countries and other. International Bank for Reconstruction comprehensive income, net of any Tariffs for services of electricity and Development (“IBRD”) and reimbursement. transmission, technical dispatch, European Bank for Reconstruction organization of balancing of and Development (“EBRD”), the Revenue recognition production/consumption of electricity Group opened bank escrow accounts, are approved by the Committee. necessary for debt service. Cash, Revenue is recognised to the extent Revenues from providing a held on these bank accounts, can be that it is probable that the economic contractual power supply with energy used exclusively for the purposes benefits will flow to the Group and systems of neighbouring countries of planned payments on interest the revenue can be reliably measured, are recognised in accordance with and principal loan amounts. If cash regardless of when the payment is terms of contracts conducted on is restricted in use for the period being made. Revenue is measured the basis of Agreement between not exceeding 12 months from the at the fair value of the consideration the Government of Republic of reporting date, such cash is treated received or receivable, taking into Kazakhstan and Russian Federation as current asset and an appropriate account contractually defined terms “On Measures Securing Parallel disclosure is provided in the notes to of payment and excluding taxes or Operation of Unified Power Systems the consolidated financial statements. duty. The Group assesses its revenue of the Republic of Kazakhstan and If cash is restricted in use for the arrangements against specific criteria Russian Federation”. period exceeding 12 months from the to determine if it is acting as principal • Interest income reporting date, such cash is reflected or agent. The Group has concluded For all financial instruments within non-current assets. that it is acting as a principal in all measured at amortised cost and of its revenue arrangements. The interest bearing financial assets Provisions specific recognition criteria described classified as available for sale, interest below must also be met before income or expense is recorded using Provisions are recognised when revenue is recognised: the effective interest rate (EIR). EIR the Group has a present obligation • Rendering of services is the rate that exactly discounts the (legal or constructive) as a result Revenue from rendering of services is estimated future cash payments or

140 / 2015 Financial Statements

receipts through the expected life of in connection with the borrowing of Operating lease payments are the financial instrument or a shorter funds. recognised as an operating expense period, where appropriate, to the net in the statement of comprehensive carrying amount of the financial asset Lease income on a straight-line basis over or liability. Interest income is included the lease term. in the statement of comprehensive The determination of whether an income. arrangement is, or contains, a lease Pension obligations • Equipment received from is based on the substance of the customers arrangement at inception date. The In accordance with the legislation of The Group receives certain property, arrangement is assessed for whether the Republic of Kazakhstan, the Group plant and equipment items from fulfilment of the arrangement is deducted 10% of employees’ salaries, its customers. The Group assesses dependent on the use of a specific but no more than KZT 160,230 whether each transferred item meets asset or assets or the arrangement per month (2014: KZT 149,745) to the definition of an asset, and if so, conveys a right to use the asset accumulative pension funds. Pension recognises the transferred asset as or assets, even if that right is not fund payments are withheld from property, plant and equipment. At explicitly specified in an arrangement. employees’ salaries and included with initial recognition, its cost is measured Group as a lessee payroll expenses in the consolidated at fair value, or the construction Finance leases that transfer statement of comprehensive income cost of transferred equipment, and a substantially all the risks and benefits when they are incurred. The Group corresponding amount is recognised incidental to ownership of the leased has no other retirement benefit as other income as the Group has no item to the Group, are capitalised at obligations. future performance obligations. If the commencement of the lease at future performance obligations exist the fair value of the leased property Current income tax such income should be deferred over or, if lower, at the present value the performance obligation period or of the minimum lease payments. Current income tax assets and useful life of the equipment whichever Lease payments are apportioned liabilities for the current and previous comes earlier. between finance costs and reduction periods are measured at the amount of the lease liability so as to achieve expected to be recovered from or paid Borrowing costs a constant rate of interest on the to the taxation authorities. The tax remaining balance of the liability. rates and tax laws used to compute Borrowing costs directly attributable Finance costs are recognised in profit the amount are those that are enacted to the acquisition, construction or or loss. or substantively enacted, at the production of an asset that necessarily A leased asset is depreciated over the reporting date in the countries where takes a substantial period of time to useful life of the asset. However, if the Group operates and generates get ready for its intended use or sale there is no reasonable certainty that taxable income. are capitalised as part of the cost of the Group will obtain ownership by Current income tax relating to the asset. All other borrowing costs the end of the lease term, the asset items recognised directly in equity are expensed in the period they occur. is depreciated over the shorter of the is recognised in equity and not in Borrowing costs consist of interest estimated useful life of the asset and the profit or loss. Management and other costs that an entity incurs the lease term. periodically evaluates positions

141 Financial Statements ANNUAL REPORT

taken in the tax returns with respect assets are recognised to the extent Deferred tax assets and liabilities are to situations in which applicable that it is probable that taxable profit measured at the tax rates that are tax regulations are subject to will be available against which the expected to apply in the year when interpretation and establishes deductible temporary differences, the asset is realised or the liability provisions where appropriate. and the carry forward of unused tax is settled, based on tax rates (and credits and unused tax losses can be tax laws) that have been enacted or Deferred tax utilised, except: substantively enacted at the reporting • Where the deferred tax asset date. Deferred tax is provided using relating to the deductible Deferred tax relating to items the liability method on temporary temporary difference arises from recognized outside profit or loss is differences between the tax bases the initial recognition of an asset recognized outside profit or loss. of assets and liabilities and their or liability in a transaction that is Deferred tax items are recognised carrying amounts for financial not a business combination and, at in correlation to the underlying reporting purposes at the reporting the time of the transaction, affects transaction either in other date. neither the accounting profit nor comprehensive income or directly in Deferred income tax liabilities are taxable profit or loss; equity. recognised for all taxable temporary • In respect of deductible temporary Deferred tax assets and deferred differences, except: differences associated with tax liabilities are offset, if a legally • Where the deferred tax liability investments in subsidiaries, enforceable right exists to set off arises from the initial recognition associates and interests in joint current tax assets against current of goodwill or of an asset or ventures, deferred tax assets are income tax liabilities and the liability in a transaction that is not recognised only to the extent that deferred taxes relate to the same a business combination and, at the it is probable that the temporary taxable entity and the same taxation time of the transaction, affects differences will reverse in the authority. neither the accounting profit nor foreseeable future and taxable taxable profit or loss; profit will be available against Dividends • In respect of taxable temporary which the temporary differences differences associated with can be utilised. Dividends are recognised as a investments in subsidiaries, The carrying amount of deferred tax liability and deducted from equity associates and interests in joint assets is reviewed at each reporting at the reporting date only if they are ventures, when the timing of date and reduced to the extent that it approved before or on the reporting the reversal of the temporary is no longer probable that sufficient date. Dividends are disclosed differences can be controlled and taxable profit will be available to allow when they are proposed before it is probable that the temporary all or part of the deferred tax asset to the reporting date or proposed differences will not reverse in the be utilised. Unrecognized deferred tax or declared after the reporting foreseeable future. assets are reassessed at each reporting date but before the consolidated Deferred tax assets are recognised for date and are recognised to the extent financial statements are authorised all deductible temporary differences, that it has become probable that future for issue. the carry forward of unused tax credits taxable profit will allow the deferred and unused tax losses. Deferred tax tax asset to be recovered. Contingencies

142 / 2015 Financial Statements

are described below. The Group required currently to replace the Contingent liabilities are not based its assumptions and service capacity of an asset (current recognised in the consolidated estimates on parameters available replacement cost). Cost approach has financial statements, but are disclosed when the consolidated financial been used due to highly specialized unless the possibility of any outflow statements were prepared. Existing nature of the assets and because in settlement is remote. circumstances and assumptions there is no history of such assets ever A contingent asset is not recognised in about future developments, being sold. the consolidated financial statements however, may change due to market The appraised current replacement but disclosed when an inflow of changes or circumstances arising cost has been further compared to the economic benefits is probable. beyond the control of the Group. recoverable amount identified based Such changes are reflected in the on discounted cash flows model. 4. SIGNIFICANT ACCOUNTING assumptions when they occur. The cash flows are derived from the JUDGMENTS, ESTIMATES AND budget for the next five years and do ASSUMPTIONS Revaluation of property, plant not include restructuring activities and equipment that the Group is not yet committed to The preparation of the Group’s or significant future investments that consolidated financial statements The revalued UPS assets constitute will enhance the asset’s performance requires management to make one class of asset under IFRS 13, of the CGU being tested. judgements, estimates and based on the nature, characteristics As a result of the assessment, the assumptions that affect the reported and risks of the property. Input data amount of KZT 415,708,160 thousand amounts of revenues, expenses, for determining the fair value of UPS was recognised as a fair value as of 1 assets and liabilities, and the assets refer to Level 3 in the fair value June 2014. disclosures, and the disclosure of hierarchy (unobservable inputs). In assessment of the fair value the contingent liabilities. Uncertainty The Group performed revaluation of following main assumptions have about these assumptions and UPS assets as at 1 June 2014. Tariffs been applied: estimates could result in outcomes increase resulted in the revaluation that require a material adjustment surplus on certain assets credited to to the carrying amount of assets or OCI in the amount of KZT 138,887,289 liabilities affected in future periods. thousand, and respective deferred Estimates tax liability in the amount of KZT and assumptions 27,777,458 thousand and revaluation gain amounting to KZT 14,250,162 The key assumptions concerning thousand was credited to profit and the future and other key sources loss to the extent of revaluation of estimation uncertainty at deficit recognized on these assets in the reporting date, that have prior periods. a significant risk of causing a Fair value of UPS assets was material adjustment to the carrying determined by using the cost amounts of assets and liabilities approach. The cost approach within the next financial year, reflects the amount that would be

143 Financial Statements ANNUAL REPORT

Discount rate (WACC) 11.61%

Long term growth rate 2.88%

Remaining useful life of the primary asset 40 years

An increase in the discount rate by less costs to sell and value in use. factors that may be specific to the 0.5% or a reduction in long term These assessments require the use entity and not applicable to entities growth rate by 0.5% would result in a of estimates and assumptions such in general. decrease in the fair value of Group’s as levels of tariffs for regulated In 2015 the Group determined main property, plant and equipment services, discount rates, future impairment indicators, including for approximately KZT 9,089,485 capital requirements, operating increasing levels of operational and thousand or KZT 9,602,177 performance (including volumes capital expenditure as a result of thousand, respectively. of electricity transmission) that significant devaluation of national Management of the Group believes are subject to risk and uncertainty. currency. As a result of assessment that fair value of UPS assets Where the carrying amount of an of the recoverable amount of the approximates their carrying value at asset or CGU exceeds its recoverable Group’s assets carried out by 31 December 2015. amount, the asset/CGU is considered Group management, no impairment to be impaired and is written down to of assets was revealed as at 31 Recoverability of National its recoverable amount. In assessing December 2015. Energy System assets (UPS recoverable amount the estimated The Group calculates recoverable assets) future cash flows are adjusted for amount using a discounted cash flow the risks specific to the asset group model. The discount rate of 9.84% The Company assesses assets or and are discounted to their present was derived from the Company’s cash-generating units (CGU) for value using a discount rate that post-tax weighted average cost impairment whenever events or reflects current market assessments of capital. The Development plan changes in circumstances indicate of the time value of money and the of the Group, which is approved that the carrying amount of an asset risks specific to the asset. Fair value for a five-year period and revised may not be recoverable. Where an less costs to sell is identified as the on an annual basis, is the primary indicator of impairment exists, a price that would be received to sell source of information. It contains formal estimate of the recoverable the asset in an orderly transaction forecasts for volumes of electricity amount is made, which is considered between market participants and transmission, revenues, costs and to be the higher of the fair value does not reflect the effects of capital expenditure.

