UNITING THE ENERGY 2018 Annual report ANNUAL REPORT 2018 OF PSJC FEDERAL HYDROGENERATING COMPANY – RUSHYDRO, INCLUDING INFORMATION ON SUSTAINABLE DEVELOPMENT
This Annual Report is preliminary approved by the Board of Directors on May 24, 2019, approved by decision of the Annual General Meeting of Shareholders on June 28, 2019 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 CONTENT
10 28 62 146 214 Company Strategic Our Corporate Appendices profile review performance governance
4 Responsibility statement 12 About Company 30 Markets served 64 Economics and finance 148 Corporate governance 216 Auditor’s opinion 4 Information on the report 12 RusHydro’s background 32 Strategy of RusHydro Group 74 Production and sales 153 Shareholders and investors 220 Opinion on Public Assurance 6 Message from the Chairman 17 Key awards and ratings 36 Key performance indicators 106 Innovations 160 Governing bodies 222 Defining materiality and creating of the Board of Directors a materiality matrix 18 Key figures 40 Investment activities 112 Procurement 180 Executive bodies 8 Message from the Chairman of 224 GRI content index 20 Structure of Rushydro Group 51 Sustainable development 117 HR and social policy 187 Audit and control the Management Board – General 229 Tables of compliance with Director 22 Geographical spread Environmental protection 199 Risk management 131 International Integrated 24 Business model 210 Report on remuneration Reporting Framework of the governing and control 230 Glossary bodies 232 List of abbreviations 232 Feedback questionnaire 233 Contacts
2 3 //COMPANY PROFILE PJSC RusHydro | Annual report 2018
Comparability with the ↗↗ RusHydro’s Information Policy information expanded from 48 to 60 RESPONSIBILITY previous annual reports Regulations; companies. Criteria for inclusion in the ↗↗ the International Integrated consolidation perimeter: STATEMENT In 2018, there were no significant changes Reporting Framework (
1 For the purpose of this report, RusHydro Group means a group of companies which include PJSC RusHydro and its subsidiaries. The control is determined in accordance with Article 2 of Federal Law No. 39-FZ On Securities Market dated April 22,1996. 1 The report also covers information on PJSC Boguchanskaya HPP, which is not a subsidiary or part of RusHydro Group, but a joint venture of RusHydro Group and UC RUSAL.
4 5 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS
Dear shareholders,
2018 marked yet another year for RusHydro power grid expansion – this is the only way to As Russia’s leader in generating green energy, healthcare institutions, along with culture, Group’s ongoing growth and development. accelerate the improvement of quality of living RusHydro Group remains committed to the education, sports and environment projects. We commissioned new power plants in the Far East going forward. principles of sustainable development. In 2018, in the Far East and modernized existing the Company made strong progress in this Over the past year, the Board of Directors hydropower plants to increase our total The Long-Term Program for Replacement field, including targets approved to reduce held 18 meetings, both in person and in installed capacity to 39.4 GW, setting a new of Retiring Capacities developed in 2018 greenhouse gas emissions and the mechanisms absentia, and considered more than 100 key record for the fourth consecutive year. by RusHydro’s management and approved for their achievement, with the regulations matters related to RusHydro Group’s general by its Board of Directors is key to address on procurements now requiring bidders’ management and strategic development. As a matter of strategic importance, we the problem of ageing CHPP equipment in this compliance with the principles of social help deliver on the national goals in the Far strategically important and rapidly growing responsibility and sustainable development. In We are grateful to our shareholders, partners Eastern Federal District. In 2018, we launched macroregion. 2018, RusHydro’s Board of Directors approved and employees for their contribution to Vostochnaya CHPP in Vladivostok, the third its updated Environmental Policy, which sets RusHydro’s development and confidence in hydropower unit of Ust-Srednekanskaya HPP The alignment of tariffs in the Far East’s targets to increase the installed capacity of the Company’s governing bodies. in the Magadan Region, and a wind power isolated areas outside of UES of the East with low-carbon generation, reduce direct and per plant in the Arctic settlement of Tiksi in Yakutia. average national rates helps promote further unit greenhouse gas emissions by 6.1% by 2025 We are also completing the construction investments in the region’s economy. The vs 2015, and prevent species elimination as a Yury of Sakhalinskaya GRES-2 and a CHPP in Russian Government is going to extend the result of the Group’s operating activities. TRUTNEV Sovetskaya Gavan. Grid infrastructure tariff adjustment mechanism up to 2028, with projects are underway, including in priority RusHydro as its operator. RusHydro Group focuses on the development Chairman of the Board of Directors of RusHydro development areas. of local communities across its footprint, In 2018, the Company continued its efforts providing for better living and health The Russian government places a great to improve corporate governance. RusHydro conditions. A major employer and taxpayer emphasis on the development of the Far East, Group delivered 15% optimization in its in the regions of its operations, RusHydro with the region’s investment appeal rising, structure by consolidating businesses with created 1,250 new jobs in 2018. Its tax new businesses emerging, and the economy similar functions or closing down poor payments to budgets of different levels booming. 2018 saw electricity consumption performers. The Group introduced and has ever exceeded RUB 81 bn. The Company in the region growing twice as fast as across since been improving its vertically integrated implements charitable projects prioritizing Russia. Still, we have to focus on energy audit, control and risk management framework support to vulnerable population groups, sector development and modernization and to enhance the quality of asset management. people with disabilities, veterans and
6 7 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD – GENERAL DIRECTOR
Dear shareholders, By the end of the year, the installed capacity and refurbishing more than 130 km of heat performance were the main drivers behind colleagues and partners, at the Company’s plants reached 39.4 GW, and 7,600 km of electric power supply strong consolidated financials. RusHydro putting RusHydro ahead of all its Russian peers. networks. During this period, the Group plans Group’s revenue grew by 5.1% to RUB 400.4 bn, The year of 2018 was another confident to launch Sakhalinskaya GRES-2, CHPP in EBITDA increased by 5.3% to a record step forward for RusHydro as we registered RusHydro’s Board of Directors supported Sovetskaya Gavan, Nizhne-Bureyskaya HPP, RUB 109.7 bn, and net profit rose by 28.5% to record-high power generation and ensured the Management Board’s initiative to Zaramagskaya HPP-1, and 5 smaller HPPs in RUB 31.8 bn. financial growth, including through consistent start levelling the station node building at the North Caucasus, while also completing cost optimization. In addition to bringing Zagorskaya PSP-2 using the compensation the construction of Ust-Srednekanskaya HPP RusHydro Group boasts a robust credit profile, to completion several major investment grouting technology to inject special solutions as per the design parameters and building a which makes it highly attractive for investors. projects, RusHydro drove home the need under the foundation. Once the project 110 kV Pevek-Bilibino power line. The upgrade In 2018, the Company successfully completed to build new and upgrade existing thermal is completed, RusHydro will make further and modernization program is expected three Eurobond offerings, including two power generation facilities in the Far East decisions on how to finish construction of this to yield 163.7 MW of additional capacity at ruble-denominated issues and a debut dim with guaranteed return on investment . essential element in Russia’s unified energy the existing hydropower generation facilities. sum bond issue, with the books substantially We are also working towards establishing system. oversubscribed by international investors. long-term tariff regulation in the Far Eastern Among other things, RusHydro focuses on The year marked the first time all three major Federal District that would take due account In 2018, the Company completed the implementing the Long-Term Program for international rating agencies – S&P, Moody’s, of energy companies’ economically justified construction of 110 kV and 35 kV approach lines Replacement of Retired Capacities and Power and Fitch – upgraded the Company’s credit expenses. Taken together, these initiatives to the 220 kV Maya substation. Thanks to this System Development in the Far East that was ratings to sovereign (investment grade). At represent a concerted effort on our part to major infrastructure project in the Far Eastern drafted by the Company’s management team the same time, ACRA confirmed RusHydro’s boost the Company’s fundamental value for Federal District, starting 2019, the frequencies and approved by the Board of Directors in top credit rating on the national scale, noting the benefit of all shareholders. of the Central and Western energy hubs of 2018. Key projects under the Program include the critical systemic importance of the Yakutia were synchronized with the UES of the construction of Khabarovskaya Company for the Russian economy. The Group’s power generation, including East, thereby ensuring a more reliable power CHPP-4, Artemovskaya CHPP-2 and the second Boguchanskaya HPP, increased 2.8% y-o-y supply for the republic. stage of Yakutskaya GRES-2, the upgrade I would like to take this opportunity to express to reach an all-time peak of 144.3 bn kWh, of Vladivostokskaya CHPP-2. Following deep gratitude to the employees engaged in while power output across Russia grew 1.6% RusHydro continues to develop power the inclusion of these projects in the state heat the generation, transmission, retail, design and y-o-y. Our strong operating performance retailing, having opened 17 unified accounting upgrade program, RusHydro will proceed with other operations of our unique energy holding. was the result of effective management centers in the Krasnoyarsk and Khabarovsk the construction and modernization of power At the end of the day, it was your hard work of hydropower operational regimes amid territories and in the Sakhalin Region, with plants with guaranteed return on investment. that made this year a success for RusHydro higher-than-usual water levels in rivers and two more centres in the Primorye Territory Group. We have no intention of slowing down. the growing demand for electricity in the set to follow in 2019. This aligns perfectly with RusHydro’s Value Growth Plan through 2021 Instead, we will continue raising the bar to bring Far Eastern Federal District, which is almost the Russian President’s Order On National includes a number of initiatives, but most the best value to our shareholders, consumers, entirely powered by RusHydro Group. Goals and Strategic Objectives of the Russian importantly it promotes the principles of and the country’s economy. Federation through to 2024, as such centers guaranteed return on investment in the Far In 2018, RusHydro launched Vostochnaya contribute to fostering a comfortable urban East thermal generation, introduction of CHPP in Vladivostok (the new capital of the environment and promoting digital economy. long-term tariff regulation in the Far Eastern Nikolay Far Eastern Federal District) and the third Unified accounting centers help create Federal District, stronger efficiency and lower SHULGINOV hydropower unit at Ust-Srednekanskaya synergies for RusHydro by consolidating operating costs. HPP in the Magadan Region. The Group also the Group’s retail functions, improving Chairman of the Management Board – commissioned a unique wind power plant in payment discipline, slashing consumer debt, In 2017–2018, savings from initiatives aimed General Director the Arctic settlement of Tiksi in the Republic and diversifying the utilities business. at cutting operating costs amounted to over of Sakha (Yakutia) and completed the first RUB 12 bn, while total procurement savings stage of Anadyrskaya CHPP gasification in The Group’s investment program through to across RusHydro Group came in at RUB 9.55 bn Chukotka. 2023 (as approved by the Board of Directors) for 2018 alone. We intend to continue our cost sets out the scope of mid-term initiatives, reduction and efficiency improvement efforts As part of its HPP Comprehensive providing for an estimated RUB 383 bn to to maximize savings. Modernization Program, RusHydro upgraded be spent on commissioning around 1.4 GW eight hydropower units with a total capacity and over 560 Gcal/h of power and heat The management’s work to optimize operating of 659 MW at seven HPPs. capacities, respectively, as well as on building costs coupled with strong operational
8 9 //COMPANYPROFILE
RUSHYDRO GROUP ANNUALLY COMMISSIONS NEW GENERATION FACILITIES AND UPGRADES EXISTING ONES. AT THE END OF 2018, RUSHYDRO’S INSTALLED CAPACITY INCREASED TO 39.4 GW, WHICH EVEN MORE BROUGHT THE POWER HOLDING TO FIRST PLACE AMONG DOMESTIC PEERS AGAINST THIS INDICATOR. RUSHYDRO OPERATES AND BUILDS POWER PLANTS IN THE CENTRAL PART OF RUSSIA, THE VOLGA REGION, IN THE NORTH CAUCASUS, IN SIBERIA, AND IN THE FAR EAST. //COMPANY PROFILE PJSC RusHydro | Annual report 2018 ABOUT RUSHYDRO’S COMPANY HISTORY PJSC RusHydro was established on December 2, 2004 as 2018 part of the reorganization of the national energy holding RAO UES of Russia. 2004–2005 2016 2017 RusHydro is the largest hydro-generating Installed electrical capacity of 1 The Company completed the construction of Zelenchukskaya RusHydro and VTB Bank completed the unique for the Russian company in Russia and among the top RusHydro Group is As part of the government program to HPP-PSP with a capacity of 140 MW and 156 MW in turbine market transaction on acquiring 13% of RusHydro’s shares and global hydropower companies in terms of reform the power sector, PJSC RusHydro (previously, OJSC HydroOGK) was and pump modes, respectively. concluding a five-year forward contract. All proceeds were used installed capacity of power plants. established on the basis of RAO UES of to refinance the debt of RusHydro Group’s Far Eastern energy Russia hydropower plants. The Company completed the second construction stage of companies. RusHydro Group is a leader in generating 39.4 Blagoveshchenskaya CHPP, increasing its electricity and heat renewable energy from water flows, solar, GW capacity by 120 MW to 400 MW and by 188 Gcal/h to 1,005 The Company completed the first construction stage of wind, and geothermal energy. [102-1], [102-2] Gcal/h, respectively. 193.5 MW Yakutskaya GRES-2, the largest power plant built under the Presidential Decree. The Company is registered in Krasnoyarsk Installed heat capacity of and headquartered in Moscow. [102-3] RusHydro Group is RusHydro Group operates within the 2006 Unified Energy System (UES) of Russia. RusHydro and RUSAL signed a joint One of the Group’s key assets is JSC RAO agreement on the implementation of the ES East Subgroup representing the most 18,924 Boguchanskaya Power and Metallurgical part of the Far Eastern Federal District’s Gcal/h Association project to complete 2010 2012 2015 power grid. The Company also operates in Boguchanskaya HPP – one of the largest and the global market by managing Armenia- longest construction projects of the Soviet For the first time in its history, RusHydro was In accordance with the Russian President’s Decree, 100 MW Gotsatlinskaya HPP was based Sevan-Hrazdan Сascade HPPs [102-4]. Headcount as at December 31, time and build an aluminium smelter. named among the world’s Top 250 largest RUB 50 bn were contributed to RusHydro’s put into operation in the Republic 2018 totaled energy companies, according to the 2010 authorized capital for the implementation of four of Dagestan. The Company also In accordance with the Russian President’s The Company put into operation the Top 250 Global Energy Company Rankings priority thermal generation projects in the Far East, commissioned 1 MW Batagay SPP, Order No. 1009 dated August 4, 2004, first stage of Irganayskaya (400 MW), by Platts. The Company ranked 113th in the including the construction of the second stage the world’s largest solar power PJSC RusHydro has been included in the Gelbakhskaya (44 MW), Maginskaya (1.2 MW) consolidated rating and 2nd in the list of the of Blagoveshchenskaya CHPP, the first stage of plant beyond the Arctic Circle, as world’s fastest-growing energy companies. well as four smaller SPPs. list of strategic enterprises and joint stock and Agulskaya (0.6 MW) smaller HPPs in the Yakutskaya GRES-2, Sakhalinskaya GRES-2, and CHPP 69.7 Republic of Dagestan, and the third stage of in Sovetskaya Gavan. companies since 2012. ‘000 people Zelenchukskaya HPP in Karachay-Cherkessia. Currently, RusHydro Group comprises over 400 power generation facilities, including Russia’s largest Sayano- Shushenskaya HPP named after P. S. Neporozhniy (capacity of 6,400 MW), nine power plants of Volga-Kama 2009 2011 2013–2014 cascade (total installed capacity over 10,000 MW), Bureyskaya HPP (capacity An accident took place at Sayano-Shushenskaya HPP. The Russian Federation contributed a The main recovery and reconstruction operations of Sayano-Shushenskaya RusHydro arranged for the recovery operations and controlling stake in RAO ES East to the HPP were completed, with the HPP reaching its design capacity of 6,400 MW. of 2,010 MW), Zeyskaya HPP (capacity of engaged Power Machines as a supplier of the core Company’s authorized capital, increasing the In addition, a major upgrade took place at the entire technological complex 1,330 MW), Novosibirskaya HPP (capacity equipment. First units were restored and put into installed capacity of RusHydro Group from of the plant, making Sayano-Shushenskaya HPP the most advanced and the of 480 MW), several dozen hydroelectric operation in next to no time. 26.1 to 35.2 GW. safest hydroelectric power plant in Russia. power plants in the North Caucasus and highly maneuverable capacities of The Company commissioned the first two hydropower units at Ust- pumped storage power plants (PSPP). Srednekanskaya HPP in the Magadan Region, with the plant capacity reaching RusHydro Group also includes thermal 2007–2008 168 MW. power plants in the Far East with a The Company achieved its target model. PJSC RusHydro total capacity of over 8,000 MW and Boguchanskaya HPP ramped up to the designed installed capacity consolidated more than 50 hydroelectric power plants in geothermal power plants in Kamchatka. of 2,997 MW. 18 Russian regions. Yuzhno-Sakhalinskaya CHPP-1 saw its 139 MW power unit No. 4 start Two 335 MW hydroelectric units of Bureyskaya HPP were put generating electricity. into operation.
1 The indicator includes the electric capacities of RAO ES East Subgroup and Boguchanskaya HPP built and jointly operated with UC RUSAL.
12 13 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 2018 milestones February June August
↗↗RusHydro was the first of the Russian corporates to issue ↗↗Votkinskaya HPP’s hydropower unit No. 7 was ↗↗The Company paid out RUB 11.2 bn as dividends for 2017.1 three-year ruble-denominated Eurobonds with a coupon upgraded as part of RusHydro’s Comprehensive rate of 7.4% in 2018. The issue was oversubscribed by four Modernization Program, becoming the second ↗↗PJSC Sakhalinenergo completed the first stage of power asset consolidation in the Sakhalin Region, 1 times of the necessary volume of RUB 20 bn. fully modernized hydropower unit at the plant. which increased the Group’s voting share holding to above 75%. As part of the additional issue of PJSC Sakhalinenergo’s shares, 91 MW power unit No. 5 at Yuzhno-Sakhalinskaya CHPP-1 and other facility ↗↗The Group’s financial debt went down by RUB 26 bn infrastructure were transferred from JSC RAO ES East into the ownership of PJSC Sakhalinenergo. following exclusion of guarantee obligations between RusHydro and Vnesheconombank on ↗↗The Bank of Russia registered RusHydro’s additional share issue and the prospectus. The issue size totaled PJSC Boguchanskaya HPP. RUB 14 bn. The decision was made by RusHydro’s Board of Directors in June 2018 as part of the first stage of May construction of two 110 kV high-voltage single-circuit power lines Pevek – Bilibino in Chukotka. ↗↗PJSC RusHydro was named Approved Employer by the ↗↗RusHydro’s Dagestan branch Association of Chartered Certified Accountants (ACCA). commissioned Miatlisnkaya ↗↗Fitch Ratings (Fitch) upgraded the Company’s long-term credit rating and the credit ratings of its bonds to HPP’s hydropower unit an investment grade BBB- (stable outlook). ↗↗S&P Global Ratings (S&P) upgraded the Company’s long- No. 2. Now all HPP’s turbines term credit rating to an investment grade BBB- (stable were replaced as part of the outlook). Comprehensive Modernization Program.
March July September October
↗↗Volzhskaya HPP, the largest ↗↗RusHydro Group sold its stock in PJSC Inter RAO (5,131,669,622.18 shares) to JSC Inter RAO ↗↗CHPP Vostochnaya commissioned in Vladivostok ↗↗RusHydro and Uzbekgidroenergo, the Uzbek national hydro-generating HPP of the Volga-Kama Capital, which accounts for 4.915% of the authorized capital. The decision was part of non- is the first large-scale power plant going into company, signed a cooperation agreement to develop hydropower cascade, commissioned a new core asset divestment effort in accordance with the orders and directives of the Russian operation in the capital of the Primorye Territory generation in Uzbekistan. The agreement provides for a feasibility study hydropower unit and replaced Government. in the last 45 years. It is expected to produce of 240 MW Mullalakskaya HPP and 200 MW Verkhne-Pskemskaya HPP a turbine, generator and auxiliary 791 m kWh of electricity and 1.377 mn Gcal of construction projects on the Pskem River in Uzbekistan, including design equipment as part of the ↗↗At Novosibirskaya HPP, the turbine replacement was followed by commissioning of the heat annually. and survey, and research and development. Comprehensive Modernization hydropower unit No. 7, as part of the Comprehensive Modernization Program. The upgrade Program. boosted Novosibirskaya HPP’s installed capacity by 5 MW. ↗↗RusHydro’s updated environmental policy came into effect seeking to increase the installed capacity of low-carbon generation, reduce direct ↗↗The first gas power boiler of ↗↗The Alania National Park and RusHydro released two leopards on the IUCN Red List into the and per unit greenhouse gas emissions, and prevent species elimination Anadyrskaya TPP was launched wild. RusHydro’s leopard conservation project in the North Ossetia received the Vernadsky as a result of operating activities. under a gasification agreement National Environmental Award as the Best Social and Environmental Initiative. between RusHydro and the ↗↗RusHydro established the Institute of Hydropower and Renewable Energy Government of the Chukotka ↗↗Cheboksarskaya HPP put into operation hydropower unit No. 14 as part of the Comprehensive Sources as part of Moscow Power Engineering Institute to train engineers Autonomous Area to carry out Modernization Program, which included the recovery of the adjustable blade pitch and the for hydro- and renewable power generation. an extensive upgrade of the replacement of the generator stator. plant’s equipment and build gas pipelines.
1 At the end of the reporting year, the issue won annual Cbonds Award 2018 as Best Primary 1 As at December 31, 2018, RUB 11.188 bn was paid to all persons and entities listed in the dividend records, excluding those who had not provided full and accurate banking details for Eurobond Deal through open voting among professional bond market participants. the payment on their registration form, and those for whom the nominal holder has not fulfilled their dividend transfer obligations for reasons outside their control.
14 15 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 November February March KEY ↗↗ A unique 900 kW wind power plant was commissioned in ↗↗The divestment of RusHydro’s 40% ↗↗RusHydro and RUSAL commissioned, the settlement of Tiksi, the Republic of Sakha (Yakutia). It share in VolgaHydro, a hydropower within two start-up complexes, the first AWARDS AND RATINGS produces green energy for over 4,500 inhabitants of the equipment manufacturing joint series of the Boguchansky Aluminum isolated polar settlement. venture in the Saratov Region, to Smelter being being part of the Voith. The sale price (RUB 450 mn) Boguchansky energy-metallurgical RUSHYDRO’S CREDIT RATINGS AWARDS ↗↗ RusHydro became the first Russian corporate borrower to was determined by an independent association. issue three-year dim sum bonds (Eurobonds denominated appraiser and fully covered in offshore Chinese renminbi) for CNH 1.5 bn. The issue is RusHydro’s investment into the ↗↗At once several projects were completed the largest public financing transaction denominated in project. within RusHydro Comprehensive CNH by a Russian borrower. The coupon rate was set at Modernization Program: next to the International: 6.125% per annum. ↗↗Moody’s Investors Service Inc. last hydro turbine was replaced at (Moody’s) upgraded the Company’s the Novosibirskaya HPP, the hydraulic S&P Global Ratings Cbonds Awards ↗↗ The first unit was commissioned at Rogun HPP, which long-term credit rating and unit No. 9 was commissioned at the In February 2018, the agency upgraded long-term credit rating RusHydro won annual Cbonds Award 2018 as its ruble- is under construction on the Vakhsh River (Tajikistan) Eurobonds rating to an investment Saratovskaya HPP, and a hydraulic unit of RusHydro and its Eurobonds at investment grade BBB- denominated notes placement in February 2018 was according to the resolution of the national government. grade Baa3 (stable outlook). with SS No. 3 and a new hydrogenerator (stable outlook), which was affirmed in April 2018. named Best Primary Eurobond Deal. The project was developed by the Moscow-based was commissioned at the Volzhskaya Hydroproject Institute, part of RusHydro Group. HPP, a hydraulic unit with SS No. 3 was commissioned at the Cheboksarskaya ↗↗ RusHydro issued ruble-denominated eurobonds in the HPP. Fitch Ratings Report Watch amount of RUB 15 bn maturing in 2022. The issue was In August 2018, the agency upgraded the Company’s long- Report Watch maintained its rating on RusHydro’s oversubscribed three times, and the coupon rate was set ↗↗RusHydro joined the leaders in the indices term credit rating and the credit ratings of its bonds to an annual report for 2017 at B+ (the top rating among the at 8.975% per annum. The eurobonds were placed on the of the Russian Union of Industrialists investment grade BBB- (stable outlook). Russian companies). Irish Stock Exchange. and Entrepreneurs “Responsibility and transparancy” and “Sustainability Vector”. Moody’s LACP 2018 Spotlight Awards In October 2018, the agency upgraded the Company’s BCA; in RusHydro’s annual report for 2017 won international February 2019, it upgraded credit ratings of RusHydro and its LACP 2018 Spotlight Awards and made it to the Top 100 bonds to an investment grade Baa3 (stable outlook). Worldwide.
Events after the reporting date National: RusHydro enjoys a leading position in ACRA corporate social responsibility In June 2018, ACRA affirmed its long-term credit rating on December January April RusHydro and its bonds at ААА(RU) (stable outlook), which ↗↗ Ranks among Top 3 most transparent electricity represents the top reliability level. companies, according to Transparency in ↗↗RusHydro’s Board of Directors adopted ↗↗The Central and Western districts ↗↗RusHydro held a public hearing on Corporate Reporting analysis conducted by the the resolution to begin the levelling of of Yakutia are connected to the the 2018 annual report draft involving Zagorskaya PSPP-2 building. The works Unified Energy System of Russia. the representatives of the main groups Russian branch of Transparency International; will kick off in 2019 and will take some 2.5 PJSC Yakutskenergo, a subsidiary of stakeholders. ↗↗ leads the Responsibility and Transparency and years. of PJSC RusHydro, transferred the Sustainability Vector indices of the Russian Union of supervision and control over the ↗↗The Board of Directors approved the new FOR THE FIRST TIME IN THE COMPANY’S HISTORY, Industrialists and Entrepreneurs; ↗↗RusHydro Group put into operation territory to the System Operator. edition of the Regulations on the Dividend INTERNATIONAL RATING AGENCIES PUT RUSHYDRO IN ↗↗ ranks second in the environmental rating of the the third hydropower unit at Ust- Policy of RusHydro. The basic scenario THE INVESTMENT CATEGORY. Russian energy companies and the best electricity Srednekanskaya HPP in the Magadan is the payment of 50% of RusHydro company according to Environmental Initiatives Region, increasing the plant’s capacity by Group’s profit under IFRS. The minimum of the Russian Companies in Media: Energy and 142.5 MW to 310.5 MW. dividend payout is the average amount of National Corporate Governance Rating Metals study; dividends paid for the previous 3 years. ↗↗ ranks among world’s Top 20 green energy The validity period of the Regulations is companies according to Energy Intelligence. 3 years. RusHydro›s corporate governance rating upgraded to level 8 (Best Corporate Governance Practice). It is the highest rating assigned by the National Corporate Governance Rating to its Russian members.