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Various assumptions such as this would have had led to no 9.5%, that is the management’s best forecasts of tariff levels for additional impairment. estimate of the market discount rate. regulated services and inflation Estimated electricity transmission In December 2015 the Group revised rates take into account existing volumes are based on the repayment period of the receivables prices, foreign exchange rates, other development plan. If the electricity from Uzbekenergo JSC in accordance macroeconomic factors and historical transmission volumes had been with repayment schedule proposed trends and variability. The projection assumed to be 5% lower than the by Uzbekenergo JSC due to the fact of cash flows was limited till 2020. assumptions used in the assessment that Uzbekenergo JSC carried out the Expenditure cash flows up to 2020 this would have had led to no timely payment of the receivables in were obtained from the Group’s additional impairment. accordance with the debt repayment development plan together with Increase of discount rate by 0.5% or schedule. Additionally, the Group has management’s current assessment decrease of long-term growth rate discounted future cash flows under of probable changes in operational by 0.5% would have had led to no 10.01% that is our best estimate of and capital expenditure. Terminal additional impairment. market rate in accordance with the value was estimated by applying schedule provided. Further details are forecasted long-term growth rate of Accounts receivable contained in Note 10. 3.5%. The key assumptions required for The Group makes allowances for Taxes the recoverable amount estimation doubtful accounts receivable. are tariffs for regulated services, Significant judgment is used to Uncertainties exist with respect to volumes of electricity transmission, estimate doubtful accounts. In the interpretation of complex tax discount rate and long-term growth estimating doubtful accounts regulations and the amount and rate. The sensitivity of the headroom historical and anticipated customer timing of future taxable income. to changes in the key assumptions performance are considered. The Given the wide range of international was estimated. Group’s estimate of uncollectible business relationships and the Assumptions on levels of tariffs overdue amounts is as follows: 31-90 long-term nature and complexity were based on Order of the chairman days − 5%, 91-180 days − 20%, 181- of existing contractual agreements, of Committee on regulation of 360 days − 50% and above 361 days differences arising between the actual natural monopolies and competition − 100%. Changes in the economy or results and the assumptions made, or protection of Ministry of National specific customer conditions may future changes to such assumptions, Economy of Republic of Kazakhstan require adjustments to the allowance could necessitate future adjustments on “Approval of tariffs upper limits for doubtful accounts recorded in the to tax income and expense already and tariff cost sheets for regulated consolidated financial statements. In recorded. The Group establishes services on transmission of 2014 the Group increased expected provisions, based on reasonable electricity, technical dispatching and repayment period for one of its estimates, for possible consequences balancing of electricity production customers, Uzbekenergo JSC, due of audits by the tax authorities. The and consumption of KEGOC JSC for to existing practice. Accordingly, amount of such provisions is based 2016-2020”. If tariff levels had been accounts receivables from on various factors, such as experience assumed to be 5% lower than the Uzbekenergo JSC were discounted of previous tax audits and differing assumptions used in the assessment, for 1 year using discount rate of interpretations of tax regulations by

145 Financial Statements ANNUAL REPORT

the taxable entity and the responsible Fair value of financial 5. OPERATING SEGMENTS tax authority. instruments INFORMATION Such differences of interpretation may arise on a wide variety of Where the fair value of financial Operating segments issues depending on the conditions assets and financial liabilities prevailing in the respective domicile recorded in the consolidated For management purposes, the of the Group companies. statement of financial position Group is organized into one business As the Group assesses the probability cannot be derived from active unit, operating a Kazakhstan for litigation and subsequent cash markets, their fair value is electricity grid for rendering services outflow with respect to taxes as determined using valuation of electricity transmission, technical remote, no contingent liability has techniques including the discounted dispatch of electricity supply to been recognised. cash flows model. The inputs the network and consumption of Deferred tax assets are recognised for to these models are taken from electricity, balancing of electricity unused tax losses to the extent that it observable markets where possible, generation and consumption. This is probable that taxable profit will be but where this is not feasible, a operating segment represents the available against which the losses can degree of judgment is required only reportable segment of the be utilised. Significant management in establishing fair values. The Group. judgement is required to determine judgements include considerations the amount of deferred tax assets that of inputs such as liquidity risk, Geographic information can be recognised in the consolidated credit risk and volatility. Changes financial statements, based upon the in assumptions about these factors Revenues from external customers likely timing and the level of future could affect the fair value reported based on the locations of the taxable profits together with future in the consolidated financial customers represent the following: tax planning strategies. statements.

In thousands of Tenge 2015 2014

Revenue from Kazakhstan customers 99,912,697 74,585,633

Revenue from Uzbekistan customers 10,148,762 8,763,555

Revenue from Russian customers − 10,170,571

Total revenue per consolidated statement of comprehensive income 110,061,459 93,519,759

146 / 2015 Financial Statements

Management analyses the Group’s book value and fair value less costs to revenue and profit before tax sell (Note 3). In accordance with the determined in accordance with IFRS. accounting policy the independent For the year ended 31 December appraiser assessed the fair value of 2015 the revenue from one customer, the share in “KazEnergoProvod” LLP Samruk-Energo Group, including amounting to KZT 161,511 thousand. its joint-ventures, amounted to KZT As fair value less costs to sell was 17,401,767 thousand, arising from less than the carrying amount which transmission, technical dispatching at the date of transfer amounted to and balancing services. KZT 161,992 thousand, the Group For the year ended 31 December 2014 recognized loss in the amount of KZT the revenue from two customers 481 thousand. amounted to KZT 13,003,569 Share in loss of “KazEnergoProvod” thousand and KZT 10,170,571 LLP for the period from 1 January thousand, arising from power 2015 till the date of transfer into non- regulation, sales of purchased current assets held for sale comprised electricity, transmission, technical KZT 5,120 thousand (2014: KZT 8,624 dispatching and balancing services. thousand).

6. NON-CURRENT ASSETS HELD FOR SALE

In 2015 the Group decided to sell 49.9% interest in its associate “KazEnergoProvod” LLP. On 6 May 2015 the Management of the Group approved the plan of sale of share. According to the approved plan sale of share should have been completed during 2015 to either shareholder of “KazEnergoProvod” LLP at a market price estimated by independence appraiser or other party under the electronic auction. Accordingly, starting from 6 May 2015, these investments are classified by the Group as non-current assets held for sale. In accordance with accounting policy non-current assets held for sale are valued at the lower of

147 Financial Statements ANNUAL REPORT

7. PROPERTY, PLANT AND EQUIPMENT AND ADVANCES PAID FOR NON-CURRENT ASSETS

Vehicles UPS and other Construction-in- In thousands of Tenge Land Buildings Total constructions property, plant progress and equipment

Cost

At 1 January 2014 1,324,235 6,984,370 496,334,581 26,978,560 37,189,851 568,811,597

Additions 133,000 616,618 7,914,622 1,230,247 24,875,583 34,770,070

Transfers 72,548 5,943,094 40,081,122 2,483,575 (48,580,339) −

Transfers to intangible assets − − − 9,914 (29,431) (19,517)

Revaluation surplus (OCI) − − 241,801,480 − − 241,801,480

Revaluation (Profit or loss) − − 16,767,840 − − 16,767,840

Disposals − (500) (584,236) (286,439) (112,814) (983,989)

At 31 December 2014 1,529,783 13,543,582 802,315,409 30,415,857 13,342,850 861,147,481

At 1 January 2015 1,529,783 13,543,582 802,315,409 30,415,857 13,342,850 861,147,481

Additions 43,449 − 47,843 826,624 23,612,941 24,530,857

Transfers 2,817 595,627 (1,583,633) 3,849,063 (2,863,874) −

Transfers to intangible assets − − − (378) (142,511) (142,889)

Transfers to investment property (46,320) (910,536) (159,699) (432,269) − (1,548,824)

Disposals (824) (3,350) (490,161) (378,135) (23,173) (895,643)

At 31 December 2015 1,528,905 13,225,323 800,129,759 34,280,762 33,926,233 883,090,982

Accumulated depreciation and impairment

At 1 January 2014 – (1,405,936) (242,805,084) (15,529,323) (252,090) (259,992,433)

Charge for the period – (207,900) (16,542,341) (2,057,234) − (18,807,475)

Revaluation surplus (OCI) – − (102,914,191) − − (102,914,191)

Revaluation (Profit or loss) – − (2,517,678) − − (2,517,678)

Disposals – 241 371,870 259,142 54,494 685,747

Transfers – 779 (12,374) 11,595 − −

148 / 2015 Financial Statements

Vehicles UPS and other Construction-in- In thousands of Tenge Land Buildings Total constructions property, plant progress and equipment

Cost

At 1 January 2014 1,324,235 6,984,370 496,334,581 26,978,560 37,189,851 568,811,597

Additions 133,000 616,618 7,914,622 1,230,247 24,875,583 34,770,070

Transfers 72,548 5,943,094 40,081,122 2,483,575 (48,580,339) −

Transfers to intangible assets − − − 9,914 (29,431) (19,517)

Revaluation surplus (OCI) − − 241,801,480 − − 241,801,480

Revaluation (Profit or loss) − − 16,767,840 − − 16,767,840

Disposals − (500) (584,236) (286,439) (112,814) (983,989)

At 31 December 2014 1,529,783 13,543,582 802,315,409 30,415,857 13,342,850 861,147,481

At 1 January 2015 1,529,783 13,543,582 802,315,409 30,415,857 13,342,850 861,147,481

Additions 43,449 − 47,843 826,624 23,612,941 24,530,857

Transfers 2,817 595,627 (1,583,633) 3,849,063 (2,863,874) −

Transfers to intangible assets − − − (378) (142,511) (142,889)