16 17 //COMPANY PROFILE KEY FIGURES [102-7] Financial data in accordance with IFRS1 Operational performance 1
Revenue and operating costs2, RUB mn Net income, RUB mn Installed capacity1, MW 8 8 8 0 0
2 8 2 8 1 0 0
2 02 1 8 1 22 1 0 80 8 2 2 00 18 1 8 0 1 1 2 2 1 8 1 1 18
1 1 18 1 1 18 RusHydro Subgroup Revenue RAO ES East Subgroup Operating costs
1 EBITDA, RUB mn САРЕХ3, RUB mn Electricity generation , bn kWh 1 8 8 1 0 1
10 8 10 1 10
1 2 8 100 1 100 1 10 180 10 180 10 81 0 81 0 8 8 8 8 00
1 1 18 1 1 18 1 1 18 RusHydro Subgroup Total and net financial debt, RUB bn, leverage as at Margin performance5, % RAO ES East Subgroup the year-end4
1 2 2 0 1 2 Heat supply, ‘000 Gcal 1 2
8 8 0 2 8 22 1 1 21 2 1 2 2 22 1 1 1 IN 2018, RUSHYDRO
1 1 18 1 1 18 DEMONSTRATED POSITIVE 1 1 1 1 0 12 0 12 2 8 Financial debt EBITDA margin Return on equity (ROE) DYNAMICS OF CONSOLIDATED Net financial debt Net margin Return on assets (ROA) FINANCIAL INDICATORS, EBITDA Net financial debt / EBITDA 1 1 18 HIT A RECORD HIGH
1 Hereinafter, operating costs, profit, EBITDA and margins for 2017–2018 are aligned with the Group’s 2018 consolidated financial statements stated using the new accounting method. The 2017 reporting data were restated due to changes in the Group’s accounting policy with PP&E recognized at historical cost less accumulated depreciation, amortization and impairment losses. The 2016 reporting data do not take into account the change in the accounting policy. The full text of the accounting policy is included in the Group’s 2018 consolidated financial statements. 2 Revenue includes government grants. Revenues and operating expenses for 2016 and 2017 are reported without effect of the new IFRS 15 “Revenue from contracts with customers”. The Group has beeb applying IFRS 15 requirement prospectively since January 1, 2018. 3 Excl. VAT 4 Financial debt is calculated as the sum of long-term and short-term liabilities (less accrued interest payable as at the reporting date), liabilities on the non-deliverable forward with VTB Bank at the end of 2017–2018, and RusHydro’s guarantee obligations on Boguchanskaya HPP loan by Vnesheconombank under the Group’s IFRS financial statements at the end of 2016–2017. Net financial debt is calculated as financial debt less cash and cash equivalents (including bank deposits for up to one year). Therefore, the data for 2016–2017 may differ from the data included in the Company’s annual report for 2017. 5 EBITDA margin and net margin factors in other operating income generated by RusHydro Group in 2016 (RUB 12.4 bn), in 2017 (RUB 0.7 bn) and in 2018 (RUB 5.5 bn) and is calculated as 1 Including PJSC Boguchanskaya HPP (a joint venture of PJSC RusHydro and RUSAL) and HPP-2 of PJSC KamGEK and insurance proceeds and profits from changes in the value of financial assets at fair value through profit or loss, from sale of assets and subsidiaries, and dividends received. excluding HPP-1 and HPP-3 of PJSC KamGEK, assets held in trust.
18 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 STRUCTURE OF RUSHYDRO GROUP [102-45]
↗↗ RusHydro’s Executive office and Novosibirskaya HPP Generating subsidiariesе ↗↗ JSC YaERC ↗↗ BOGES LIMITED Other investments ranging branches and its subsidiaries within ↗↗ PJSC RusHydro’s branch ↗↗ JSC Magadanenergoremont ↗↗ BALP LIMITED from 1 to 50% report boundaries, excluding Saratovskaya HPP ↗↗ JSC FEGC ↗↗ JSC Magadanelectrosetremont ↗↗ JSC Boguchanskiy Aluminum Smelter RAO ES East Subgroup. ↗↗ PJSC RusHydro’s branch Sayano- ↗↗ JSC Geotherm ↗↗ LLC HYDROPROJECT-SERVIS Construction Customer ↗↗ LLC Transbaikal Development Shushenskaya HPP named after ↗↗ PJSC KamHEC ↗↗ JSC Boguchanskaya HPP Construction Corporation ↗↗ RAO ES East Subgroup’s companies P. S. Neporozhniy ↗↗ CJSC MEC Organizer ↗↗ JSC Magadanelectroset within report boundaries. ↗↗ PJSC RusHydro’s North Ossetia branch ↗↗ JSC NDES Subsidiaries that are service ↗↗ CJSC Boguchanskaya HPP Construction ↗↗ JSC IEGC ↗↗ PJSC RusHydro’s branch ↗↗ PJSC Kolymaenergo providers Customer ↗↗ LLC VolgaHydro ↗↗ Companies that are part of RusHydro Cheboksarskaya HPP ↗↗ CJSC Boguchanskiy ↗↗ JSC CEK Group, but not within report ↗↗ PJSC RusHydro’s branch CorUnH ↗↗ JSC RHS Aluminum Smelter ↗↗ JSC ENIN boundaries. Electric grid subsidiary ↗↗ RusHydro CAC JSC Construction Organizer ↗↗ LLC INTERNATIONAL INSTITUTE OF ↗↗ LLC RusHydro IT Service ↗↗ LLC CKHK BoGES GEOMECHANICS AND HYDRAULIC Subsidiaries combining ↗↗ JSC DRSK ↗↗ JSC SSHPP SC STRUCTURES Branches generation, transfer and sales of ↗↗ JSC Transport Company RusHydro ↗↗ JSC Krasnoyarsk Krai Development electricity ↗↗ RusHydro International India Private Subsidiaries that do not have Corporation ↗↗ PJSC RusHydro’s branch Bureyskaya Other specialized companies Limited any relevant activities or ↗↗ JSC SKK HPP ↗↗ PJSC Yakutskenergo ↗↗ JSC Vehicle Fleet Operator LuTEC the liquidation (preparation for ↗↗ JSC NGES ↗↗ PJSC RusHydro’s branch Volzhskaya ↗↗ JSC Sakhaenergo ↗↗ JSC Teploenergoservis ↗↗ LLC DUZ liquidation) of which is in progress ↗↗ JSC Shakhta Ugolnaya HPP ↗↗ PJSC Kamchatskenergo ↗↗ JSC LCM ↗↗ LLC SNRG ↗↗ JSC Okhinskaya TPP ↗↗ PJSC RusHydro’s branch Votkinskaya ↗↗ JSC SENK ↗↗ JSC Rodnik Zdorovya ↗↗ JSC RHBE ↗↗ CJSC Verkhne-Narynskie HPPs HPP ↗↗ PJSC Magadanenergo ↗↗ JSC VOSTEC ↗↗ JSC Karachay-Cherkessia ↗↗ PJSC RusHydro’s Dagestan branch ↗↗ JSC Chukotenergo Subsidiaries that are customer- ↗↗ JSC Energotranssnab Hydrogeneration company ↗↗ PJSC RusHydro’s branch ↗↗ PJSC Sakhalinenergo developers ↗↗ RusHydro International B.V. ↗↗ JSC HydroEngineering Siberia Zhigulevskaya HPP ↗↗ PJSC Peredvizhnaya Energetika ↗↗ RusHydro International A.G. ↗↗ CJSC Verkhne-Naryn HPPs ↗↗ PJSC RusHydro’s branch ↗↗ JSC CHPP at Sovetskaya Gavan ↗↗ JSC Technopark Rumyantsevo Zagorskaya PSPP ↗↗ JSC Sakhalinskaya SDPP-2 ↗↗ JSC FEETC ↗↗ PJSC RusHydro’s branch Subsidiaries – management ↗↗ JSC Nizhne-Bureyskaya HPP Subsidiaries that are institutes ↗↗ JSC Small HPPs of Altai Zeyskaya HPP companies ↗↗ JSC Leningradskaya PSHPP ↗↗ JSC HUA ↗↗ PJSC RusHydro’s Kabardino- ↗↗ JSC Zagorskaya PSHPP-2 ↗↗ JSC Vedeneyev VNIIG ↗↗ JSC ESKO UES Balkaria branch ↗↗ АJSC MC HydroOGK ↗↗ LLC SHPPs of Stavropol Krai and ↗↗ JSC NIIES ↗↗ JSC Engineering Center for ↗↗ PJSC RusHydro’s branch ↗↗ JSC ESC RusHydro Karachay-Cherkessia ↗↗ JSC Lenhydroproject Renewable Energy Kamskaya HPP ↗↗ LLC Verkhnebalkarskaya SHPP ↗↗ JSC Mosoblhydroproject ↗↗ JSC AvtotransportEnergo ↗↗ PJSC RusHydro’s Karachay- ↗↗ JSC Zaramagskiye HPPs ↗↗ JSC Hydroproject Institute ↗↗ JSC KRSK Cherkessia branch Electricity retail subsidiaries ↗↗ JSC Dyakov Ust-Srednekanskaya ↗↗ LLP VNIIG ↗↗ PJSC RusHydro’s branch Cascade of HPP Verkhnevolzhskiye HPPs ↗↗ PJSC Krasnoyarskenergosbyt Holding companies and asset ↗↗ PJSC RusHydro’s branch Cascade of ↗↗ PJSC Ryazanenergosbyt Companies within the structure holders Kubanskiye HPPs ↗↗ JSC Chuvashskaya Electricity Sales Subsidiaries engaging in of BEMO ↗↗ PJSC RusHydro’s branch Company construction and repairs ↗↗ JSC RAO ES East Nizhegorodskaya HPP ↗↗ PJSC Far-Eastern Energy Company ↗↗ PJSC Boguchanskaya HPP1 ↗↗ JSC Hydroinvest ↗↗ PJSC RusHydro’s branch (FEEC) ↗↗ JSC Hydroremont – VCC ↗↗ JSC BoAP ↗↗ JSC Malaya Dmitrovka» ↗↗ JSC ChirkeiHPPstroy ↗↗ JSC BoHPP Holding Company ↗↗ JSC Blagoveshchenskaya CHPP ↗↗ JSC Ust-Srednekan HPPstroy ↗↗ HYDROOGK ALUMINIUM COMPANY ↗↗ JSC Yakutskaya SDPP-2 ↗↗ JSC KhPRC LIMITED ↗↗ JSC MGES CBR ↗↗ JSC KhRAC ↗↗ HYDROOGK POWER COMPANY ↗↗ JSC Sulaksky HydroCascade ↗↗ JSC Neryungrienergoremont LIMITED ↗↗ JSC KhETC
1 PJSC Boguchanskaya HPP is a joint venture of RusHydro Group and RUSAL Group, not part of RusHydro Group.
20 21 RUSHYDRO GROUP COMPRISES MORE THAN // GEOGRAPHICAL 70 HYDROPOWER PLANTS IN RUSSIA AND SPREAD ABROAD, THERMAL GENERATION, RENEWABLES, ELECTRIC GRIDS IN THE FAR EAST, ENERGY RETAIL, CONSTRUCTION AND SERVICE COMPANIES, AND RESEARCH AND DESIGN ORGANIZATIONS.
Territories of the Russian Federation where RusHydro Group conducts energy sales activities 32 regionsregions ofof presencepresence
HPPs 14. Kolymskaya HPP 25. Zagorskaya PSPP 37. Vladivostokskiye CHPPs 53. Yuzhno-Sakhalinskaya CHPP-1 GeoPPs Retail companies Research and design 1. Boguchanskaya HPP 15. Cascade of Kubanskiye HPPs 26. Nizhne-Bureyskaya HPP 38. Kamchatskiye CHPPs 54. Yakutskaya GRES 63. Verkhne-Mutnovskaya GeoPP 67. Far-Eastern energy company organizations 2. Byreyskaya HPP 16. Nizhegorodskaya HPP 27. Ust-Srednekanskaya 39. Komsomolskiye CHPPs 55. Arkagalinskaya GRES 64. Mutnovskaya GeoPP (DEK) 75. Vedeneyev VNIIG 3. Cascade of Verkhnevolzhskiye HPPs 17. Novosibirskaya HPP A. F. Dyakova HPPа 40. Kyzym (Mobile PP) 56. Mayskaya GRES 65. Pauzhetskaya GeoPP 68. Krasnoyarskenergosbyt 76. Hydroproject institute 4. Cascade of Viluysky HPPs 18. Saratovskaya HPP 28. VerkhnebalkarskayaSHPP 41. Labytnangi (Mobile PP) 57. Chaunskaya CHPP 69. Ryazan retail energy 77. Lenhydroproject institute 5. Volzhskaya HPP 19. Sayano-Shushensky Branch 29. Ust-Dzhegutinskaya SHPP 42. Magadanskaya CHPP 58. Yakutskaya CHPP company 78. Mosoblhydroproject 6. Votkinskaya HPP 20. Sevan-Hrazdan Cascade HPPs 30. Barsuchkovskaya SHPP 43. Nerunginskya GRES 59. Yakutskaya GRES-2 70. Chuvash retail energy 79. NIIES 7. HPP’s of Dagestan branch 21. HPPs of the Northern Ossetian 44. Nikolaevskaya CHPP 60. Vostochnaya CHPP Solar PP company 80. Khabarovsk Energy Technological Branch 45. Partizanskaya GRES 8. Zhigulevskaya HPP SPP in in the Republic of Sakha Company 22. Tolmachyovskiye HPPs Thermal PPs 46. Primorskaya GRES 9. Zagorskaya PSPP (Yakutia), 19 power plants 10. Zeyskaya HPP 23. Cheboksarskaya HPP 31. Amurskaya CHPP 47. Raychikhiskaya GRES 11. Zelenchukskaya PSPP 32. Anadyrskaya Gas Engine CHPP 48. Sakhalinskaya GRES Thermal PPs under construction Wind PPs 49. Urengoy (Mobile PP) 12. HPP’s of Kabardino-Balkarian 33. Anadyrskaya CHPP 61. Sovetskaya Gavan CHPP 71. WPP in Ust-Kamchatsk Electric grid company HPPs under 50. Khabarovskiye CHPPs Branch 34. Artyomovskaya CHPP 62. Sakhalinskaya GRES-2 Tidal PP 72. WPP in Nikolskoe construction 51. Chulmanskaya CHPP 81. Far Eastern distribution company 13. Kamskaya HPP 35. Birobidzhanskaya CHPP 66. Kislogubskaya Tidal PP 73. WPP in Novikovo 52. Egvekinotskaya GRES-1 (DRSK) 24. Zaramagskaya HPP-1 36. Blagoveshenskaya CHPP 74. WPP in Tiksy 22 23 //COMPANY PROFILE PJSC RusHydro | Annual report 2018 BUSINESS MODEL In om n Cap ta A t 1 R u t or Sta ho r 1
F nan a ap ta F nan a ap ta
1 1 The o ny r n er ncre ng n r n c 586 y o y 196 8 y o y 109 7 y o y 5 5% n 201 1 2 n 201 11 2 12,464 lue nd oo ng n e en o en l hrough R n R n R n return net de t R n R n gu r n eed d dend you o h reholder nd o n und de t unds A on u ty R A d dends payouts to n ere y en o lender s are olders C
under RS
Prop rty p ant an Natura ap ta Natura ap ta Prop rty p ant an
u pm nt 2 1 u pm nt he le der o low c r on ower gener on n u 1 7 y o y 769 6 y o y he o ny en ure he rel l y nd e y o R n n tonnes o C e roduc on c l e nd eek o reduce he neg e 2 en ron ental 0 8 2 The o ny r u elec r c y gener on en ron en l c osts e ss ons ro PP 331 y o y 426 9 y o y 11 5% c l e y ro ng he er or nce o gener on al y o y rogr nd n e en ro ec d u ed o he r 2 787 y o y 17 5 y o y ro t o nstalled ro t o nstalled a dent n u n tonnes ele tr ty apa ty eat apa ty redu t on ater used oal used n 2018 10 0 y o y 39,370 18,924 104 7 y o y 63 al 000 tonnes 2 8 0 2 2 0 total a ardous aste 144 3 y o y 29,864 y o y 884 nstalled ele tr nstalled eat H len t lass and output output 6 4 y o y 239 y o y n 000 al n u 000 uel tonnes ele tr po er oe output pro d n an as used n 2018 ot er uels used enerat on opt on or r d onne t on o onsu ers to t e a u apa ty
So a an r putat ona Int tua ap ta Int tua ap ta So a an r putat ona ap ta ap ta The o ny work ow rd he u gr de n econo c Establishment of 3 04 the Institute R n nno e echn c l nd n ger l olu on o Hydropo er and Electricity tariff The o ny con r u e o he le en on nno at e e elop ent Rene a les at t e at onal o go ern en k o eed u oc o econo c Resear n ers ty redu t on or end onsu ers t rou t e appl at on o t e os o Po er n neer n tar e ual at on e an s n t e ar astern ederal str t de elo en o he re ence reg on 7 20 nst tute des n partner nst tutes un ers t es 81 2 28 0% world’s fourth biggest R n Pur ases a on peer o pan es t ta es pa d to t e only ro S s a predo nant s are ud ets o ar ous o ydro enerat on le els Human ap ta Human ap ta Russia’s leader Contribution to the safety n rene a le ener y re o ery The o ny o er de elo en o or un e 339 36,537 e er en y response e work ng cond on nd r re uner on o R n tra n n ourses In 2018, RusHydro granted e loyee tra n n osts RusHydro roup s e ployees attended Corporate 21 ealt a l t es 6 9 7 Uni ersity of sports s ools and lu s 000 people Hydropower 18 orp ana es and s elter are a l t es re a l tat on enters or non adults and ead ount ar ta le oundat ons and non o er al ent t es
1 The figures are as of December 31, 2018. 1 The figures are as of December 31, 2018.
24 25 //COMPANY PROFILE PJSC RusHydro | Annual report 2018
Ru Hy ro Group’ Pro u t on Cha n
N on tru t on
u en u l er I and II price zones Con tru t on ern l con ruc on nd ompan G n rat on re r co n e R ta ompan Buy r Ga upp y Cu tom r 24 874 MW u ydro on um r
D op r M hu h nergy e l o ny
kh l n ro ec C
E y n nergy e l o ny u ydro rge ndu r l o er or on e eg r noy r kenergo y
W con u er on ed on o l D n u d ry kh l n n t tut R pa r ro ec o er or e l elec r c y ro e hreg ong con u er
Non-price zone of the East e l co n e 3 340 MW Sa E tr ty tran m on kh l n h ro k l d o ok g el ne r d co n e y e r kh r n ne eg ener ng lro g o ny Length of 0.4 110 V OHL and cable lines
Coa upp y 58 327 m | 15 744 MVA Coa upp r 6 062 MW 11 847 substations echel ol r nd 13 246 Gcal/h u n o l Isolation zones of the Far Eastern Federal District Oth r pro u r E tr ty an h at n rat on, tran m on, o po r an h at an a tran rr by Ru Hy ro to th Far Ea t rn F ra energo nd con rolled co n e n ol ed ower sy e D tr t
lro o energo o Generation 4 555,5 MW | 5 678 Gcal/h l no un c l energy 0.4 220 V power grid comple 46 420 m | 10 153 substations | 13 573 MVA
P r m t r o Ru Hy ro Group
1 Transfer the commissioned power facilities to operating utility companies according to a territorial logic.
26 27 //STRATEGICREVIEW
EVEN MORE
RUSHYDRO GROUP, THE TOP PERFORMER IN THE RENEWABLE ENERGY GENERATION IN RUSSIA, IS BOLSTERING GEOTHERMAL, SOLAR, WIND AND HYDRO-GENERATIONPROJECTSINISOLATEDPOWER AREAS OF THE FAR EASTERN FEDERAL DISTRICT. IN 2018, IN THE ARCTIC VILLAGE OF TIKSI, A UNIQUE WIND POWER STATION WITH A CAPACITY OF 900 KW WAS PUT ENVIRON INTO OPERATION. MENTALLY //STRATEGIC REVIEW
With the generating assets of RusHydro ranks among the world’s top MARKETS SERVED [102-6] the Group boasting a total installed hydropower generating companies. hydropower capacity of 31 GW, Position in the industry The world’s largest hydropower generating companies, GW The Russian electricity and capacity East, the Luchegorsky coal strip mine, consumed within the unified energy C na ree or es market is comprised of the wholesale construction and repair companies, systems. Corporat on C na 0 electricity and capacity market and and design institutes, which makes ↗↗ As a renewable resource, letro ras the retail electricity market (REM), with it one of Russia’s largest energy hydropower ranks among the most ra l 8 RusHydro operating in the wholesale infrastructure holdings. environmentally friendly sources electricity and capacity market. of energy. Its use helps reduce Hydro u e Canada RusHydro’s key competitive advantages emissions from thermal power plants
The wholesale market is a place where include: and save hydrocarbons for future RusHydro 1 a special type of commodities – ↗↗ HPP/PSPP-based power generation generations. Hydropower produced electricity and capacity – are traded does not require fuel and is therefore at RusHydro’s HPPs annually saves S Ar y Corps o n neers SA 20 within the Unified Energy System not susceptible to fluctuations the planet 50 mt of СО2 emissions; across Russia’s economic space. in fossil fuel prices (natural gas, oil, ↗↗ To bring electricity tariffs in the Far Stat ra t 1 Capacity as a commodity is coal, and other). Moreover, it remains East in line with the Russian base or ay an obligation to properly maintain highly profitable as pricing in (average) rate, a surcharge was added power generating facilities in order the electricity and capacity markets to the capacity price in the first and to timely meet the consumer demand reflects the cost of heat generation, second price zones of the WECM. for electric power. The retail market which includes fuel expenses. RusHydro has been designated by Competitive landscape trades in only one commodity – ↗↗ HPPs can adjust output in response the Russian Government to collect electric power. to changing demand for power and transfer the surcharge amount RusHydro Group is one of Russia’s companies emerging from supply, which provides them with to the Far East. This measure has leading electric power producers, the restructuring of RAO UES of With acquisition of a number of guaranteed load during the times helped reduce the accounts receivable with Rosatom State Corporation Russia acting as its main competitors. electricity retailers and the companies of peak demand when electricity from current consumers in the Far and the independent energy of RAO ES East, RusHydro Group has price is the highest. Eastern Federal District and attract significantly increased its visibility ↗↗ Low production cost of power investments in the region’s energy- in the retail electricity and heat generated by HPPs is the main intensive industrial projects to help RusHydro’s competitors in Russia, GW markets of Russia. The Group also reason why extra hydropower create potential effective demand owns distribution grids in the Far supplies and capacities are fully for electricity. RusHydro
a pro ner o old n
1 RusHydro’s share in Russia’s electric power market nter RA
Year Electricity Capacity R SA 2 Output Output Share Total installed Total installed Share in Russia by RusHydro capacity, Russia capacity, RusHydro uroS ner o 20
mn kWh mn kWh % MW MW % Plus S 1
2016 1,071,800 138,405 12.91 244,100 38,309 15.69 2017 1,073,700 139,820 13.02 246,868 38,479 15.59 2018 1,091,700 143,853 13.18 250,400 38,803 15.50 THE GROUP’S ELECTRICITY GENERATION MADE UP 13.2% OF THE RUSSIAN TOTAL POWER GENERATION
1 Excluding International Energy Corporation.
30 31 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
STRATEGY RusHydro Group’s strategic goals OF RUSHYDRO GROUP Ensuring reliable Promoting stable Developing Increasing and safe operations development the Far Eastern the Company’s of the Company's of electricity energy sector value Mission and values facilities generation RusHydro Group’s mission is to ensure efficient use of water resources and reliability of the Unified Energy System of Russia, as well as to support the social and economic The o ny en ure he rel le The o ny e nd The o ny en ure The o ny r e development of the Far Eastern regions by providing its existing and prospective nd e o er on o e u en elec r c y gener on e dy de elo en o ncre e consumers with access to energy infrastructure. hydr ul c ruc ure nd her l olu e y ro ng o he r ern energy und en l lue ower l n n r ruc ure the efficiency of ec or nd r c e n e en e l w h reg rd o oc e y he roduc on rogr n he le en on nd lue grow h wh le nd en ron en k ng n o nd n e en ro ec o n on l go l en ur ng rel le nd Strategy and its implementation ccoun he econo c e l y k ng n o ccoun he r o re l ne he oc l e o er on o und lloc ed or g ng econo c er or nce nd econo c o c l e RusHydro Group’s Development Federation until 2035 developed strategy seeks to implement the tasks o le r k nd reduc ng de elo en 1 Strategy until 2020 with an outlook jointly with RusHydro. The industry outlined in the draft energy strategy of o en l d ge o he reg on for 2025 was approved by RusHydro’s strategy centres around the transition the Russian Federation until 2035. Board of Directors in 2016 (Minutes from resource-based to innovative No. 238 of June 8, 2016). development of the energy sector, The strategy sets out development focusing on the comprehensive goals for the entire RusHydro Group The Group’s strategy stems from upgrade of the Russian energy along with specific objectives for their the draft energy strategy of the Russian companies. RusHydro Group’s achievement. Key tasks
Development Investment policy and changing Operating efficiency and improvement approaches to the investment and transparency of perfomance program development RUSHYDRO GROUP’S CORPORATE VALUES of production and technological complex Improvment of the Far East assets managment and the Far East Clean energy – ensuring environmental safety and protection of natural resources. energy development
Engineering culture – operating assets in a safe and reliable manner. Human resources development
Prosperous society – promoting reliability and infrastructure development, efficient use of water resources, 3 Strategic management Strategy Implementation Plan outlining the Russian Federation and the Russian utilization of hydropower potential and expanded use of renewable energy sources which contribute 4 system the Company’s development priorities, Government . to the development of territories, economic growth and society’s welfare and prosperity. objectives and indicators aimed at The Company has a strategic achieving its strategic goals, as well as RusHydro Group’s Long-term Reliable business – implementing social policy which supports the Company’s employees and residents management system in place2, which the Value Growth Plan. Development Program sets out across its footprint. links strategic management processes the main principles and activities for with the incentive system. the Company’s rapid growth, seeking Leading company – striving for the Company’s success and leadership by combining its employees’ efforts, Long-term Development to ensure efficient use of water resources, resources and business components to achieve excellence in every aspect of the Company’s operations. The main tools for implementing Program sustainability of Russia’s Unified Energy the strategy are RusHydro Group’s System, as well as social and economic United team – providing opportunities for the development and fair remuneration of the employees to build Long-term Development Program and RusHydro’s Long-term Development development of the Russian regions, a competitive edge across RusHydro’s operations (team spirit, self-expression and unlocking employees’ Program for 2018–2022 has been including the Far East, by providing its prepared in accordance with existing and prospective consumers potential). 1 RusHydro Group’s strategy was drafted in line with the following documents: the instructions of the President of with access to energy infrastructure. • Сoncept of long-term social and economic development Developmental environment – implementing new technologies and offering infinite opportunities to foster of the Russian Federation until 2020; • National Security Strategy of the Russian Federation; further development. • Long-term forecast of economic development of the Russian Federation until 2030; • Draft energy strategy of the Russian Federation until 2035; 2 The system factors in the recommendations of the Federal Agency for State Property Management on the development of • Scheme and program for the development of Russia’s key strategic documents (Recommendations of the Federal Agency for State Property Management No. OD-11/18576 of Young energy – promoting energy-related careers among schoolchildren. Unified Energy System; April 29, 2014). • General layout of power generation facilities until 2020; • Regional social and economic strategies, energy 3 Instruction No. Pr-3086 of December 27, 2013. strategies; • Industry strategies. 4 Minutes No. 3 of January 30, 2014, Directive No. 4955p-P13 of the Russian Government of July 17, 2014.