Transfers to investment property (46,320) (910,536) (159,699) (432,269) − (1,548,824)

Disposals (824) (3,350) (490,161) (378,135) (23,173) (895,643)

At 31 December 2015 1,528,905 13,225,323 800,129,759 34,280,762 33,926,233 883,090,982

Accumulated depreciation and impairment

At 1 January 2014 – (1,405,936) (242,805,084) (15,529,323) (252,090) (259,992,433)

Charge for the period – (207,900) (16,542,341) (2,057,234) − (18,807,475)

Revaluation surplus (OCI) – − (102,914,191) − − (102,914,191)

Revaluation (Profit or loss) – − (2,517,678) − − (2,517,678)

Disposals – 241 371,870 259,142 54,494 685,747

Transfers – 779 (12,374) 11,595 − −

149 Financial Statements ANNUAL REPORT

Vehicles UPS and other Construction-in- In thousands of Tenge Land Buildings Total constructions property, plant progress and equipment

Impairment – − – – (157.775) (157.775)

At 31 December 2014 – (1,612,816) (364,419,798) (17,315,820) (355,371) (383,703,805)

At 1 January 2015 – (1,612,816) (364,419,798) (17,315,820) (355,371) (383,703,805)

Charge for the period – (262,308) (19,555,680) (2,289,621) − (22,107,609)

Transfers – 679 (412,998) 412,319 − −

Transfer to investment property – 346,460 74,821 337,492 − 758,773

Disposals – 2,328 260,908 373,848 19,014 656,098

Impairment reversal – − − − 5,353 5,353

At 31 December 2015 – (1,525,657) (384,052,747) (18,481,782) (331,004) (404,391,190)

Net book value

At 1 January 2014 1,324,235 5,578,434 253,529,497 11,449,237 36,937,761 308,819,164

At 31 December 2014 1,529,783 11,930,766 437,895,611 13,100,037 12,987,479 477,443,676

At 31 December 2015 1,528,905 11,699,666 416,077,012 15,798,980 33,595,229 478,699,792

If UPS assets were measured using the cost model, the carrying amount would be as follows:

In thousands of Tenge 31 December 31 December 2015 2014

At costs 247,164,032 249,271,337

Accumulated depreciation (74,224,315) (65,946,769)

Net carrying amount 172,939,717 183,324,568

150 / 2015 Financial Statements

Vehicles UPS and other Construction-in- In thousands of Tenge Land Buildings Total constructions property, plant progress and equipment

Impairment – − – – (157.775) (157.775)

At 31 December 2014 – (1,612,816) (364,419,798) (17,315,820) (355,371) (383,703,805)

At 1 January 2015 – (1,612,816) (364,419,798) (17,315,820) (355,371) (383,703,805)

Charge for the period – (262,308) (19,555,680) (2,289,621) − (22,107,609)

Transfers – 679 (412,998) 412,319 − −

Transfer to investment property – 346,460 74,821 337,492 − 758,773

Disposals – 2,328 260,908 373,848 19,014 656,098

Impairment reversal – − − − 5,353 5,353

At 31 December 2015 – (1,525,657) (384,052,747) (18,481,782) (331,004) (404,391,190)

Net book value

At 1 January 2014 1,324,235 5,578,434 253,529,497 11,449,237 36,937,761 308,819,164

At 31 December 2014 1,529,783 11,930,766 437,895,611 13,100,037 12,987,479 477,443,676

At 31 December 2015 1,528,905 11,699,666 416,077,012 15,798,980 33,595,229 478,699,792

As at 31 December 2015 and 31 December financed by bank loans (2014: KZT Advances paid for non-current 2014 fully amortised property, plant 414,827 thousand at the capitalization assets and equipment (at cost), which are still rate of 3.05-4.27%). in use amounted to KZT 8,480,667 As at 31 December 2015 advances paid thousand and KZT 6,261,817 thousand, Construction in progress for non-current assets mainly repre- respectively. sent prepayments made to suppliers for Construction in progress is mainly construction work related to the project Capitalized borrowing costs represented by equipment and “Construction of 500 kW line Ekibas- construction works as part of the tuz − Shulbinskaya GES (Semey) − Ust During the year ended 31 December implementation of the project Kamenogorsk”, “Construction of 500 2015 the Group did not capitalise “Construction of 500 kW line kW line Shulbinskaya GES (Semey) − any borrowing costs as a result of Ekibastuz − Shulbinskaya GES Aktogay − Taldykorgan − Alma” (2014: completion of its investment projects (Semey) − Ust-Kamenogorsk”. as at 31 December 2014 the advanced

151 Financial Statements ANNUAL REPORT

paid for non-current assets mainly rep- with complex of equipment and for the total amount of 2,161,476 resent prepayments made to suppliers adjacent land located in Astana. thousand Tenge. In accordance with for construction work related to the In this regard, these assets were sales and purchase agreement the project “Construction of 500 kW line transferred from property, plant payment will be made by monthly Ekibastuz − Shulbinskaya GES (Semey) and equipment to investment installments of 16,375 thousand − Ust-Kamenogorsk”). property. Tenge till 2027. The present value In July 2015 the Group decided to of the future payment amounted to Investment property sell the investment property, as a 1,249,840 thousand Tenge as at 31 result the property was transferred December 2015 (Note 27). In June 2015 the Group leased to non-current assets held for sale out buildings and constructions and sold out on 30 September 2015 8. INVESTMENTS IN ASSOCIATES

Investments in associates comprised the following:

In thousands of Tenge 31 December 31 December 2015 2014

Batys Transit JSC 266,815 115,053

KazEnergoProvod LLP 161,992 167,112

428,807 282,165

Transfer to assets held for sale (Note 6) (161,992) –

266,815 282,165

Group’s ownership in associates is as follows:

31 December 31 December 2015 2014

Batys Transit JSC 20.0% 20.0%

152 / 2015 Financial Statements

Batys Transit JSC’s (“Batys Transit”) Batys Transit is realization of a project region. Batys Transit’s bonds are listed on principal place of operations and on construction and exploitation of the Kazakhstan Stock Exchange. country of incorporation is the Republic interregional power line, which connects of Kazakhstan. The main activity of the North Kazakhstan region with Aktobe

The following table illustrates the summarised financial information of Batys Transit:

In thousands of Tenge 31 December 31 December 2015 2014

Statement of financial position

Current assets 1,444,651 1,737,686

Non-current assets 20,692,201 21,839,053

Current liabilities (1,722,382) (4,203,537)

Non-current liabilities (19,080,393) (18,615,330)

Net assets 1,334,077 757,872

Unrecognised share in net assets – (182,606)

1,334,077 575,266

Group’s share in net assets 266,815 115,053

Carrying amount of the investment 266,815 115,053

In thousands of Tenge 31 December 31 December 2015 2014

Statement of comprehensive income

Revenue 5,460,163 3,298,799

Net profit 576,206 1,005,474

Group’s share of income of an associate 115,241 201,095

Previously unrecognised share in net liabilities – (86.042)

Group’s share of income of an associate recognised in profit or loss 115,241 115,053

153 Financial Statements ANNUAL REPORT

The associates require the parent’s The associates had no contingent consent to distribute its profits. The liabilities or capital commitments as parent does not foresee giving such at 31 December 2015 or 2014. consent at the reporting date.

9. INVENTORIES

In thousands of Tenge 31 December 31 December 2015 2014

Spare parts 1,242,830 1,303,556

Raw and other materials 852,345 807,416

Fuel and lubricants 125,711 117,508

Other inventory 28,894 49,043

Less: allowance for obsolete inventories (267,427) (247,478)

1,982,353 2,030,045

Movement in the allowance for obsolete inventories was as follows:

In thousands of Tenge 2015 2014

At 1 January 247,478 163,972

Charge for the year 80,681 155,069

Write-off (60,732) (71,563)

At 31 December 267,427 247,478

10. TRADE ACCOUNTS RECEIVABLE

In thousands of Tenge 31 December 31 December 2015 2014

Trade accounts receivable 25,559,459 18,605,575

Less: allowance for doubtful accounts receivable (1,452,512) (3,445,256)

Less: discount of accounts receivable (675,571) (488,532)

23,431,376 14,671,787

154 / 2015 Financial Statements

Movement in the allowance for obsolete inventories was as follows:

In thousands of Tenge 2015 2014

At 1 January 3,445,256 893,394

Charge for the period 15,375,749 5,301,090

Utilized (5,893) (53,641)

Reversal (17,362,600) (2,695,587)

At 31 December 1,452,512 3,445,256

As at 31 December 2015 trade recoverability of the receivables from on accounts receivable comprised receivables included receivables from Uzbekenergo JSC and reversed the KZT 675,571 thousand (31 December the client Uzbekenergo JSC in the allowance for doubtful accounts in the 2014: KZT 488,532 thousand). During amount of KZT 19,495,495 thousand amount of KZT 17,107,925 thousand the year ended 31 December 2015 the (31 December 2014: KZT 13,789,041 due to the fact that the Uzbekenergo Group recognized amortization of thousand). In 2014 the Group JSC carried out the timely payment discount in the amount of KZT 912,679 estimated that the average actual of the receivables in accordance with thousand as a part of the finance repayment period of receivables from the debt repayment schedule, that income in the consolidated statement Uzbekenergo JSC takes one year. The was proposed by Uzbekenergo JSC. of comprehensive income. Group discounted future cash flows Additionally, the Group has discounted from Uzbekenergo JSC, accordingly. future cash flows in accordance with In December 2015 the Group revised the schedule provided. its expectations regarding the As at 31 December 2015 the discount

The ageing analysis of trade receivables is as follows:

Past due but not impaired

Neither past In thousands of Tenge due nor 30-90 91-180 181-270 Above 271 Total impaired days days days days

31 December 2015 23,431,376 4,765,585 200,833 141,647 5,288,501 13,034,810

31 December 2014 14,671,787 6,738,462 898,885 605,629 3,726,090 2,702,721

155 Financial Statements ANNUAL REPORT

Trade receivables were denominated in the following currencies:

In thousands of Tenge 31 December 31 December 2015 2014

United States dollar 19,693,177 10,050,854

Tenge 3,247,617 4,109,477

Russian rouble 490,582 511,456

23,431,376 14,671,787

11. OTHER FINANCIAL ASSETS

In thousands of Tenge 31 December 31 December 2015 2014

Long-term other financial assets

Bank deposits 5,100,150 2,838,441

Bonds of Batys Transit 868,269 868,269

5,968,419 3,706,710

Short-term other financial assets

Bank deposits 65,509,892 28,825,720

Interest accrued on bonds of Batys Transit 62,298 38,996

65,572,190 28,864,716

Total other financial assets 71,540,609 32,571,426

In 2007-2009 the Group acquired sale investments. Fair value is the Kazakhstan in accordance with bonds of Batys Transit, an associate price to sell an asset or transfer a guarantee agreement dated 9 January (Note 8), an entity listed on the liability, and therefore an exit price, 2006. Kazakhstan Stock Exchange. The not an entry price. The bonds Batys In January 2014 the Group placed interest rate on the bonds is 8%. The Transit are secured with Guarantee long-term deposit with ATF Bank bonds are classified as available for of the Government of Republic of amounting to USD 15,000 thousand