32 33 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Strategy of RusHydro Group Value Growth plan economically justified costs in the tariff Strategy implementation and to retain the effect of cost savings. in 2018 RusHydro Group’s Value Growth Within the framework of the heat Plan through to 2021 was approved generation modernization program The Strategy Implementation Plan for 2018 sets by RusHydro’s Board of Directors of the Government of the Russian the following strategic goals. The Long-term The Value 5 Development Program Growth Plan on October 27, 2017 to maximize Federation, a return on investment is the Company’s value and its investment expected at a rate consistent with that Key strategic goals for 2018 appeal for shareholders and investors. of the projects for replacing retired Goal Progress capacities in the Far East. Value Growth Plan aims to increase Ensuring reliability of ↗↗RusHydro Group’s Technical Policy is being developed Development programs in key areas: existing assets and their to reconcile top-level documents of RusHydro and RusHydro’s fundamental and market In terms of optimization measures for ↗ Investment Program upgrade, enhancing RAO ES East aiming to determine the scope and value as fundamental value drives market investment and operating activities, as management efficiency with development trends of technologies and technical ↗ Innovative Development Program capitalization, which is particularly well as activities for the sale of non-core respect to the production solutions improving reliability and efficiency of RusHydro ↗ Production Program important in view of the fact that shares assets, the resulting effect has already complex Group’s production facilities in the short and long term, ↗ Business Plan while also ensuring safe operations. of RusHydro and other Russian power exceeded RUB 55 bn. ↗↗RusHydro Group’s Environmental Policy has been approved, companies are currently traded with which, along with the principles of environmental a significant discount to global majors. In addition, in order to minimize protection and safety, sets out key tasks aimed at improving Plan for the implementation of the Strategy for the year the impact of ongoing non-monetary the environmental management system. To secure effective implementation of impairment on the amount of Enhancing the operating ↗↗Cost optimization plan is being implemented based on the Value Growth Plan, it is planned dividends paid, proposals were made performance and the results of the external independent cost audit of KPI and motivation system to introduce a cost approach to for adjusting the Dividend Policy to transparency RusHydro and its subsidiaries. the Company’s management for establish the minimum level of dividend ↗↗In 2017–2018, the economic effect of the initiatives to optimize operating costs and the management RusHydro Group’s Long-term programs. Information on the program the management processes, systems payout. The revised Dividend Policy Improving the efficiency model amounted to RUB 10,552 mn and RUB 1,863 mn, 1 of the Far Eastern asset Development Program for 2018–2022 implementation and on Long‑term and solutions to maximize value while was approved by the Company’s management system and respectively. has been prepared in accordance with Development Program’s KPI ensuring safe operations at generating Board of Directors (Minutes No. 287 of developing the Far Eastern RusHydro Group’s Development Strategy achievement is provided in the following facilities. At the same time, the Value April 22, 2019). energy sector until 2020 with an outlook for 2025 and sections: Key performance indicators, Growth Plan includes tasks and Increasing the competitive ↗↗The Company is preparing a development strategy for its sets key parameters for the production Economics and finance, Production and initiatives to streamline operational and edge of the engineering scientific and engineering design complex. programs, investment program, sales, Investment activities, Innovations, investment activities, both controlled Strategic risks design complex Innovative Development Program, as well as in Appendix No. 9 Report on by the management and dependent on and the Consolidated Business Plan the Long-term Development Program external factors. The Company maintains a strategic risk Drafting the Company’s ↗↗The Group’s Long-Term Development Program for strategic documents 2018–2022 has been updated. of the Group, while also featuring the implementation of RusHydro Group register which identifies risk owners ↗↗RusHydro has approved the concept of the Company’s analysis of implementation risks and key for the year of 2018 and Methodology Moreover, the Value Growth Plan outlines and is reviewed on an annual basis. positioning in the international market seeking to performance indicators of the Long-term of Calculation and Measurement and the Company’s key focus areas aimed at The register is used to disclose risk- determine the main development areas of RusHydro Development Program. Appendix No. 10 The auditor’s report on improving the openness and transparency related information to shareholders, Group’s international activities and its approaches to fostering a positive image of the Company in the global the Long-term Development Program of RusHydro Group in regards to rating agencies, auditor and other business arena. Objectives of RusHydro Group’s Long- implementation in 2017 of RusHydro the market participants and minimizing stakeholders, and to further promote term Development Program: Group for the period 2016-2020. the gap between the fundamental and and control risk optimization initiatives. Improving the corporate ↗↗The number of corporate governance standards and governance system principles set forth in the Corporate Governance Code and ↗↗ Ensuring reliable and safe operations market value of the Company. implemented in RusHydro’s corporate governance practices of the Company’s facilities; The progress on RusHydro Group’s Long- grew to 92.4%. ↗↗ Promoting stable development term Development Program is monitored The focus area of the Company’s efforts Expanding the talent pool ↗↗The Action Plan for the Introduction of Professional of electricity generation; in accordance with the Long‑term in 2018 to pursue the Value Growth Standards into RusHydro’s Operations is being ↗↗ Developing the Far Eastern energy Development Program audit standard Plan was a change in approaches to The list of strategic risks and information on the risk implemented, including 33 standard training programs sector; approved by RusHydro’s Board of setting tariffs in the Far Eastern Federal management system for the professional development and retraining of facility 2 ↗↗ Increasing the Company’s value. Directors and the Terms of Reference District. A Decree of the Government are available in the Risk personnel at the Corporate Hydropower University based on the professional standards framework. for auditing the implementation of the Russian Federation was drafted management section. ↗↗RusHydro Group’s employees completed 36,537 training In the reporting year, RusHydro Group’s of the Long-term Development to introduce long-term tariffs for non- courses. 3 Long-term Development Program was Program developed in line with price zones in the Far Eastern Federal ↗↗RusHydro participated in the creation of Institute of implemented within the framework of the recommendations of the Russian District, which makes it possible for Hydropower and Renewable Energy Sources (part of 4 Moscow Power Engineering Institute) acting as a single production, investment and innovative government . the energy companies to accommodate center for education and training of engineers specializing in hydropower and renewables.
1 Minutes No. 271 of the Board of Directors of 01.06.2018 , taking into account changes approved by the Minutes No. 279 of the Board of Directors of October 26, 2017. 2 Minutes No. 281 of the Board of Directors of December 27, 2018. 3 Minutes No. 279 of the Board of Directors of October 26, 2018. 4 Instruction No. ISH-P13-2583 of the Russian Government of April 15, 2014. 5 Minutes No. 259 of the Board of Directors of October 30, 2017.
34 35 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Target and actual KPI of RusHydro’s Management Board members KEY KPI Period Target Actual Target KPI Weight, % KPI 1 achievement achievement PERFORMANCE INDICATORS in 2018, % EBITDA1, RUB mn 2017 97,993 110,323 Achieved 15 100 The system of key performance indicators (“KPI”) for RusHydro’s management is based on national statutory requirements2 and is designed to improve the Company’s 2018 170,932 181,526 Achieved 15 100 performance and achieve the goals set by its shareholders. Since 2017, the management KPI system includes annual key performance indicators of the Management Board and key ROE, % 2017 6.10 10.13 Achieved 15 100 performance indicators of RusHydro’s Long-Term Incentive Plan (“LTIP”). 2018 15.86 23.88 Achieved 15 100
Share of procurement 2017 ≥18 85 Achieved 10 100 In 2016, based on recommendations of goals and thus balancing the interests KPI are calculated and evaluated from small and medium businesses, % 2018 ≥18 76 Achieved 10 100 an independent advisor3, the Company of the Company’s management and using the calculation and evaluation developed its annual KPI list, as shareholders. In 2019, the independent methodology (approved by the Board including: based on 2017 ≥10 38 Achieved 10 100 well as calculation and evaluation advisor updated the list of the LTIP of Directors4) for the Management procurement from small 5 and medium businesses methodology for the KPI of RusHydro’s KPI by introducing Earnings per share Board’s KPI and the calculation and only, % 2018 ≥15 46 Achieved 10 100 Management Board, and KPI of the LTIP (EPS), RUB/share as a KPI with a 15% evaluation methodology for the KPI of 6 aimed at motivating the Company’s weight. The RusHydro Management RusHydro’s Long-Term Incentive Plan . Accident prevention 2017 0 0 Achieved 20 100 management to achieve strategic Board’s KPI and the Company’s LTIP 2018 0 0 Achieved 20 100
2017 ≤ 5-year 14 Achieved 20 100 number of production- average2 related accidents 2018 ≤ 5-year 9 Achieved 20 100 average3 Annual KPI of RusHydro’s number of major 2017 0 0 Achieved 20 100 accidents Management Board in 2018 2018 0 0 Achieved 20 100
Adherence to 2017 85 92.8 Achieved 20 100 The annual KPI of RusHydro’s the Federal Agency for State Property Resolution of the Board of Directors the capacity Management Board for 2018 consist Management – return on equity (ROE). approved the target annual KPI of commissioning schedule, of five financial and two industry- The Company’s financial indicators RusHydro’s Management Board for 2018 funding and spending 2018 85 92.8 Achieved 20 100 specific indicators. Financial indicators are calculated based on the Group’s and target KPI of the second cycle of plan, % of the annual KPI of RusHydro’s consolidated financial statements the Long-Term Incentive Plan for 2018– Labor productivity, 2017 4.74 5.20 Achieved 10 100 7 Management Board include prepared under the IFRS. 2020 . RUB ‘000/man-hour a mandatory indicator required by 2018 5.30 6.12 Achieved 10 100 Decrease in operating 2017 2 2.26 Achieved4 10 100 expenses (costs), %
2018 2 2.69 Achieved5 10 100
1 In the Key Performance Indicators section, a special methodology is used to calculate KPIs, and therefore the values of indicators with the same name may differ in other sections of the report. 1 According to the applicable calculation and evaluation methodology for the KPI of RusHydro’s Management Board, the EBITDA approved by resolution of the Board of Directors shall be The methodology for calculating the KPI of the Long-term Development Program is disclosed in Appendix No. 9 to the Report. calculated on the basis of RusHydro Group’s audited consolidated financial statements under the IFRS using the following formula: EBITDA = EBT + depreciation and amortization + non-cash expenses – non-cash revenue + interest payable + fuel cost. The EBITDA calculated using this formula is different from that used in RusHydro Group’s IFRS financial statements due to different 2 Clause 4 of the List of Russian President’s Instructions No. Pr-1474 of July 5, 2013, Instruction of the Russian Government No. ISH-P13-2043 of March 27, 2014, and Directives of the Russian approaches to calculating the indicator. According to Note 6 to the IFRS consolidated financial statements of RusHydro Group, EBITDA is calculated as operating profit/loss net of depreciation Government No. 2579p-P13 of April 25, 2014, No. 7558p-P133 of November 12, 2014, in accordance with Methodological Guidelines of the Federal Agency for State Property Management. and amortization, gain on financial assets at fair value through profit or loss, impairment of fixed assets, impairment of receivables, gain/loss on disposal of fixed assets, gain/loss on disposal of subsidiaries and joint ventures, and other non-cash operating income and expenses. 3 Recommendations of an independent advisor (Ernst & Young (CIS) B.V.) on the methodology for the Management Board’s remuneration system were approved by the Board of Directors (Minutes No. 241 of September 23, 2016). 2 25.2. 4 Minutes No. 245 of December 26, 2016. 3 22.8. 5 As amended (Minutes No. 251 of April 18, 2017 and No. 269 of April 25, 2018). 4 Subject to factors beyond control of the management. Resolution of the Board of Directors of April 24, 2018 (Minutes No. 269). 6 The latest version approved by the Board of Directors (Minutes No. 283 of February 21, 2019). 5 Subject to factors beyond control of the management. Resolution of the Board of Directors of April 4, 2019 (Minutes No. 286). 7 Minutes No. 264 of December 28, 2017 as amended by resolutions of the Board of Directors (Minutes No. 269 of April 25, 2018, No. 276 of October 4, 2018, and No. 283 of February 21, 2019).
36 37 PJSC RusHydro | Annual Report 2018
KPI of the Long-Term the Federal Agency for State Property Target and actual KPI for the Long-Term Development Program1 Incentive Plan Management) and an integrated KPI 2018 2019 2020 2021 2022 innovative KPI1. Target Actual Progress Target The first and second cycles of 2 3 RusHydro’s LTIP consist of the following The achievement of target KPI for EBITDA , RUB mn 170,932 181,526 Achieved 175,629 193,795 209,894 207,698 KPI: three financial indicators (including the Long-Term Incentive Plan will be ROE, % 15.86 23.88 Achieved 16.363 16.12 16.70 16.03 total shareholder return (TSR) as assessed upon expiry of the respective Share of procurement 18 76 Achieved 18 18 18 18 a mandatory indicator required by period. from small and medium businesses, % including 15 46 Achieved 15 15 15 15 2 Target KPI for the first LTIP cycle for 2017–2019 procurement from small and medium KPI Target businesses only, % Total shareholder return (TSR), % 100 Accident 0 0 Achieved 0 0 0 0 Integrated innovative KPI, % 85 prevention: Free cash flow (FCF), RUB mn –138,601 number of ≤ 5-year ≤ 5-year Achieved ≤ 5-year ≤ 5-year ≤ 5-year ≤ 5-year production-related average average average average average average Earnings per share (EPS), RUB/share 0.85 accidents
number of accidents 0 0 Achieved 0 0 0 0 2 Target KPI for the second LTIP cycle for 2018-2020 Adherence 85 92.8 Achieved 85 85 85 85 KPI Target to the capacity commissioning Total shareholder return (TSR), % 100 schedule, funding Integrated innovative KPI, % 85 and spending plan 3 Free cash flow (FCF), RUB mn –92,284 Labor productivity, 5.30 6.12 Achieved 5.72 5.31 5.60 5.75 RUB ‘000/man-hour Earnings per share (EPS), RUB/share 0.81 Decrease in operating 2 2.69 Achieved4 2 2 2 2 expenses (costs), % Integrated innovative 85 96 Achieved 85 85 85 85 KPI, % Total shareholder return 100 0 Not achieved 100 100 100 100 KPI of the Long-Term (including the consolidated investment 5 Development Program program) and subject to the activities (TSR) , % stipulated in the Group’s programs. Free cash flow (FCF), –66,079 –41,789 Achieved 11,704 25,498 54,277 56,424 RusHydro’s Long-Term Development RUB mn Program consists of KPI established for The list of KPI for RusHydro’s Long- 2018–2022. Term Development Program for 2018– 2022 includes the list of annual KPI of The target KPI were calculated in the Management Board and the list of accordance with RusHydro Group’s draft LTIP KPI. [103] Consolidated Business Plan for 2018–2022
THE KPI SYSTEM IS DESIGNED TO IMPROVE THE COMPANY’S PERFORMANCE AND ACHIEVE THE GOALS SET BY ITS SHAREHOLDERS 1 Target KPI for the LTDP for 2018–2022 were approved as part of RusHydro’s LTDP for 2018–2022 (Minutes No. 271 of the Board of Directors of June 1, 2018, as amended by Minutes No. 279 of the Board of Directors of October 26, 2018). The actual KPI for 2018 are calculated using RusHydro’s KPI calculation and evaluation methodology approved by the Board of Directors (Minutes No. 271 of June 1, 2018). 2 The methodology of calculating EBITDA for the purpose of the LTDP KPI is similar to that for EBITDA of the Management Board’s KPI. 1 Approved by resolution of the Interagency Working Group for Implementing the Innovative Development Priorities of 3 As resolved by the Company’s Board of Directors (Minutes No. 282 of December 27, 2018). the Presidium of the Russian President’s Council for Modernization of the Economy and Innovative Development of Russia (Minutes No. AD-P36-247pr of December 17, 2015). The integrated innovative KPI is listed among KPI in compliance with 4 As resolved by meeting of the Board of Directors of April 5, 2019 (Minutes No. 286). Directives No. 1427p-P13 of the Russian Government of March 3, 2016 and Resolution of the Board of Directors (Minutes No. 242 of October 10, 2016). 5 The TSR in 2018 was down by 32.8%, while the MOEX Russia Index grew by 12.2% over the same period. In 2018, the MOEX Russia Index was up 7.8% y-o-y, while the Moscow Stock Exchange Power Index was down 11.4%, with shares in RusHydro losing 33.4%. In 2018, the market value of RusHydro shares decreased against a backdrop of the general lack of investor interest in 2 Pursuant to Resolution No. 282 of the Company’s Board of Directors of December 25, 2018 amending target performance the electric power industry, as evidenced by the Power Index downward trend. RusHydro shares were under pressure from sanctions imposed on RUSAL and geopolitical risks, including indicators for the first cycle of RusHydro’s Long-Term Incentive Plan for 2017–2019 and the second cycle of the Plan for the proposed new US sanctions (DASKA, August 2018). The exclusion of the Company from the MSCI Russia Index in late November 2018 was the strongest contributor to the decline. 2018–2020, and Resolution No. 283 of February 21, 2019 approving the target KPI ”Earnings per share (EPS), RUB/share“.
39 //STRATEGIC REVIEW Role of federal and regional INVESTMENT governments in the investment ACTIVITIES program development [EU19]
Investment policy and its principles [103–2] Our cooperation with the country’s and substations, and ensure the normal federal and regional governments operating conditions for UES Russia The Company’s investments are governed by the Regulations extends beyond developing and and the actual output from new power on Managing Investing Activities Performed in the Form of reviewing our investment program, plants. Capital Investments. with working on proposals and updates to energy policy papers (the “Policy The TPL aims to consolidate data on Papers”) also on our agenda. These prospective energy facilities of federal RusHydro’s investment policy principles documents include: importance, including their types, ↗↗ the schemes and programs purposes, names, key specifications, Compliance of investment decisions and projects with statutory Step-by-step approach to develop regional energy systems and locations. requirements, building codes and regulations, to implementation (the “DSPs”); and environmental standards of investment projects ↗↗ the Scheme and Program to Develop RusHydro Group works to ensure the Unified Energy System of Russia that the Policy Papers contain only (the “UES DSP”); the most recent information on its ↗↗ the general layout of power energy facilities and plans, providing Compliance of investment Analysis of costs and benefits Access to financing generation facilities in Russia materials, commentary and suggestions decisions and projects associated with alternative for all investment projects (the “General Layout”); and as necessary. with risk-return profiles investment decisions (performed ↗↗ the territorial planning layout approved by the Board at the end of each stage in case for the Russian power industry The Group’s cooperation with regional of Directors of a change in key project metrics) (the “TPL”). governments extends to drafting proposals and updating information Both the DSPs and the UES DSP focus on heating layouts for Russian cities Investment programs are approved agencies. The drafts are based on sector, the drafts are submitted to on developing the grid infrastructure and towns. by the respective boards of directors the Group’s consolidated investment the authorized government agencies and the generating capacities, meeting within RusHydro Group, with program, which is approved by after being reviewed by their boards the mid- to long-term demand Developing and updating heating the programs of members involved the Management Board and presented of directors. for electricity and heat (capacity- layouts for cities and towns across in the electricity sector additionally to the Board of Directors. In the case wise), and creating a stable and the Far Eastern Federal District ensures reviewed by the authorized government of entities involved in the electricity favorable environment for investments efficient and safe performance of heat in the electricity infrastructure. supply systems and help improve them as heat suppliers within RusHydro The General Layout provides Group upgrade their fixed assets and Investment objectives a foundation for organizing the power implement energy conservation and generation facilities and the grid efficiency initiatives. infrastructure in a way to proactively balance production, consumption RusHydro’s subsidiaries have Ensure stable Satisfy the growing Upgrade energy Reduce grid Reduce power and capacities in UES Russia and participated in public hearings on heat power supply with energy consumption facilities losses equipment technologically isolated local energy supply schemes for the Khabarovsk, no disruptions failures and systems, prevent the forecasted power Vladivostok and Artyom urban districts for the consumers wear and tear and capacity shortages, identify the key and other Far Eastern municipalities. locations for placing transmission lines RUSHYDRO GROUP’S INVESTEMENTS IN 2018 TOTALED RUB 82.8 BN
40 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018 Long-term Program for Replacement of Retiring RusHydro’s investment program Capacities for 2020–2027
The Long-term Program for Replacement of Retiring Capacities and Power System RusHydro’s updated investment Implementation of RusHydro Actual spending in 2017–2018, Development in the Far East drafted by RusHydro’s management aims to ensure a stable program for 2018 and investment Group’s consolidated RUB mn (incl. VAT) 1 and robust power supply to existing and prospective customers in the Far Eastern program for 2019-2028 were investment program Federal District by formulating solutions to develop the region’s energy infrastructure approved by the Russian Ministry of 0 82 82 Energy’s Order No. 6@ On Approval Spending on the consolidated as necessary. of RusHydro’s Investment Program investment program in 2018 totaled 0 for 2019-2028 and Amendments to RUB 82.8 bn, including RUB 53.0 bn for The Program provides a foundation ↗↗ Ust-Srednekanskaya HPP to be project; the project parameters will be RusHydro’s Investment Program RusHydro Group’s investment projects for developing the electrical power commissioned (260 MW, the fourth specified following their completion. Approved by the Russian Ministry (without JSC RAO ES East Subgroup’s) industry in the Russian Far East1. hydropower unit, new runners); Construction (upgrade) of these of Energy’s Order No. 34@ of and RUB 29.8 bn for JSC RAO ES East 0
↗↗ Khabarovskaya CHPP-1 to be generation facilities is planned to December 29, 2017 of October 22, 2018. Subgroup. 29 790 Its key objectives include: decommissioned (435 MW) be carried out by introducing the 2 22 ↗↗ drafting capacity retirement and Khabarovskaya CHPP-4 to be capacity price surcharge as part of The Group’s updated consolidated replacement proposals (including commissioned (320 MW); the program to upgrade generation investment program for 2018 was possible alternatives); ↗↗ Artyomovskaya CHPP to be facilities approved by the Government approved by RusHydro’s Board 1 18 ↗↗ drafting proposals to satisfy decommissioned (400 MW) of the Russian Federation. of Directors (Minutes No. 276 of RAO ES East Subgroup the prospective demand and Artyomovskaya CHPP-2 to be October 4, 2018) as part of RusHydro RusHydro Subgroup develop the energy infrastructure; commissioned (420 MW); In order to implement the CHPP Group’s Consolidated Business Plan for ↗↗ identifying the best courses of action ↗↗ Vladivostokskaya CHPP-2 to be construction project in Pevek, it is 2018. In addition, the updated Business in respect of the proposed initiatives; upgraded (bringing the installed necessary to determine the budget Plan for 2018, as approved by the Board NEW CAPACITIES WERE COMMISSIONED, and capacity of heat power units No. 1, financing mechanisms for the financial of Directors (Minutes No. 281 of INCLUDING 345.2 MW IN POWER GENERATION, ↗↗ assessing the economic effect of 2, 3 to 360 MW). standing of RusHydro to remain December 27, 2018), included updates 442.47 GCAL/H IN HEAT, the Program. unaffected. The corresponding to RusHydro’s investment program 972.23 MVA OF TRANSFORMER CAPACITIES, The Program seeks to provide instruction is reflected in the Minutes for the same year. AND 1,336.15 KM OF POWER LINES. The Program includes projects a rationale for including RusHydro of the meeting with Dmitry Kozak, to build or upgrade energy facilities Group’s projects in a program being Deputy Chairman of the Government The draft RusHydro Group’s in the Russian Far East with a view developed by the Russian Government of the Russian Federation (Minutes consolidated investment program to replacing 1.6 GW of retiring to raise funds for upgrading the heat No. DK‑P9‑250pr (section I, para. 8) for 2020-2024 and for 2019 (revised) capacities and satisfy the prospective generation infrastructure, and dated December 12, 2018). was reviewed by RusHydro’s Board Key investment areas under RusHydro Group’s consolidated demand from regional energy systems: a foundation for proposals related of Directors (Minutes No. 285 of investment program in 20182 ↗↗ Chaunskaya CHPP to be to investment programs within Construction of Ust-Srednekanskaya March 29, 2019). decommissioned (30 MW) the Group. HPP is planned as part of Spending, CAPEX, CHPP to be commissioned in Pevek the consolidated investment program There are no investments with RUB mn (incl. VAT) RUB mn (excl. VAT) (36 MW); Design and survey works are of RusHydro Group and will be financed the projected return exceeding 10% ↗↗ Yakutskaya GRES-1 to be currently underway for the stage 2 of internally. per year. decommissioned (368 MW) Yakutskaya GRES-2, Artyomovskaya The second stage of Yakutskaya CHPP-2, Khabarovskaya CHPP- GRES-2 to be commissioned 4 construction projects and (226 MW); Vladivostokskaya CHPP‑2 upgrade 82 82 1
Construction of new facilities 43,829 Construction of new facilities 42,343 Rehabilitation 26,600 Rehabilitation 25,186 and modernization and modernization Utility connection 7,986 Utility connection 6,741 Other 4,411 Other 5,443
1 Includes RusHydro’s subsidiaries covered by the Consolidated Business Plan for the period, such as SHPPs of Stavropol Krai and Karachay-Cherkessia, Smaller HPPs of Kabardino-Balkaria, Verkhnebalkarskaya SHPP, RusHydro’s R&D institutes, Leningradskaya PSHPP, Pauzhetskaya GeoPP, NDES, Verkhne-Mutnovskaya GeoPP, Montazhenergo, Agroenergo, and Rodnik Zdorovya. 2 Under the management accounting standards adopted, • investment program spending means the total amount spent by the members of RusHydro Group to implement investment projects, including disbursements to suppliers and contractors and project administrators’ expenses; and • CAPEX mean the capital investments recognized on the basis of amounts specified in delivery and acceptance certificates signed with suppliers and contractors and accounted for 1 The Long-term Program for Replacement of Retiring Capacities was reviewed at RusHydro’s Board of Directors meeting on October 25, 2018 (Minutes No. 279 of October 26, 2018). as the respective project administrators’ expenses.
42 43 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Investments in construction of new facilities in 2018 Investment plans for 2019 Capacity commissioning in 2018 Type Russian Far East European part of Russia Spending, CAPEX, Spending by source Planned financing in 2019, and Siberia RUB mn (incl. VAT) RUB mn (excl. VAT) of funds in 2018, RUB mn (incl. VAT) Target Actual Target Actual RUB mn (incl. VAT) Power generation, MW 285.29 289.45 52.75 55.75
Heat, Gcal/h 442.33 442.47 – –
Power lines, km 1,378.93 1,336.15 – –
Transformer capacities, 1,100.74 972.23 – – MVA 82 2 82 82 12 221
Targets for capacity commissioning Type 2019 Power generation, MW 982.4
Priority projects 12,704 Priority projects 14,015 Own 72,886 Construction and modernization 63,240 Heat, Gcal/h 529.6 in the Russian Far East in the Russian Far East Raised 5,516 Rehabilitation and modernization 44,911 Zaramagskiye HPPs 9,468 Zaramagskiye HPPs 10,138 Federal 4,424 Utility connection 11,810 Transformer capacities, MVA 548.0 Off-site infrastructure for priority 5,658 Ust-Srednekanskaya HPP 5,493 Other 6,260 projects in the Russia Far East Off-site infrastructure for priority 3,471 Power lines, km 1,647.7 Ust-Srednekanskaya HPP 4,519 projects in the Russia Far East Nizhne-Bureyskaya HPP 3,200 Vostochnaya CHPP 2,638 Vostochnaya CHPP 2,451 SHPPs in the North Caucasian 2,037 SHPPs in the North Caucasian 2,220 Federal District Federal District Nizhne-Bureyskaya HPP 1,704 Other Other 3,610 2,848 Construction of energy facilities
1 Key investment projects and their impact on local economies across the Group’s footprint [203–2] Project Indirect economic impact The RUB 7.46 bn difference Consolidated investment program spending by region in 2018 vs Zaramagskiye HPP Social and economic effects between the actual spending under the Business Plan, RUB mn Installed capacity ↗↗Higher tax revenues at every government level. the consolidated investment program 356 MW and the 2018 target was mainly Supply stability effects Average annual output ↗↗Addressing the electricity shortage in the Republic of North Ossetia – Alania. attributable to: 842 mn kWh ↗↗Reducing exchange-related grid losses. ↗↗ updates on the work schedules for Year of commissioning ↗↗Addressing supply disruptions that might be experienced by remote communities. rehabilitation and modernization, 2019 with the reasons including more time required for contractors to complete Nizhne-Bureyskaya HPP Social and economic effects 12 1 0 0 1 28 0 2 8 ↗↗Reducing current heat generation expenses for the Unified Energy System of the East. their assignments and reductions in Installed capacity 320 MW ↗↗Creating an opportunity for nearby settlements to use electric boiler facilities instead of project costs following approval of ar astern uropean S er an expensive coal or fuel oil and lower heat tariffs for customers. Average annual output design documentation (RUB 4.04 bn); ederal Russ a ederal ↗↗Higher tax revenues at every government level. str t str t 1,670 mn kWh and Year of commissioning Supply stability effects ↗↗ updates on the work schedules for Target 2019 ↗↗Managing load irregularities of Bureyskaya HPP, contributing to power generation and supply Actual utility connection upon customer within the Unified Energy System of the East, and ensuring flood control. requests (RUB 2.45 bn). Ust-Srednekanskaya HPP Social and economic effects Installed capacity ↗↗Generates power for Matrosov Mine (the Natalka gold deposit) to support the mining industry 570 MW (142.5 MW third stage in driving the region’s economic growth. commissioned in 2018) ↗↗Higher tax revenues at every government level. Average annual output Supply stability effects 2,555 mn kWh ↗↗Making the isolated Magadan energy system more reliable. Year of commissioning 2022
1 In 2018, no economic migration came as a result of building RusHydro Group’s new facilities. [EU22]