156 / 2015 Financial Statements

(equivalent of KZT 5,100,150 thousand to USD 5,000 thousand (equivalent deposits placed in Kazakhstan banks as at 31 December 2015) with fixed of KZT 1,700,050 thousand at 31 with the fixed interest rate of 3-32% interest rate of 4.5% per annum due December 2015) for a period of 368 per annum; and also include the in 2017. As at 31 December 2015 days with fixed interest rate of 5.1% accrued and uncollected interest in the the accrued interest was nil (2014: per annum due in November 2016. amount of KZT 114,722 thousand and accrued interest was KZT 103,191 As at 31 December 2015 the accrued KZT 306,180 thousand, respectively. thousand). interest was nil. In October 2015 the Group placed Short-term deposits as at 31 deposit with ATF Bank amounting December 2015 and 2014 represent

Other financial assets were denominated in the following currencies:

In thousands of Tenge 31 December 31 December 2015 2014

United States dollar 68,367,375 31,651,160

Tenge 3,173,234 920,266

71,540,609 32,571,426

12. RESTRICTED CASH

In thousands of Tenge 31 December 31 December 2015 2014

Cash on reserve accounts 2,204,660 1,490,425

Cash on debt service accounts − 460,851

Cash restricted on current account 144,969 91,073

2,349,629 2,042,349

As at 31 December 2015 and 2014 agreements with IBRD and EBRD, semi-annual period preceding restricted cash mainly represented the Group’s creditors, the Group the scheduled date of payment of cash held on a debt service account accumulates cash on a special principal, interest and commission and reserve account. debt service bank account opened fees related to the IBRD and EBRD According to the terms of the loan with Kazakhstan bank during the loans.

157 Financial Statements ANNUAL REPORT

In accordance with the terms of loans (Note 16), the Group is obliged to at least 110% of the upcoming semi- the guarantee agreements with hold cash on a special reserve account annual payment of principal, interest the Government of the Republic of opened in a Kazakhstan bank. The and commission fees of the IBRD and Kazakhstan, the guarantor of Group’s Group is obliged to reserve cash for EBRD loans.

As at 31 December 2015 and 2014, restricted cash was denominated in the following currencies:

In thousands of Tenge 31 December 31 December 2015 2014

United States dollar 2,204,660 1,951,276

Tenge 144,969 91,073

2,349,629 2,042,349

13. OTHER CURRENT ASSETS

In thousands of Tenge 31 December 31 December 2015 2014

Deferred expenses 65,009 35,094

Advances paid for goods and services 23,155 205,731

Loans to employees 22,623 28,300

Other receivables 355,603 106,297

Less: provision for impairment of other current assets (114,200) (97,987)

352,190 277,435

Changes in the provision for impairment of other current assets are as follows:

In thousands of Tenge 2015 2014

At 1 January 97,987 29,574

Charge for the period 68,433 88,746

Reversal (51,187) (20,291)

Utilized (1,033) (42)

At 31 December 114,200 97,987

158 / 2015 Financial Statements

14. CASH AND CASH EQUIVALENTS

In thousands of Tenge 31 December 31 December 2015 2014

Short-term deposits 5,036,000 7,550,000

Current accounts with banks, in Tenge 2,551,406 4,334,932

Current accounts with banks, in foreign currencies 1,434,716 2,067,974

Cash on hand 3,424 4,919

Cash at special accounts 5,216 4,298

9,030,762 13,962,123

During 2015 the interest is accrued on is accrued on short-term deposits at cash on current accounts at 0.5-7% 16-32% per annum. per annum. During 2015 the interest

As at 31 December 2015 and 2014, cash and cash equivalents were stated in the following currencies:

In thousands of Tenge 31 December 31 December 2015 2014

Tenge 7,596,046 11,894,149

Euro 1,040,794 1,653,838

United States dollar 393,010 409,569

Russian rouble 307 4,203

Others 605 364

9,030,762 13,962,123

15. EQUITY shares that were issued and fully paid. dividend payment is not guaranteed. All ordinary shares have equal voting On 30 September 2014 the Group As at 31 December 2015 and 31 rights. The Group does not hold received fixed assets with fair value December 2014 share capital of the preferred shares. Although ordinary amounting KZT 7,116,151 thousand for Company comprised of 260,000,000 shareholders have voting rights, the payment of 19,508,061 shares that

159 Financial Statements ANNUAL REPORT

were issued on 7 September 2014. Dividends amount of KZT 2,444,000 thousand The Group placed 25,999,999 that is 40.01% of net income, or common shares at a price of KZT 505 On 30 April 2015 on the General 9.40 Tenge per common share. In at the Kazakhstan stock exchange Shareholders meeting the Group December 2015 the Group reached the under the People’s IPO program. On declared dividends for 2014, in the agreement on deferment of dividend 19 December 2014 the contribution amount of KZT 8,613,800 thousand payment to the major shareholder to share capital of KZT 13,129,999 that is 99.97% of net income, or 33.13 – Samruk-Kazyna − in the amount thousand was received. As of 31 Tenge per common share. In May and of KZT 2,199,600 thousand due to December 2015 and 31 December June 2015 dividends were fully paid to 30 December 2016. The payment for 2014 authorized capital is presented the shareholders. other shareholders was performed in net of the cost of the consulting On 16 October 2015 on the October 2015. services related to the issue of shares extraordinary General Shareholders under People’s IPO of KZT 692,568 meeting the Group declared dividends thousand. for the 1st half-year of 2015, in the

Earnings per share

Basic and diluted (loss)/earnings per share are given as follows:

In thousands of Tenge 2015 2014

(Loss)/profit for the year (7,779,573) 8,616,020

Weighted average number of shares 260,000,000 220,441,961

Basic and diluted (loss)/earnings per share (29.92) 39.09

In accordance with the decision of the (ordinary and preferred) as of Exchange Board of the Kazakhstan the reporting date, calculated in Stock Exchange JSC (“KASE”) dated accordance with the KASE rules. 4 October 2010 financial statements shall disclose book value per share

160 / 2015 Financial Statements

In thousands of Tenge 31 December 31 December 2015 2014

Total assets 595,336,614 549,928,041

Less: intangible assets (1,036,367) (1,044,908)

Less: total liabilities (254,360,000) (190,150,575)

Net assets 339,940,247 358,732,558

Number of ordinary shares 260,000,000 260,000,000

Book value per share, Tenge 1,307 1,380

Asset revaluation surplus 31 December 2015 amounted to investments are subsequently KZT 458,668 thousand (2014: KZT measured at fair value with As at 31 December 2015 and 2014 232,366 thousand). unrealised gains or losses recognised the revaluation surplus represents as other comprehensive income in the revaluation surplus recognized as Other reserves other reserves until the investment is a result of revaluation of Group’s derecognised. Fair value is the price UPS constructions on 1 June 2014. Other reserves represent to sell an asset or transfer a liability, Transfer of asset revaluation accumulated reserve on available and therefore an exit price, not an surplus into retained earnings, upon for sale investments. After initial entry price. disposal of PPE, for the year ended measurement, available for sale

16. BORROWINGS

In thousands of Tenge 31 December 31 December 2015 2014

International Bank of Reconstruction and Development (IBRD) 74,153,611 43,861,868

European Bank of Reconstruction and Development (EBRD) 97,076,928 63,734,545

171,230,539 107,596,413

161 Financial Statements ANNUAL REPORT

In thousands of Tenge 31 December 31 December 2015 2014

Less: current portion of loans repayable within 12 months (22,090,879) (12,881,885)

149,139,660 94,714,528

As at 31 December 2015 and 31 thousand, respectively. amounts to KZT 813,886 thousand December 2014 the accrued and As at 31 December 2015 and 31 and KZT 894,810 thousand, unpaid interest amounts to KZT December 2014 the unamortized respectively. 1,421,081 thousand and KZT 902,515 portion of loan origination fees

Loans were denominated in the following currencies:

In thousands of Tenge 31 December 31 December 2015 2014

In United Stated dollars 110,952,763 66,134,005

In euro 60,277,776 41,462,408

171,230,539 107,596,413

As at 31 December 2015 the Group In 1999 the Group received the and 31 December 2014 are USD made prepayment of accrued interest following credit line facilities for the 49,540 thousand (equivalent to and principal due on 15 January 2016 purpose of implementation of the KZT 16,844,095 thousand) and on loan granted by IBRD for reali- “Kazakhstan National Electricity USD 60,270 thousand (equivalent zation of “Construction of the Alma Transmission Rehabilitation Project”: to KZT 10,990,234 thousand), 500 kW substation” project in the a. USD 140,000 thousand from IBRD respectively; amount of KZT 197,681 thousand and for the 20 years period, secured b. USD 45,000 thousand from EBRD KZT 600,571 thousand, respectively. by a guarantee of the Government for the 15 years period, secured by For financial statements presenta- of the Republic of Kazakhstan. a guarantee of the Government tion purposes the borrowings were The loan is repayable by annual of the Republic of Kazakhstan. presented net of these prepayments. instalments commencing 2005. The loan is repayable by annual An interest at LIBOR base rate instalments commencing 2004. “Kazakhstan National Electricity plus general spread is payable An interest at LIBOR base rate Transmission Rehabilitation semi-annually. The outstanding plus 1% margin is payable semi- Project” balances as at 31 December 2015 annually. As at 31 December 2015

162 / 2015 Financial Statements

loan balances were fully repaid. Transmission Rehabilitation Project, balances as at 31 December 2015 The outstanding balances at 31 Phase 2” the Group opened the and 31 December 2014 are euro December 2014 were USD 3,905 following credit lines: 1,811 thousand (equivalent to KZT thousand (equivalent to KZT a. two credit-line facilities of euro 672,763 thousand) and euro 3,019 712,077 thousand). 127,500 thousand and euro 75,000 thousand (equivalent to KZT thousand from EBRD for 15 years, 668,852 thousand), respectively. “North-South Electricity of which the first four years are a In November 2013 the Group Transmission Project” grace period. An interest at the concluded supplementary agreement, interbank six months EURIBOR according to which the second credit In 2005 for the purpose of rate plus a 3.85% margin is payable line was decreased from euro 75,000 implementation of the Phase 2 semi-annually. The outstanding thousand to euro 53,443 thousand. In of the “North-South Electricity balances as at 31 December 2015 December 2014 the unused part of loan Transmission Project”, the Group and 31 December 2014 are euro from the European Reconstruction received a credit line facility of USD 129,389 thousand (equivalent to and Development Bank amounted to 100,000 thousand provided by IBRD KZT 48,062,645 thousand) and EUR 5,028 thousand was cancelled for a period of 17 years of which first euro 146,640 thousand (equivalent due to the fact that actual expenses five years are a grace period. This to KZT 32,494,018 thousand), were lower than expected. credit line facility is secured by a respectively; guarantee of the Government of the b. a credit line facility of euro 47,500 “Moinak Electricity Transmission Republic of Kazakhstan. An interest thousand from EBRD for 12 years, Project” at LIBOR dollar rate plus general of which the first four years are a spread is paid semi-annually. In 2011 grace period. An interest at the In 2009, for the realization of the the non-disbursed part of this IBRD interbank six months EURIBOR “Moinak Electricity Transmission credit line in the amount of USD 1,918 rate plus a 3.55% margin is payable Project” a credit line facility from thousand was cancelled due to the semi-annually. The outstanding IBRD of USD 48,000 thousand was fact that actual costs incurred within balances as at 31 December 2015 opened for 25 years, of which the this project were less than expected. and 31 December 2014 are euro first five years are a grace period. The outstanding balances as at 31 29,248 thousand (equivalent to The credit line facility is secured by December 2015 and 31 December 2014 KZT 10,864,522 thousand) and the guarantee of the Government are USD 57,129 thousand (equivalent euro 35,748 thousand (equivalent of the Republic of Kazakhstan. An to KZT 19,424,481 thousand) and USD to KZT 7,921,345 thousand), interest rate is USD LIBOR rate 65,285 thousand (equivalent to KZT respectively; plus fixed spread is payable semi- 11,904,694 thousand), respectively. c. a credit line facility of euro annually. In May 2013 unused portion 5,000 thousand from EBRD of the credit line from the IBRD in “Kazakhstan National Electricity for 9 years, of which the first the amount of USD 3,274 thousand Transmission Rehabilitation four years are a grace period. was cancelled due to the fact that the Project, Phase 2” An interest at the interbank amount of actual expenses incurred six months EURIBOR rate plus in the course of the project was less In 2008, for the realization of the a 2.75% margin is repayable than expected. The outstanding “Kazakhstan National Electricity semi-annually. The outstanding balances as at 31 December 2015

163 Financial Statements ANNUAL REPORT

and 31 December 2014 are USD for realization of the “Ossakarovka and 3.70% (B2b) margin is payable 42,490 thousand (equivalent to Transmission Rehabilitation Project”: semi-annually. The outstanding KZT 14,446,957 thousand) and USD a. two credit-line facilities of balances as at 31 December 2015 44,726 thousand (equivalent to KZT USD 77,293 thousand and USD and 31 December 2014 are USD 8,155,806 thousand), respectively. 44,942 thousand, from EBRD 10,168 thousand (equivalent to for a 15 years. An interest at the KZT 3,457,055 thousand) and USD “Construction of the Alma 500 interbank six months LIBOR rate 11,183 thousand (equivalent of KZT kW substation” plus a 3.95% margin is payable 2,039,310), respectively. semi-annually. The outstanding In May 2014 the Group concluded In 2010 for the realization of the balances as at 31 December 2015 supplementary agreement, project “Construction of the Alma and 31 December 2014 are USD according to which the undisbursed 500 kW substation with connection 86,763 thousand (equivalent to amount of the second tranche of to UPS of Kazakhstan with the KZT 29,500,398 thousand) and EBRD credit line was decreased voltage of 500, 200 kW” the Group USD 95,026 thousand (equivalent from USD 14,800 thousand to USD received a credit line facility of to KZT 17,328,082 thousand), 11,691 thousand. USD 78,000 thousand from IBRD respectively; for 25 years, of which the first b. a credit-line facility of USD 17. CONSTRUCTION OBLIGATION five years are a grace period. The 17,973 thousand, from EBRD credit line facility is secured by a for 12 years. An interest at the In accordance with the decision of guarantee of the Government of the interbank six months LIBOR rate the Management Board of Samruk- Republic of Kazakhstan. An interest plus a 3.70% margin is payable Kazyna dated 28 November at LIBOR dollar rate plus fixed semi-annually. The outstanding 2013, the Group shall construct spread is repayable semi-annually. balances as at 31 December 2015 a kindergarten in Astana city. In The outstanding balances as at 31 and 31 December 2014 are USD 2014 the Group estimated cost December 2015 and 31 December 11,431 thousand (equivalent to of construction and engaged a 2014 are USD 69,572 thousand KZT 3,886,802 thousand) and construction company. Accordingly, (equivalent to KZT 23,665,329 USD 12,956 thousand (equivalent the Group recognised provision thousand) and USD 71,356 thousand to KZT 2,362,458 thousand) for construction for the whole (equivalent to KZT 13,011,832 respectively. amount of KZT 683,430 thousand thousand), respectively. In 2011, for execution of and respective distribution to the “Reconstruction of the Ossakarovka Shareholder. The expected date of “Ossakarovka Transmission 220 kW power line” the Group completion of the construction of Rehabilitation Project” received from EBRD credit lines for the kinder garden is at the end of the amounts of USD 12,900 thousand 2016. In 2011, for refinancing of EBRD and (A2, B1b) and USD 1,900 thousand DBK loans received in 2004-2005 (B2b). The credit lines were for realization of the Phases 1, 2 and provided for 12 years, of which the 3 of the “North-South Electricity first three years is a grace period. An Transmission Project” the Group interest at the interbank six months opened the following credit lines LIBOR rate plus 3.95% (A2, B1b)

164 / 2015 Financial Statements

18. TRADE AND OTHER ACCOUNTS PAYABLE

In thousands of Tenge 31 December 31 December 2015 2014

Accounts payable for property, plant and equipment and construction works 8,091,105 5,980,443

Accounts payable for electricity purchased 4,507,777 4,427,471

Accounts payable for inventories, works and services 926,262 1,586,396

13,525,144 11,994,310

Accounts payable as at 31 December 2015 and 31 December 2014 are stated in the following currencies:

In thousands of Tenge 31 December 31 December 2015 2014

Tenge 12,613,812 9,893,669

Russian rouble 782,163 826,099

United States dollar 64,961 28,941

Euro 64,208 1,245,601

13,525,144 11,994,310

165 Financial Statements ANNUAL REPORT

19. OTHER CURRENT LIABILITIES

In thousands of Tenge 31 December 31 December 2015 2014

Due to employees 555,197 1,225,630

Commission payable on the non-withdrawn portion of EBRD loans* − 9,665

Other 173,690 207,726

728,887 1,443,021

* The Group is obliged to pay EBRD an annual commission charge on the non-withdrawn portion of the borrowings at the rate of 0.5% and 1%. For the year ended 31 December 2015 the commission on the non-withdrawn portion of the borrowings amounted to nil, as credit lines were fully utilised (2014: KZT 57,172 thousand) (Note 23).

20. REVENUE

In thousands of Tenge 2015 2014

Electricity transmission 73,343,942 57,766,254

Technical dispatch 15,071,222 12,225,728

Balancing of electricity production and consumption 13,017,269 10,329,887

Revenue from sales of purchased electricity 5,004,398 7,278,411

Revenue from electricity sales for compensation of the interstate balances of 3,020,328 3,932,061 electricity flows

Revenue from power regulation services − 2,898,688

Other 1,276,395 1,572,860

110,733,554 96,003,889

Discounts to customers (672,095) (2,484,130)

110,061,459 93,519,759

Discounts to customers are authorised by the Committee of the Republic of Kazakhstan for the Regulation of Natural Monopolies.

166 / 2015 Financial Statements

21. COST OF SALES

In thousands of Tenge 2015 2014

Depreciation and amortization 21,774,524 18,505,522

Technical losses of electric energy 20,172,090 20,779,476

Payroll expenses and related taxes 11,446,146 10,991,705

Cost of purchased electricity for compensation of interstate balances of electricity 8,291,914 10,234,929 flows

Repair and maintenance expenses 4,954,298 4,778,621

Cost of purchased electricity 4,891,579 5,150,762

Inventories 1,213,793 1,071,549

Security services 981,283 920,591

Other 1,816,977 1,783,186

75,542,604 74,216,341

22. GENERAL AND ADMINISTRATIVE EXPENSES

In thousands of Tenge 2015 2014

Taxes other than income tax 5,205,055 5,321,160

Payroll expenses and related taxes 2,788,241 3,173,328

Depreciation and amortization 584,225 544,370

Consulting services 212,567 180,615

Insurance 155,121 136,741

Sponsorship and charitable donations 152,170 134,213

167 Financial Statements ANNUAL REPORT

In thousands of Tenge 2015 2014

Business trip expenses 133,596 111,113

Rent expenses 106,469 117,963

Utilities 99,490 73,624

Trainings 85,615 68,826

Provision for obsolete inventory (Note 9) 80,681 155,069

Materials 63,061 73,665

Corporate events 53,989 53,566

Bank services 37,804 38,332

Security services 37,339 43,551

Communication services 24,357 22,252

Repair expenses 6,793 21,891

(Reversal of) / provision for doubtful receivables and impairment of advances (1,969,605) 2,673,958 (Notes 10 and 13)

Other 707,737 436,761

8,564,705 13,380,998

23. FINANCE INCOME/(COSTS)

In thousands of Tenge 2015 2014

Finance income

Interest income from deposits, current accounts and bonds 2,958,192 1,451,025

Amortization of discount on accounts receivable 912,679 435,780

Others 5,634 8,000

3,876,505 1,894,805

168 / 2015 Financial Statements

In thousands of Tenge 2015 2014

Finance costs

Interest on loans 3,410,140 3,152,588

Discount on account receivable 675,570 989,760

Commission on bank guarantees 615,165 460,042

Amortization of loan origination fees 88,122 87,340

Commission on the non-withdrawn portion of EBRD loan (Note 19) − 57,172

Others − 688

Less: interest capitalized into the cost of qualifying assets (Note 7) − (414,827)

4,788,997 4,332,763

24. FOREIGN EXCHANGE LOSS, in process of exchange rate formation. implementation of inflation targeting NET As a result of devaluation of Tenge the program. As a consequence of change Group incurred foreign exchange loss of exchange rate of Tenge for the year On 11 February 2014 National Bank of of KZT 7,510,748 thousand for the year ended 31 December 2015, the Group the Republic of Kazakhstan made a ended 31 December 2014. incurred net foreign exchange loss decision to cease supporting exchange On 20 August 2015 National Bank in the amount of KZT 35,739,224 rate of Tenge against US dollar and of Republic of Kazakhstan and thousand. other major currencies on the same Government of Republic of Kazakhstan level, reduce volume of currency decided to shift to freely floating interventions and reduce interventions currency exchange rate as a part of

25. OTHER INCOME

In thousands of Tenge 2015 2014

Income from fines and penalties 649,655 70,668

Gain from sales of buildings and constructions 214,488 −

Income from gratuitous transfer of assets − 1,587,134

Other income 222,597 205,596

1,086,740 1,863,398

169 Financial Statements ANNUAL REPORT

26. INCOME TAX BENEFIT / (EXPENSE)

In thousands of Tenge 2015 2014

Current income tax

Current income tax expense 64,306 55,865

Adjustments in respect of current income tax of previous year (115,145) (15,126)

Deferred tax

Deferred income tax (benefit)/expense (2,116,659) 2,922,928

Total income tax (benefit)/expense reported in profit and loss (2,167,498) 2,963,667

Deferred tax expense on revaluation of UPS constructions – 27,777,458

Tax expense during the period recognized in OCI – 27,777,458

The income tax rate in the Republic of Kazakhstan is 20% in 2015 and 2014.