44 45 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Project Indirect economic impact Comprehensive modernization, rehabilitation, Sakhalinskaya GRES-2 Social and economic effects Installed capacity ↗↗Sakhalinskaya GRES-2 should have a positive social and economic effect on Sakhalin’s west coast and upgrade programs 120 MW by creating new jobs and driving housing and social infrastructure development. It should also provide a capacity margin for connecting new customers. Average annual output Comprehensive obsolete and worn-out equipment and This was true until December 2011, 840 mn kWh Supply stability effects Modernization Program forced it to focus on maintenance and when the Board of Directors approved Year of commissioning ↗↗Making the isolated Sakhalin energy system more reliable. partial replacements instead. the Comprehensive Modernization 2019 ↗↗Replacing retiring capacities at the existing Sakhalinskaya GRES. As many large HPPs were Program to upgrade the Company’s commissioned in the 1950s and 1960s, Since mid-2000s, a number of power generation facilities by 2025. CHPP in Sovetskaya Gavan Social and economic effects the need arose in the early 2000s RusHydro’s HPPs began replacing Its key priority is to ensure that no core Installed capacity ↗↗Satisfying the rising local demand for electricity as a result of the sea port expansion, 126 MW, 200 Gcal/h the construction of the the Russian Far East’s largest coal terminal and the town’s development to upgrade or replace the existing equipment on a case-by-case basis, generation equipment with expired as a transport hub. Average annual output equipment. Tough economic conditions but the overall trend of ageing safe operation life remains in place ↗↗Providing for centralized heat supply to Sovetskaya Gavan. prevented RusHydro from replacing prevailed. by then. 630 mn kWh ↗↗Higher tax revenues at every government level. Year of commissioning 2019 Supply stability effects ↗↗Replacing retiring capacities and inefficient equipment at Mayskaya GRES. ↗↗Making the Sovetskaya Gavan energy hub more reliable. Key results of RusHydro’s Comprehensive Modernization Program CHPP Vostochnaya in Social and economic effects Vladivostok ↗↗Reducing the load of Vladivostokskaya CHPP-2 will make it possible to supply heat to new Results, pcs Additions to installed capacity, MW customers, including those in the Patroclus and Zeleny Ugol districts. Installed capacity Type of equipment 2018 2019 E HPP 2018 2019 E 139.5 MW, 432 Gcal/h ↗↗Creating a heat capacity margin should support the city’s further development. ↗↗The hot gases discharged by the plant’s three modern gas turbine units are used to heat water Turbines 7 10 Zhigulevskaya HPP 10.5 10.5 Average annual output in waste heat boilers. This improves the overall fuel efficiency and makes pollutant emissions three 792 mn kWh to four times lower than the maximum permissible rates. Generators 8 10 Saratovskaya HPP 12.0 12.0 Year of commissioning Transformers 6 3 Novosibirskaya HPP 5.0 5.0 2018 Supply stability effects ↗↗Absorbing the heat load from the now connected adjacent area previously serviced by the High-voltage circuit breakers 76 12 Votkinskaya HPP 15.0 15.0 central steam and water boiler facility. Hydraulic structures 25 22 Cascade of Verkhnevolzhskiye HPPs 10.0 0.0 ↗↗Addressing shortages with a more reliable energy system in the south of the Primorye Territory. Secondary switches 342 191 Nizhegorodskaya HPP 3.0 0.0 The second stage of Social and economic effects Secondary equipment 360 178 Total 55.5 42.5 gasification at Anadyr CHPP ↗↗Allowing a slowdown in tariff increases and making power generation in Anadyr more sustainable. Year of commissioning 2020 Supply stability effects ↗↗Ensuring stable power and heat supply for the Anadyr energy hub and improving the power generation efficiency at Anadyr CHPP by using a cheaper fuel. Technical condition index Over the five decades since its to the environment, the new Connecting the 220 kV Supply stability effects of RusHudro’s core equipment commissioning in 1962, this unit had runner is expected to contribute Orotukan-Palatka-Tsentralnaya ↗↗The line will be connected to PJSC Magadanenergo’s electrical grids under Contract No. 797/20- in 2018, % worn down to a significant extent. more to ecological sustainability. 2016 of July 29, 2016. power line Equipment % It took about a year to replace its The upgraded automatic control Year of commissioning turbine, generator and secondary system will update the operators Turbines 78.41 2019 equipment and upgrade its on the equipment status while Generators Construction of two single- Social and economic effects 76.15 automatic control system. The new also enhancing the operating hydropower unit was manufactured efficiency and mitigating the risk circuit 110 kV Pevek-Bilibino ↗↗Supporting the development of the mining and metals cluster within the Chaun and Bilibino Transformers 67.50 power lines energy hub. by Power Machines – a Russian of malfunctions. Grid length, transformer company. Supply stability effects substations capacity In 2018, Votkinskaya HPP’s In 2018, Volzhskaya HPP 490.59 km ↗↗Allowing the Chaun and Bilibino energy hub to carry out power exchange for the construction of a floating nuclear power plant and making the local energy system more reliable. hydropower unit No. 7 was upgraded The second unit’s runner, turbine commissioned a new hydropower 12.6 MVA as part of RusHydro’s Comprehensive chamber and automatic control unit and replaced a turbine, Year of commissioning Modernization Program, becoming and excitation system were generator and auxiliary equipment 2022 the second fully modernized replaced entirely. Designed to as part of the Comprehensive hydropower unit at the plant. prevent lubes from being released Modernization Program.
46 47 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
At Novosibirskaya HPP, the turbine Modernization Program in that it looks 2017 to carry out an extensive upgrade in the Republic of Sakha (Yakutia), with three 3 MW diesel generators benefits, including the opportunity replacement was followed by to replace equipment on a case-by- of the plant’s equipment and build gas generates green power for over 4,500 and an energy storage system. Once to store drinking water for future use. commissioning of the hydropower case basis, bringing more advanced pipelines. It took less than a year to residents. This facility ensures a more the project is completed, all these In Russia, smaller HPPs are defined unit No. 7. The upgrade will boost alternatives to RusHydro’s facilities. build the infrastructure for an on‑site stable power supply in Tiksi and systems will be integrated into a single as those with a capacity of 30 MW or Novosibirskaya HPP’s installed Its other priorities include extending gas pipeline and gas distribution makes Yakutia’s Bulunsky District less power generation complex. less (as per GOST R51238-98). They capacity by 5 MW. lifespans of the core generation station, implement key utility systems dependent on expensive diesel fuel are built on rivers as well as on lake equipment, reducing production costs and rehabilitate the boiler to feed on deliveries – expected to shrink by 500 spillways, irrigation channels, etc. Cheboksarskaya HPP put into and enhancing the overall economic natural gas. All gas equipment has tonnes in annual terms. Its three unique Smaller HPPs operation hydropower unit efficiency. been pre-commissioned successfully. turbines were designed to operate in 2018 saw the commissioning of No. 14 following its upgrade, The plant feeds on the natural gas an Arctic climate at temperatures as RusHydro is active in developing a 1.26 MW SHPP on the Bolshoy which included the recovery Driven by the need to ensure long-term coming from the Zapadno-Ozernoye low as -50ºC and withstand winds of smaller HPPs, which are vital Zelenchuk River. of the adjustable blade pitch reliability throughout its technological field, which is operated by Sibneft- up to 70 m/s. Manufactured by Japan’s for remote, hard-to-reach and and the replacement of complex, JSC RAO ES East Subgroup Chukotka. Komaihaltec, each turbine is 41.5 m power-deficient areas as well as the generator stator. runs its own rehabilitation and high and has 33 m blades. In 2019, for local water supply to towns modernization program (as part of its RusHydro’s Dagestan branch RusHydro will continue working to and settlements. These plants are investment program). The development commissioned Miatlisnkaya HPP’s build a diesel power plant equipped sustainable and provide additional Rehabilitation and and implementation of this initiative hydropower unit No. 2. Now all HPP’s modernization program is regulated by RusHydro Group’s turbines were replaced (hydropower Technical Policy. unit No. 1 was upgraded in 2015). The rehabilitation and modernization program draws upon The rehabilitation and modernization Ongoing RES projects the Comprehensive Modernization program saw Anadyr CHPP launch Project RES Capacity, Year of Indirect economic impact Program. While focused on its first gas power boiler under MW commissioning ensuring adequate maintenance a gasification agreement signed by and commissioning new capacities, RusHydro and the Government of 900 kW wind power plant Wind 0.9 2019 Replacing the output of a local diesel power plant it differs from the Comprehensive the Chukotka Autonomous Area in May in Tiksi, Bulunsky District (operated by JSC Sakha Energy’s Bulun Electric Power Grids) with renewable energy and reducing the consumption of expensive diesel fuel as a result. In addition, a 3,000 kW diesel power plant will be constructed, providing an energy storage unit for the wind Program for the development of energy diesel power station in Tiksi, Bulunsky District. 1 Krasnogorskaya SHPP Water 24.9 2021 Addressing shortages within the energy system of based on renewables Karachay-Cherkessia.
Using renewables is a top priority are implemented in isolated energy Given the local specifics, none of Pravokubanskaya SHPP Water 24.9 2022 for RusHydro Group, which keeps hubs of the Far Eastern Federal the projects are standard by design, Verkhnebalkarskaya SHPP Water 10 2019 Enhancing the power supply to the Balkarian hub. ramping up installed capacities by District outside of the Unified Energy the 1 MW northernmost SPP in Batagay building new HPPs and commissioning System. is not an exception. Our R&D spe Ust-Dzhegutinskaya SHPP Water 5.6 2019 Alleviating electricity shortages in Karachay-Cherkessia new power generation facilities. cialists have designed a prototype and enhancing the power supply by using water flows wind diesel and solar diesel power from the Ust-Dzhegutinskiy Main Hydrotechnical Complex. RusHydro was among the first in Solar and wind power in isolated stations and tested a range of Barsuchkovskaya SHPP Water 5.25 2019 Creating new generating capacities in the North Caucasian Russia to start developing projects energy hubs equipment, including energy storage Federal District. relying on geothermal, solar and wind units, all to be used in isolated energy power generation. One of RusHydro Since 2012, RusHydro Group has hubs of the Far Eastern Federal District. Group’s objectives for 2016–2020 with launched 19 solar power plants an outlook until 2025 is to improve with a total capacity of 1.6 MW and Commissioned in November 2018, energy efficiency by using alternative four wind power plants with a total a unique 900 kW wind power plant energy sources. Most of the projects capacity of 3.6 MW2. in Tiksi, an isolated polar settlement
1 Any renewable energy sources specified in Article 3 of Federal Law No. 35-FZ On Electric Power Industry dated March 26, 2003, excluding HPPs with an installed capacity of over 30 MW 2 Including the WPP in Tiksi, which is under pre-commissioning.
48 49 //STRATEGIC REVIEW
RusHydro Group construction SUSTAINABLE quality assurance [103–2] DEVELOPMENT
Construction and installation quality subject to both industry and RusHydro’s own ISO 9001:2008, ISO 14001:2004 As the largest Russian energy holding, RusHydro Group assurance is performed to ensure internal quality assurance standards. Our key (GOST R ISO 14001-2007); and is fully aware of its responsibility to the government the following: design quality management principles and • the project administrator and and society and is focused on the development of socially ↗↗ compliance with the Urban the employees in charge are specified in developer (JSC Sakhalinskaya GRES‑2) responsible business, while pursuing a consistent policy of Development Code, design the Regulations on Managing and Monitoring has adopted construction and introducing elements of sustainable development into its documentation, technical regulations, Investment Projects during the Development installation quality assurance guidelines operational and management processes relying on Russian and results of engineering surveys; and of Documentation for Construction of for building control. and international best practices. Sustainable development ↗↗ reliable and trouble-free operation of RusHydro Group’s New Facilities as ↗↗ For the CHPP in Sovetskaya Gavan, energy facilities and lower unproductive approved by RusHydro’s Order No. 1021 of • the project administrator and is an important value and is outlined in the Company’s costs after commissioning. December 28, 2018. developer (JSC CHPP in Sovetskaya strategic goals. Gavan) has adopted construction and Quality assurance: The Supervisory Board of the Uniform System installation quality assurance guidelines ↗↗ means developing engineering of Conformity Assessment for Health, Safety for building control; and The Company adheres to the corporate increasing the generation of clean requirements for deliverables and and Environment, and Safety in the Energy • contractors (JSC Ust-SrednekanGESstroy, social responsibility concept as energy, while also improving energy verifying their compliance with these and Construction Industries is developing JSC Hydroremont – VCC, ARSENAL defined by ISO 26000. According efficiency. requirements and internal and statutory the Uniform System of Conformity PLUS, and Corporation of JSC ESKM) to the standard, a company is regulations; Assessment in Construction (Modernization have developed a quality assurance responsible for the impact of its RusHydro Group’s another priority is ↗↗ is performed by all parties involved and Renovation of Immovable Property) and system to facilitate planning and decisions and operations on society its contribution to the development in construction, including the general requirements in respect of the corresponding management in the corresponding and the environment and must act in of the regions where it operates. contractor, developer/administrator control activities. Compliance monitoring domain. a transparent and ethical way that: RusHydro Group facilitates the growth and designer (during field supervision); is performed by the Federal Environmental, ↗↗ For Zagorskaya PSPP-2, Nizhne- ↗↗ promotes sustainable development, of welfare, creating new jobs, ↗↗ includes incoming, operational and Industrial and Nuclear Energy Supervision Bureyskaya HPP, Ust-Srednekanskaya HPP including public health and well- paying taxes, and delivering positive acceptance inspections, progress Service. and Zaramagskiye HPP, the respective being; multiplier effects by developing control, final checks and issuing quality project administrators have developed ↗↗ takes into account the expectations energy infrastructure (connection of assurance reports; and Before a power plant is commissioned, deliverable acceptance regulations and of stakeholders; new consumers to power grids, water ↗↗ involves external supervision by it receives an automated diagnostic quality assurance systems. ↗↗ complies with applicable laws and supply, etc.). RusHydro Group supports the Federal Environmental, Industrial control system that will read and process ↗↗ For the SHPPs in the Stavropol Krai and international standards of conduct; education, culture, sports, and and Nuclear Energy Supervision Service measurements to help analyze the status of Karachay-Cherkessia, the respective ↗↗ is integrated into the operation of environmental protection and provides and other government agencies in facilities across the hydrotechnical complex. project administrators have adopted the entire company and is applied assistance to socially vulnerable the field of industrial supervision. After completion of a hydraulic structure, its construction and installation quality with regard to its stakeholders. population groups across its footprint. measuring equipment, along with all data assurance guidelines for building control. collected, is handed over by the construction ↗↗ Both JSC Chirkeigesstroy and One of RusHydro Group’s strategic A comprehensive approach to Regulation and supervision company to the project administrator. JSC Ust-SrednekanGESstroy have goals is to ensure the reliable and safe addressing RusHydro Group’s developed and implemented operation of its facilities, taking into sustainable development objectives Our quality assurance procedures for Quality assurance systems for new energy quality management systems for all account the economic feasibility of ensures the most efficient transition construction and installation, materials, facilities are developed individually under hydropower facilities they have been funds allocated for mitigating possible to low-carbon development with structures and assemblies are compliant agreements with the respective general assigned to as the general contractor. risks and reducing potential damage. minimal environmental impact, as well with Russian laws, industry standards contractors. The systems are now certified under as compliance with all occupational and regulations, internal engineering ↗↗ For the first stage of Sakhalinskaya ISO 9001:2008 and ISO 14001:2004 The Company is committed health and safety standards for standards, and regulatory requirements for GRES‑2, (GOST R ISO 14001‑2007). to increasing the share of renewables employees and residents across design documentation. • the general contractor (JSC HPC in the country’s energy mix by means the Company’s operations. Mosenergo) has developed and of commissioning new facilities and RUSHYDRO GROUP CONTRIBUTES In addition to primary and secondary federal implemented a quality management TO THE DEVELOPMENT OF ITS legislation1, all construction works are system that is now certified under PRESENCE REGIONS THROUGH NEW JOBS AND TAX LIABILITIES, CHARITABLE ACTIVITIES
1 The Urban Development Code and the Russian Government’s Resolution No. 468 of June 21, 2010 On the Procedure for Building Control during Construction, Modernization and Renovation of Immovable Property.