A reconciliation of the 20% income tax rate and actual income tax recorded in the consolidated statement of comprehensive income is provided below:

In thousands of Tenge 2015 2014

(Loss)/profit before income tax expense (9,947,071) 11,579,687

Tax at statutory income tax rate of 20% (1,989,414) 2,315,937

Adjustments in respect of current income tax of previous year (115,145) (15,126)

(Reversal)/accrual of provision for doubtful accounts receivable (385,303) 524,295

Non-deductible forex loss 81,979 −

Support of producers of energy from renewable sources 80,534 −

Other non-deductible expenses 159,851 138,561

Income tax (benefit) / expense reported in profit or loss (2,167,498) 2,963,667

170 / 2015 Financial Statements

Tax effect on temporary differences leading to deferred income tax assets and liabilities at 31 December 2015 and 31 December 2014 is provided below:

Consolidated statement Consolidated statement of of financial position comprehensive income

In thousands of Tenge 31 December 31 December 2015 2014 2015 2014

Tax losses carried forward 3,472,159 1,201,812 2,270,347 1,201,812

Accounts receivable 263,044 129,591 133,453 105,131

Accrued liabilities 127,625 305,230 (177,605) (4,016)

Property, plant and equipment (68,537,131) (68,427,595) (109,536) (4,225,855)

Deferred tax (expense)/benefit 2,116,659 (2,922,928)

Net deferred tax liabilities (64,674,303) (66,790,962)

The Group offsets tax assets and enterprises in which a substantial liabilities if and only if it has a legally interest in the voting power is owned, enforceable right to set off current tax directly or indirectly, by the Group’s assets and current tax liabilities and key management personnel and other the deferred tax assets and deferred entities controlled by the Government. tax liabilities relate to income taxes The related party transactions were levied by the same tax authority. made on terms agreed between the parties that may not necessarily be 27. TRANSACTIONS WITH at market rates, except for regulated RELATED PARTIES services, which are provided based on tariffs available to related and third Related parties include key parties. management personnel of the Group,

171 Financial Statements ANNUAL REPORT

The following table provides the balances of Trade accounts payable to/receivable from related parties as at 31 December 2015 and 31 December 2014:

Trade accounts Trade accounts In thousands of Tenge receivable from payable to related related parties parties

2015 1,873,643 1,734,326 Subsidiaries of Samruk-Kazyna Group 2014 585,642 1,844,045

2015 322,623 205,367 Associates of Samruk-Kazyna 2014 304,904 324,385

2015 314,628 686,464 Entities under joint control of Samruk-Kazyna 2014 108,787 2,011,868

2015 47,602 11,883 Associates of the Group 2014 27,163 19,169

The Group had the following transactions with related parties for the year ended 31 December 2015 and 2014:

Sales Purchases In thousands of Tenge to related from related parties parties

2015 22,452,578 12,008,135 Subsidiaries of Samruk-Kazyna Group 2014 19,215,320 12,958,556

2015 5,794,687 1,846,301 Associates of Samruk-Kazyna 2014 3,959,937 1,169,841

2015 2,791,742 10,169,968 Entities under joint control of Samruk-Kazyna 2014 2,390,475 11,187,190

2015 293,011 87,094 Associates of the Group 2014 311,539 96,232

172 / 2015 Financial Statements

The Group’s sales to related the amount of KZT 168,654 thousand JSC in the amount of KZT 30,700 parties mainly represent electricity (31 December 2014: KZT 154,403 thousand. transmission, technical dispatch thousand) presented within long- Total compensation to key and services on organizing and term receivables from related parties. management personnel included in balancing of electricity production and In accordance with sales agreement personnel costs in the consolidated consumption services. The Group’s Balkhash TES JSC will repay the statement of comprehensive income purchases from related parties mainly outstanding balance in December was KZT 362,814 thousand for the represent communication services, 2018. As at 31 December 2015 the year ended 31 December 2015 (for the energy services and purchase of discount on accounts receivable year ended 31 December 2014: KZT electricity. from Balkhash TES JSC comprised 304,262 thousand). Compensation As at 31 December 2015 the Group’s KZT 51,197 thousand (31 December to key management personnel mainly borrowings of KZT 75,266,975 2014: KZT 65,448 thousand). For consists of contractual salary and thousand were guaranteed by the the year ended 31 December 2015 the performance bonus based on operating Government of the Republic of amortization of discount on accounts results. Kazakhstan (31 December 2014: KZT receivable comprised KZT 14,251 44,911,159 thousand). thousand (2014: KZT 9,926 thousand). 28. FINANCIAL RISK In 2007-2009 the Group acquired On 30 September 2015 the Group has MANAGEMENT OBJECTIVES AND bonds of an associate, Batys Transit sold buildings and constructions with POLICIES JSC, an entity listed on the Kazakhstan equipment and land located in Astana Stock Exchange. The interest rate city to its related party Kazpost JSC for The Group’s principal financial on the bonds is 8%. The bonds KZT 2,161,476 thousand. In accordance liabilities comprise borrowings, are classified as available for sale with sales agreement Kazpost JSC will trade and other payables. The main investments. Fair value is the price repay the outstanding balance by equal purpose of these financial liabilities to sell an asset or transfer a liability, monthly payments until June 2027. is to finance the Group’s investment and therefore an exit price, not an Accordingly, the Group discounted projects and operations. The Group entry price. The carrying value of the future cash flows using discount has trade and other receivables, Batys Transit bonds comprised KZT rate of 10.37%, which is the Group cash and short-term and long-term 868,269 thousand as of 31 December Management’s best estimate of market deposits that arrive directly from 2015 (31 December 2014: KZT 868,269 rate. As of 31 December 2015 the its operations. The Group also holds thousand). discount on accounts receivable from available-for-sale investments. Interest income accrued on bonds Kazpost JSC comprised KZT 911,636 The Group is exposed to interest rate of Batys Transit JSC, the associate, thousand. As of 31 December 2015 the risk, foreign currency risk, credit risk amounted to KZT 75,084 thousand for receivable net of discount comprised and liquidity risk. the year ended 31 December 2015 (for KZT 1,249,840 thousand, of which the year ended 31 December 2014: KZT KZT 1,151,591 thousand was accounted Interest rate risk 57,219 thousand). for within long-term receivables from As of 31 December 2015 the Group related parties. For the year ended 31 Interest rate risk is the risk that the had outstanding accounts receivable December 2015 the Group recognized fair value or future cash flows of a from Balkhash TES JSC for the sale income from amortization of discount financial instrument will fluctuate of property, plant and equipment in on long-term receivables from Kazpost because of changes in market interest

173 Financial Statements ANNUAL REPORT

rates. The Group’s exposure to the rates in the currencies in which the risk of changes in market interest borrowings are denominated. rates relates primarily to the Group’s The following table demonstrates the long-term and short-term borrowings sensitivity of the Group’s profit before with floating interest rates (Note 16). tax to a reasonably possible change in The Group limits its interest rate risk interest rates with all other variables by monitoring changes in interest held constant.

Increase/ Effect In thousands of Tenge (decrease) in on profit basis Points* before tax

For the year ended 31 December 2015

LIBOR 50/(12) (556,105)/133,465

EURIBOR 25/(25) (149,000)/149,000

For the year ended 31 December 2014

LIBOR 2/(2) (13,301)/13,301

EURIBOR 7/(7) (28,759)/28,759

* 1 basis point = 0.01%.

The assumed movement in basis points because of changes in foreign sensitivity to a reasonably possible for the interest rate sensitivity analysis exchange rates. The Group’s exposure change in the US dollar and euro is based on the currently observable to the risk of changes in foreign exchange rate, with all other variables market environment, showing a exchange rates relates primarily held constant. The Group’s exposure significantly higher volatility than in to the Group’s financing activities. to foreign currency changes for all prior years. Also, the Group’s exposure to the other currencies is not material. risk of changes in foreign exchange Foreign currency risk rates relates to the Group’s operating activities (when revenue or expense Foreign currency risk is the risk that is denominated in a different currency the fair value or future cash flows of from the Group’s functional currency). a financial instrument will fluctuate The following tables demonstrate the

174 / 2015 Financial Statements

In thousands of Tenge Increase/(decrease) Effect on profit in exchange rate before tax

At 31 December 2015

US dollar 60%/(20%)* (12,215,701)/4,071,900

Euro 60%/(20%)** (35,580,714)/11,860,238

At 31 December 2014

US dollar 17.37%/(17.37%) (3,838,785)/(3,838,785)

Euro 18.36%/(18.36%) (7,537,546)/(7,537,546)

* in absolute terms increase/(decrease) in exchange rate of Tenge in relation to US dollar comprised 204.01/(68) Tenge; ** in absolute terms increase/(decrease) in exchange rate of Tenge in relation to euro comprised 222.08/(74.29) Tenge.

Credit risk Book value of financial assets rec- reporting date on an individual ognized in the consolidated financial basis for all customers based on Credit risk is the risk that counter- statements of the Group less impair- number of days the receivables are party will not meet its obligations ment allowance reflects the maximal overdue. The calculation is based on under a financial instrument or cus- extent of the Group’s credit risk. actual incurred historical data. The tomer contract, leading to a financial Customer credit risk is managed maximum exposure to the credit loss. The Group is exposed to credit subject to the Group’s established risk is represented by the carrying risk from its operating activities, pri- policy, procedures and control value of each class of financial assets marily trade receivables (Note 10) relating to customer credit risk disclosed in Note 10. The Group does and from its financing activities, in- management. The outstanding not hold collateral as security. cluding deposits with banks (Notes customer receivables are regularly The credit risk on cash and deposits is 11, 12 and 14). The Group’s exposure monitored by the Group management. limited because the counterparties of and the creditworthiness of its coun- At 31 December 2015 the Group had the Group are banks with high credit- terparties are controlled constantly. one customer Uzbekenergo JSC that ratings assigned by international It is the Group’s policy to enter into owed the Group KZT 18,986,981 credit-rating agencies. financial instruments with a diversi- thousand and accounted for 81% of all ty of creditworthy parties. The max- trade accounts receivable outstanding Liquidity risk imum exposure to the credit risk is (31 December 2014: KZT 10,048,687 represented by the carrying value of thousand and accounted for 68%). The management of the Group each financial asset (Notes 10, 11, 12 An impairment analysis is performed has built an appropriate liquidity and 14). by Group management at each risk management framework in

175 Financial Statements ANNUAL REPORT

accordance with the short, medium its debt and concluded it to be low. and long-term funding and liquidity The Group has access to a sufficient management requirements. The variety of sources of funding and debt Group manages its liquidity risk by maturing within 12 months can be maintaining adequate reserves, bank rolled over with existing lenders. loans and credit lines, by monitoring The table below summarises the projected and actual cash flows and maturity profile of the Group’s comparing maturity dates of financial financial liabilities based on assets and liabilities. contractual undiscounted payments. The Group assessed the concentration of risk with respect to refinancing

On Due more Due more Due more Due more Total demand than 1 than 3 than 1 year than month but months but but not 5 years In thousands of Tenge not later not later later than than 1 year than 3 5 years months

At 31 December 2015

Borrowings – 6,944,759 19,416,270 93,532,667 75,206,539 195,100,235

Trade and other accounts – 13,525,144 − − − 13,525,144 payable

– 20,469,903 19,416,270 93,532,667 75,206,539 208,625,379

At 31 December 2014

Borrowings – 4,076,231 10,895,062 56,652,174 51,083,760 122,707,227

Trade and other accounts – 11,994,310 − − − 11,994,310 payable

– 16,070,541 10,895,062 56,652,174 51,083,760 134,701,537

Capital management it maintains a strong credit rating The Group manages its capital and healthy capital ratios to support structure and makes adjustments The primary objective of the Group’s its business and maximise the to it in light of changes in economic capital management is to ensure that shareholder’s value. conditions. To maintain or adjust

176 / 2015 Financial Statements

the capital structure, the Group managing capital during the year higher than 0.5. Debt is considered may adjust the dividend payment ended 31 December 2015. to be equal to all borrowings. Capital to shareholders, return capital to The Group monitors capital using a is considered to be equal to the total shareholders or issue new shares. debt to capital ratio, which is debt liabilities and entire equity. No changes were made in the divided by total capital. The Group’s objectives, policies or processes for objective is to keep the ratio not

31 December 2015 31 December 2014

Debt/capital 0.29 0.20

In thousands of Tenge 31 December 2015 31 December 2014

Long-term borrowings 149,139,660 94,714,528

Short-term borrowings 22,090,879 12,881,885

Debt 171,230,539 107,596,413

Total liabilities 254,360,000 190,150,575

Equity 340,976,614 359,777,466

Capital 595,336,614 549,928,041

The structure of the Group capital disclosing the fair value of financial indirectly; includes the share capital as instruments by valuation technique: • Level 3: techniques that use inputs disclosed in Note 15, reserves and • Level 1: quoted (unadjusted) prices that have a significant effect on retained earnings. in active markets for identical the recorded fair value that are not assets or liabilities; based on observable market data. Fair value hierarchy • Level 2: other techniques for which all inputs that have a significant The Group uses the following effect on the recorded fair value hierarchy for determining and are observable, either directly or

177 Financial Statements ANNUAL REPORT

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities:

Assets measured at fair value

In thousands of Tenge 31 December Level 1 Level 2 Level 3 2015

Financial assets

Available-for-sale financial assets 868,269 – – 868,269 (Note 11)

Non-financial assets

Long-term assets held for sale (Note 6) 161,511 – – 161,511

UPS constructions (Note 7) 416,077,012 – – 416,077,012

Liabilities for which fair values are disclosed

In thousands of Tenge 31 December Level 1 Level 2 Level 3 2015

Financial liabilities

Borrowings (Note 16) 171,230,539 – 171,230,539 –

Assets measured at fair value

In thousands of Tenge 31 December Level 1 Level 2 Level 3 2015

Financial assets

Available-for-sale financial assets 868,269 – – 868,269 (Note 11)

Non-financial assets

UPS constructions (Note 7) 437,895,611 – – 437,895,611

178 / 2015 Financial Statements

Liabilities for which fair values are disclosed

31 December Level 1 Level 2 Level 3 In thousands of Tenge 2015

Financial liabilities

Borrowings (Note 16) 107,596,413 – 107,596,413 –

As of 31 December 2015 and 2014 Kazakhstan continues economic prices and a significant devaluation of the fair value of these bonds were reforms and development of its Kazakhstani Tenge. The combination measured at present value of future legal, tax and regulatory frameworks of the above along with other factors cash flows. as required by a market economy. resulted in reduced access to capital, The future stability of Kazakhstan a higher cost of capital, increased Fair values of financial economy is largely dependent upon inflation and uncertainty regarding instruments these reforms and developments economic growth. Management and the effectiveness of economic, believes it is taking appropriate As of 31 December 2015 and 31 financial and monetary measures measures to support the sustainability December 2014 the management undertaken by the government. of the Partnership’s business in the assessed that the fair value of financial The National Bank of the Republic current circumstances. instruments of the Group, such as of Kazakhstan shifted to inflation trade accounts receivable and payable, targeting policy. Starting from 20th Taxation other financial assets, cash and cash August 2015 it was decided to cease equivalents, cash restricted in use, the support of Tenge exchange rate Kazakhstan’s tax legislation and approximates their carrying amounts against US dollar and other main regulations are subject to ongoing largely due to the short-term maturities currencies in order to decrease the changes and varying interpretations. of these instruments. Borrowings volume of currency interventions and Instances of inconsistent opinions are stated at amortized costs which to reduce the influence on establishing between local, regional and national approximate their fair values. the Tenge exchange rate. Official tax authorities are not unusual. The methods and assumptions used exchange rate before devaluation The current regime of penalties to estimate the fair value of UPS amounted to 188.38 Tenge per 1 US and interest related to reported and constructions are disclosed in Note 4. dollar. As at 31 December 2015 the discovered violations of Kazakhstan’s exchange rate amounted to 340.01 tax laws are severe. Penalties are 29. COMMITMENTS AND Tenge per 1 US dollar. generally 50% of the taxes additionally CONTINGENCIES In 2015, the Kazakhstan economy assessed and interest is assessed at continued to be negatively impacted the refinancing rate established by Operating environment by a significant drop in crude oil the National Bank of the Republic

179 Financial Statements ANNUAL REPORT

of Kazakhstan multiplied by 2.5. As • Earnings before interest, income consolidated financial statements for a result, penalties and interest can tax, depreciation and amortization unexpected expenses associated with amount to multiples of any assessed (“EBITDA”) to interest expense of damage or loss of these assets. taxes. Fiscal periods remain open not less than 3:1; to review by tax authorities for 5 • Net debt to EBITDA of not more Capital commitments calendar years preceding the year of than 4:1; review. Under certain circumstances • Self-financing ratio of not less than To ensure the stable and reliable reviews may cover longer periods. 20%; performance of the national electricity Because of the uncertainties • Debt service ratio of not less than grid, the Group developed a capital associated with Kazakhstan’s tax 1.2. investment plan. As at 31 December system, the ultimate amount of taxes, Management believes that the Group 2015, the Group’s outstanding penalties and interest, if any, may be complied with all existing loan contractual commitments within in excess of the amount expensed covenants with EBRD and IBRD as at the frameworks of this plan amount to date and accrued at 31 December 31 December 2015 and 31 December to KZT 84,277,398 thousand (31 2015. 2014. The Group excludes from December 2014: KZT 103,344,164 As at 31 December 2015, EBITDA the foreign exchange loss, thousand). Management of the Group believes as management believes that foreign Due to the fact that a significant part that its interpretation of the relevant exchange loss meets definition of of the plan on capital investments and, legislation is appropriate and that non-cash impairment and as such open contracts in particular, consist of it is probable that the Group’s shall be excluded from the calculation equipment and spare parts purchased tax positions will be sustained, of EBITDA as provided in the loan outside of the Republic of Kazakhstan, except as provided for or otherwise agreement. As of 31 December 2015 there is a likelihood of fluctuations in disclosed in these consolidated the Group excluded from EBITDA the value of contractual obligations. financial statements. the foreign exchange loss of KZT The main cause of these variations is 35,739,224 thousand incurred during the effect of changes in exchange rates Compliance with loan covenants the year ended 31 December 2015. caused by the transition to the regime of free-floating exchange rate in the From 1999 till 2011 the Group Insurance framework of the implementation of concluded loan facility agreements target-based inflation. with EBRD and IBRD (the “Creditors”) As at 31 December 2015, the Group Tariffs on purchase of electricity for the amounts of 558 million US insured property and equipment with from renewable energy sources dollars and 233 million euro (Note the carrying value of KZT 153,385,690 According to the Government 16). According to the Loan facility thousand. The insurance payment Decree No. 419 dated 29 April Agreements concluded between the is limited to the carrying value of 2014, the tariffs for the purchase of Group and the Creditors, the Group property and equipment. The Group electricity from renewable energy has to comply with the following does not insure its other property. stations, which have been put into covenants: Since absence of any insurance does exploitation before the adoption of • Current ratio of not less than 1:1; not imply a reduction of the cost of the Law on renewable energy No. • Total debt to total capital of not assets or occurrence of any liabilities, 165-IV (“Law”) dated 4 July 2009, more than 50%; no provision has been made in these are equal to the tariffs stipulated in

180 / 2015 Financial Statements

the technical-economic justification services, the Group did not recognize of the station. For the renewable revenue from sales of these services, energy producing organizations as management believes that the that have been put into exploitation amount of revenue cannot be reliably after the Law adoption fixed tariffs measured, and that it is not probable approved by the Government decree that future economic benefits of the Republic of Kazakhstan No. associated with this transaction will 645 dated 12 June 2014 are applied. flow to the entity. Tariff on sale of electricity from renewable energy sources Tariff on sale of electricity from renewable energy sources to contingent consumers is calculated according to the Rules on Calculating the Tariffs on Supporting the Renewable Energy Sources approved by the Government Decree No. 290 dated 1 April 2014. The sales tariff includes cost of purchased electricity, operating costs, cost of services on balancing production and profit margin and is calculated by the Company regularly. Management believes that purchase and sales tariffs on electricity from renewable energy sources are applied and calculated properly in accordance with the applicable regulation and legislation.

Contractual commitments

Power regulation services During the year ended 31 December 2015 the Group provided power regulation services to its client Uzbekenergo JSC. However, due to the fact that as at 31 December 2015 the Group has not yet signed a sales agreement for power regulation

181 Appendices ANNUAL REPORT

APPENDICES

APPENDIX 1. REPORT ON The number of the placed shares is of EnergoInform in the authorized MANAGEMENT OF BRANCHES 217,970. capital of KazEnergoProvod is 49.9 AND AFFILIATES, AND IMPACT OF The revenues of EnergoInform in % or KZT 161.5 million in monetary THE FINANCIAL AND ECONOMIC 2015 were KZT 3,743.371 million with terms. PERFORMANCE OF BRANCHES the total expenses of KZT 3,453.141 AND AFFILIATES ON KEGOC million. According to the results of Financial Settlement Centre for PERFORMANCE INDICATORS operations for the period, the net Support to Renewable Energy IN 2015 income was KZT 235.374 million. Sources In comparison with 2014 the revenues EnergoInform decreased by KZT 134.37 million or Financial Settlement Centre for Support 3.47 %, while expenses decreased by to Renewable Energy Sources (FSCS KEGOC is the sole shareholder (100% KZT 138.260 million or 3.86 %. RES) was established in accordance shares). The key performance indicators with the decision of the Board of Mission: Ensure reliable operation and of EnergoInform for 2015 were as Directors of KEGOC dated 12 August effective development of information follows: 2012. and telecommunication system of • EBITDA margin was 9.97 %, for the Order No. 256 of the Minister of Energy the unified power system (UPS) of same period of 2014 it was 10.74 of the Republic of Kazakhstan dated Kazakhstan using the world’s best %, the deterioration in EBIDTA 31 March 2015 On Determination practices and innovative technologies. margin compared to the previous of Financial Settlement Centre for Strategic goals: year was caused by decrease in the Support to Renewable Energy Sources • Reliable and efficient Company’s income; determined Financial Settlement operation and development • net income was KZT 235.374 Centre for Support to Renewable of telecommunications and million, which is higher than the Energy Sources. information systems of KEGOC. actual figure in 2014 by KZT The core operations of FSCS RES: • Becoming an Information 33.988 million, or 16.9 %. to ensure the centralised purchase Integrator Unified Power System EnergoInform together with and sale of the electricity produced of Kazakhstan. EAST INDUSTRY COMPANY by renewable energy sources (RES) • Increase in the cost of equity Ltd LLP in the city of Semey in facilities and delivered to the electric capital. October 2012 organized a venture: networks of Kazakhstan UPS. The core operations: maintenance KazEnergoProvod LLP. The area of As of 31 December 2015 FSCS RES of information telecommunication key operations is manufacture and concluded contracts with 40 RES complex of KEGOC. sale of bare conductor (aluminium facilities. The charter capital of EnergoInform is and aluminium steel reinforced types) In 2015, FSCS RES sold electricity KZT 2,179.700 million. The number of for overhead power lines. Production produced by RES facilities to issued shares is 700,000; the nominal capacity of the plant is 8,000 tonnes conditional customers in the amount of value of one share is KZT 10,000. of cables and wires a year. The share 203.6 million kWh.

182 / 2015 Appendices

The sole founder and sole participant is the results of 2015 amounted to KZT KEGOC. 22.554 million. FSCS RES was registered in the Department of Justice Department of Saryarka district of Astana on 27 The financial and economic activity of August 2013. EnergoInform and FSCS RES in 2015 FSCS RES’s authorized capital was had almost no effect on the financial KZT 100.0 million as of 31 December performance of the Company. 2015. Total income of FSCS RES amounted to KZT 5,026.013 million at the end of 2015. Expenses amounted to KZT 4,998.771 million. Profit based on

According to the non-consolidated According to the consolidated financial statements (excluding financial statements (including EnergoInform and FSCS RES) EnergoInform and FSCS RES) Indicators

2014 2015 2014 2015

General key indicators

EBITDA margin, % 26.34 45.50 26.52 43.74

Liquidity and borrowing

Current liquidity ratio (not less than 1.0) 2.32 2.67 2.33 2.61

Interest coverage (EBIT / interest 5.14 -2.02 5.23 -1.92 expense)

Debt to EBITDA (not more than 5.0) 3.26 11.16 3.22 10.82

Debt / equity (not more than 2.0) 0.30 0.50 0.30 0.50

Profitability

Profitability of operations, % 7.08 -4.68 7.21 -4.38

183 Appendices ANNUAL REPORT

Batys Transit Batys Transit implements the Batys Transit mission: Contribute to project on the basis of a concession the development of power industry Batys Transit was registered in agreement with the Government of the in Kazakhstan through the structural November 2005, in accordance with Republic of Kazakhstan represented improvement of the Unified Power the decree of the Government of by the Ministry of Industry and System of Kazakhstan Kazakhstan to implement the project New Technologies of the Republic Core operations of Batys Transit: for the construction of inter-regional of Kazakhstan; and this is one of • Transmission of electricity; power transmission line linking the first examples of public-private • Operation of electric networks and the North Kazakhstan with Aktobe partnership in implementation of the substations; oblast. The founders of Batys Transit projects of the national significance on • Construction and erection works; are: KEGOC with 20% of shares, the basis of the concession agreement • Other activities not prohibited by MekhEnergoStroy LLP with 80% of and financed by placing infrastructure applicable law. shares. bonds.

Appendix 2. Corporate Calendar for 2016

An extraordinary General Meeting of Shareholders of KEGOC: determination of 29 January an audit firm to audit the Company’s financial statements for 2016 – 2018.

Participation in the meeting of the Consultative Committee for Electrical Energy January at the College of the Eurasian Economic Commission

Report of the Company’s management to the employees on the results of work February-March for 2015 and tasks for 2016

Participation in the 49th meeting of the CIS Electric Power Council, Dushanbe, May Tajikistan

Before 29 May Holding the Annual General Meeting of Shareholders

May Participation in the IX Astana Economic Forum

Celebration of the Labour Dynasties Day of Samruk-Kazyna, with the May participation of all members of the Company’s labour dynasty

XIII International competition to test the professional skill of electric power industry experts from CIS countries – International repair and maintenance September competition for 110 kV and higher electricity transmission lines on the training ground in Makinsk.

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Holding the meetings of the Board of Directors and the Management Board of September KEGOC with talent pool

October Participation in the 50th meeting of the CIS Electric Power Council

October Participation in the annual KAZENERGY forum

Participation in the 15th Kazakhstan International Exhibition and Forum – Power October Kazakhstan, Almaty

November Participation in the republican meeting of power engineers of KEA

December Holding the Best Mentor of the Year competition

The actual dates and the nature of the events may vary irrespective of the best efforts of KEGOC.

Appendix 3. Glossary

AR Autoreclosing

ARNM Agency of Kazakhstan for Regulation of Natural Monopolies

Branches MES and NDC SO branches of KEGOC

CHPP Combined heat and power plant

CIS Commonwealth of Independent States

Company Kazakhstan Electricity Grid Operating Company Joint Stock Company “KEGOC”

EA Executive Administration

EBRD European Bank for Reconstruction and Development

ECR Pool Kazakhstan electric capacity reserve pool

EIA Environmental impact assessment

ESO Energy supplying organization

FS Feasibility Study

185 Appendices ANNUAL REPORT

Appendix 3. Glossary (Continued)

Fund Samruk-Kazyna Sovereign Wealth Fund Joint Stock Company

GRES State District Power Plant

GTPP Gas turbine power plant

HPP Hydroelectric power plant

IAS Internal Audit Service

IBRD International Bank for Reconstruction and Development

ICS Internal control system

IMS Integrated management system

IPO Initial Public Offering

IPS Integrated power system

JSC Joint Stock Company

KEGOC JSC Kazakhstan Electricity Grid Operating Company Joint Stock Company “KEGOC”

kWh kilowatt-hour

LLP Limited liability partnership

MEBP Ministry of Economy and Budget Planning of the Republic of Kazakhstan

MES KEGOC’s branches – Intersystem Power Grids

MVA Megavolt-ampere

MW Megawatt

NDC SO KEGOC’s branch – National Dispatch Centre of the System Operator

NGOs Non-governmental organizations

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NPG National Power Grid

OJSC Open Joint Stock Company

OHTL Overhead transmission line

OSY Outdoor switchyard

PLС Power line carrier

Preliminary EIA Preliminary environmental impact assessment

RDC Regional Dispatch Centre

REC Regional network company

ROACE Return on average capital employed

SAIDI System average interruption duration index

SAIFI System average interruption frequency index

Samruk-Kazyna JSC, sole Samruk-Kazyna Sovereign Wealth Fund Joint Stock Company shareholder

SCADA Supervisory Control and Data Acquisition system

SS Substation

STC Scientific and Technical Council

TPP Thermal power plant

UPS Unified Power System

VAT Value added tax

WACS Wide area control systems

WAMS Wide area measurement systems

187 Contacts

Contacts

www.kegoc.kz

GENERAL FOR ENQUIRIES REGARDING AUDITOR ANNUAL REPORT

Kazakhstan Electricity Grid Corporate Development Ernst & Young LLP, Operating Company (KEGOC) Department: Esentai Tower, 77/7 Al-Farabi Ave, joint-stock company, Almaty, 050060, 59 Tauyelsizdik Ave, Astana, Zhuldyz Zhumabayeva the Republic of Kazakhstan the Republic of Kazakhstan phone: +7(7172) 690-326 phone: +7 (727) 258-59-60 e-mail: [email protected] fax: +7 (727) 258-59-61 e-mail: [email protected] phone: +7(7172) 319-522 Yelena Feklistova fax: +7(7172) 690-455 phone: +7(7172) 690-565 REGISTRAR e-mail: [email protected] e-mail: [email protected] Integrated Securities Registrar JSC, Investors Relations Tengiz Towers, 30A/3 Satpayev Str, Department: Almaty, 050040, the Republic of Kazakhstan Dinara Sagintayeva phone: +7(727) 272-47-60 phone: +7(7172) 690-491 fax: : +7 (727) 272-47-60 ext. 230 e-mail: [email protected] e-mail: [email protected]

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