50 PJSC RusHydro | Annual Report 2018
Sustainable development Internal regulations governance CSR area Internal regulations Sustainable production ↗↗RusHydro Group’s Development Strategy until 2020 with an outlook until 2025; ↗↗RusHydro’s Long-term Development Program for 2018–2022; Responsibility for providing control, coordinated at regular meetings ↗↗RusHydro’s Regulations on the Working Group on Technical Standards; methodology support and regulation of the working group on sustainable ↗↗Regulations on Managing Investing Activities Performed in the Form of Capital Investments; of RusHydro Group’s sustainable development to monitor the efficiency of ↗↗RusHydro’s Regulations on the Standardization System; low-carbon development, as well implementation of key tasks in sustainable ↗↗RusHydro’s Regulations on Internal Controls. as preserving cultural heritage development for the period through Procurement ↗↗The Uniform Regulations on RusHydro Group’s Procurements and other internal regulations sites and biological diversity in to 2020 approved by RusHydro’s Order developed to provide further details, including the Methodology for Reviewing the Reliability accordance with Order No. 420 of No. 614 of September 11, 2017. (Business Reputation) and Financial Standing of the Bidders. June 15, 20181, is assigned to member Corporate ethics ↗↗RusHydro’s Code of Corporate Ethics; of the Management Board, First Deputy Key sustainable development issues are and anti-corruption ↗↗RusHydro’s Anti-Corruption Policy; ↗↗RusHydro’s Regulations on the Prevention and Management of Conflicts of Interest; General Director – Chief Engineer. reviewed at the meetings of the Board ↗↗Regulations on the Procedure to Report Presents Received by RusHydro’s Employees during of Directors and the Company’s Official Events, Business Trips, etc.; Sustainable development activities Management Board. The Committee ↗↗RusHydro’s Regulations on the Committees for Compliance with the Corporate Ethics Standards are carried out by specialized units on Reliability, Energy Efficiency and and Management of Conflicts of Interest; ↗↗Rules of RusHydro’s Line of Trust Operation; within the area of their functional Innovation under RusHydro’s Board ↗↗RusHydro’s Comprehensive Program of Anti-Corruption Activities for 2016–2019. responsibility: of Directors plays an important role Environmental impact ↗↗RusHydro Group’s Environmental Policy; ↗↗ Social responsibility – personnel in RusHydro’s sustainable development ↗↗RusHydro’s Program of Energy Saving and Increased Energy Efficiency through to 2020; management unit; management and also preliminary ↗↗RAO ES East Subgroup’s Energy Saving and Energy Efficiency Improvement Policy. ↗ Cooperation with government reviews matters of long-term ↗ Health and safety ↗↗RusHydro’s Health and Safety Policy; authorities in the regions of development of hydropower and energy ↗↗Policies on occupational health and safety of RusHydro’s subsidiaries. the Company’s operations and based on other renewables (“RES”), as Charity ↗↗The Company’s Charity and Sponsorship Policy; creation of a favorable social well as development of functional policies ↗↗Charity and Sponsorship Policy of the Company’s Subsidiaries. environment for the Company’s (technical, environmental, etc.), corporate Innovative development ↗↗Innovative Development Program of RusHydro Group for 2016–2020 with an outlook until 2025; efficient development – corporate standards in technical regulation, etc. ↗↗RAO ES East’s Innovative Development Program for 2016–2020 with an outlook until 2025; communications unit, Far East ↗↗Regulations on Design and Implementation of RusHydro’s Innovative Development Program; Division; The Company has adopted a number ↗↗Regulations on R&D Management Process in RusHydro’s Operations; ↗↗ Economic responsibility – unit of of internal regulations outlining and ↗↗Regulations on the Intellectual Property Management Process in RusHydro Group; ↗↗Regulation on Planning and Monitoring the Progress of Activities as Part of the Innovative economic planning and investments, governing the approach to sustainable Development Programs of RusHydro Group and RAO ES East; unit of production activity, unit development and corporate social ↗↗Regulation on Preparation, Adjustment and Monitoring of Implementation of Procurement Plans of capital construction, and unit responsibility (“CSR”). In 2018, for Innovative and/or High-Tech Products; of financial and corporate law a number of new internal regulations ↗↗Methodology for Assessment of Technical and Economic efficiency of Innovative Projects and the Temporary Procedure for Assessment of Technical and Economic Efficiency of Innovative management; on environmental protection and social Projects Implemented as R&D. ↗↗ Power generation, improvement of development were approved, including Personnel management ↗↗RusHydro’s Social Policy; energy efficiency and environmental the new consolidated Environmental ↗↗Regulations on RusHydro’s Employee Training; responsibility – unit of production Policy of RusHydro Group (approved ↗↗Regulations on Personnel Certification at RusHydro’s Branches; activity; charity – corporate by Minutes No. 275 of the Board of ↗↗Regulations on the Database Formation of Candidates to Be Recruited at RusHydro’s Branches; communications unit; Directors of August 9, 2018), as well as ↗↗Regulations on RusHydro’s Talent Pool; ↗↗Concept of advanced human resource development From School to Workplace. ↗↗ Providing charitable aid – corporate the Uniform Regulations on RusHydro communications unit. Group’s Procurements (approved by Minutes No. 277 of the Board of Directors Operation of RusHydro’s different of October 4, 2018). subdivisions and subsidiaries is THE COMPANY IS COMMITTED TO INCREASING THE SHARE OF RENEWABLES IN THE COUNTRY’S ENERGY MIX
1 On Distribution of Tasks, Powers and Responsibilities Among RusHydro’s Managers.
53 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Compliance of the Group’s operations Goals and objectives Programs, projects and initiatives with the UN Sustainable Development Goals SOCIAL TARGETS
Sustainable development activities of RusHydro Group are focused on achieving a number of Sustainable Development Goals (SDGs) adopted by the UN in September 2015
The Company has identified 13 SDGs rights, labor, anti-corruption, and Network of Global Compact Association. which are particularly important for its the environment, and strives to ensure At the General Meeting of the operations, while sharing other SDGs and that the needs of the current generation members of the National Network of Reducing the risks of injuries and occupational ↗↗Carrying out initiatives to improve industrial safety and reduce injuries contributing to their achievement. will not compromise the opportunities of Global Compact Association held on diseases. of RusHydro Group’s employees, contractors and third parties. those who will come next. September 26, 2018, Boris Bogush, Ensuring availability of qualified personnel. ↗↗Insuring employees against industrial accidents. In 2017, RusHydro joined the UN Global Member of the Management Board, ↗↗Implementing programs for advanced personnel development (system Fighting corruption and promoting efficient of corporate elevators: supporting future specialists from school to RusHydro’s Compact, the largest business initiative in On June 27, 2018, the Annual General First Deputy General Director – Chief procurement. 1 facilities). sustainable development . The Company Meeting of Shareholders resolved on Engineer, was elected member of Joining international initiatives and non-financial ↗↗Signing partnership and cooperation agreements with specialized universities. shares ten principles on human RusHydro’s participation in the National the Governing Board. disclosures. ↗↗Implementing the Anti-Corruption Policy and Conflict of Interest Management Policy. Initiatives to ensure compliance with the Code of Corporate Ethics. ↗↗Complying with and improving regulations on procurement of RusHydro Group and its subsidiaries. ↗↗Joining the UN Global Compact. RusHydro’s main goals, objectives and corporate programs for achieving sustainable development goals ↗↗Annual sustainable development and CSR disclosures in accordance with GRI (as part of the integrated report since 2018). Goals and objectives Programs, projects and initiatives
ECONOMIC TARGETS ENVIRONMENTAL TARGETS
Regulatory framework of water regimes ↗↗Implementing program of efficient collaboration with the System Operator and and protection of territories and population the Federal Water Resources Agency in terms of planning and managing the HPP Contributing to low-carbon development. ↗↗Implementing the Environmental Policy in terms of ensuring low-carbon from floods. water and energy regime. Preserving biodiversity. development. ↗↗Ensuring the functioning of the tariff adjustment mechanism in five out of ↗↗Developing target indicators to reduce greenhouse emissions, and mechanisms Affordable energy. Conserving and restoring fish reserves in water nine regions of the Far Eastern Federal District to the average Russian level for their achievement. bodies. Increasing the share of renewables in the energy of RUB 4,3 per kWh. Acting as the scheme’s operator, RusHydro collects ↗↗Developing and implementing a biodiversity conservation program. mix. the surcharge to the capacity price (KOM price) and transfers these funds in Promoting efficient water use. ↗↗Carrying out initiatives aimed at restoring fish reserves. Installing fish protection Maximization of value for the state, shareholders, full to budgets of regions of Russian Federation to energy companies of the equipment. the Company and its employees. Far Eastern Federal District to offset lost revenue caused by sales of power at ↗↗Implementing RusHydro Group’s programs in terms of rational use of water Innovative development. reduced tariffs. resources. ↗↗Launching new energy facilities (including HPPs and renewables). ↗↗Carrying out the oBEREGAi annual program for cleaning up rivers and reservoirs. Energy conservation and efficiency. ↗↗Implementing RusHydro Value Growth Plan through to 2021 aimed at increasing ↗↗Creating tourist route in protected natural areas. the Company’s fundamental and market value. ↗↗Implementing Innovative Development Program of RusHydro Group for 2016– 2020 an outlook until 2025. ↗↗Implementing the Concept for Reforming RusHydro’s Scientific and Design Capacities. ↗↗Implementing the Program of Energy Saving and Increased Energy Efficiency of RusHydro and RAO ES East through to 2020. ↗↗Achieving and improving ratings from the leading ratings agencies as recognition of socially responsible investments. ↗↗Implementing charity programs of the Company and its subsidiaries.
1 The decision on the Company’s joining the UN Global Compact was made by RusHydro’s Board of Directors (Minutes No. 259 of October 30, 2017).
54 55 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Stakeholder relations RusHydro Group’s stakeholder relations in 2018 [102–43], [102–44] Key mechanisms Responses to requests Stakeholder relations stakeholder group impact on RusHydro account the effect each topic has and relations stakeholders in 2018 principles and approaches Group (and vice versa) were recognized on the stakeholders. as the key stakeholders. [102–42] ↗↗ responsiveness – relates to providing 1. Shareholders and investors In the course of its operations, timely reaction from the Company Stakeholders’ interests: economic efficiency; business resilience; business process transparency RusHydro strives to balance In building a framework for successful to events related to material Preparing and holding Annual General Meetings ↗↗The meetings focused on discussing RusHydro Group’s strategic the interests of all its stakeholders, relations with stakeholders, RusHydro sustainable topics, expressed in of Shareholders priorities and plans, including those related to the dividend policy, ensuring the most complete and timely Group follows four fundamental specific actions or communication Preparing IR presentations and arranging IR activities implementation of the Value Growth Plan, management efforts aimed 1 at improving operational efficiency, and plans for asset modernization. disclosure of relevant information. principles of the AA1000 [102–43] Series with the stakeholders. Public reporting ↗↗Feedback from the investment community, including weekly analytical of Standards: ↗↗ impact – relates to assessing Maintaining business contacts with analysts of investment coverage of RusHydro and the industry’s other companies, was To this end, in preparation of ↗↗ inclusivity – relates to identifying the Company’s positive and/or banks and other financial institutions communicated to the Company’s management. the integrated annual report for 2018, stakeholders and their needs and negative effect on sustainable Preparing press releases and information materials about the Company RusHydro Group’s stakeholders arranging interaction with them on development aspects and For more information, see ranking map was updated following material sustainability topics. stakeholders’ interests. Arranging meetings between investors and the Company’s the Shareholder and Investor Relations section on p. 159. a survey among internal and external ↗↗ materiality – relates to identifying management stakeholders. Those who scored over and prioritizing the most relevant Preparing and conducting roadshows 2.8 points as part of the assessment of sustainability topics, taking into Disclosing information on the Company and its subsidiaries’ websites in accordance with the disclosure rules as per resolutions of the Government of the Russian Federation The Investors section is available on the Company’s Stakeholder map [102–40] website at http://www.eng.rushydro.ru/investors/
2. Customers and consumers 2 Stakeholders’ interests: reliable power supply; improved quality of products and services; high standards of service 3,5 8 Online consultations on the websites of sales companies ↗↗Carrying out activities to change the tariff system in the Far East 1 Line of Trust in order to switch to long-term tariff regulation methods. ↗↗Implementing agreements related to regional energy development, Mobile service centers ensuring sustainable power and heat supply to consumers, as well as 11 Online reception desk social and economic activities. Contact center 2,5 Personal accounts for consumers of guaranteed suppliers For more information, see the Production and sales section on p. 74. 10 Developing front offices 12 More information for potential energy-intensive consumers 2 is available on the Company’s website at: http://www. rushydro.ru/activity/elektrosnabzhenie-krupnykh- potrebiteley/
Stakeholders' impact on RusHydro 1,5 Single information and settlement centers
3. Business partners, suppliers and contractors 1 Stakeholders’ interests: fair competition and responsible market behavior; transparent operations, including procurement 1 1,5 2 2,5 3,5 Forums, exhibitions, conferences, dialogues ↗↗In 2018, RusHydro became a partner of the Eastern Economic Forum RusHydro Group's impact on stakeholders' interests Open and competitive procurement procedures and took part in the Russian Energy Week international forum and the St. Petersburg International Economic Forum. Joint projects ↗↗RusHydro, the Government of the Sakha Republic (Yakutia) and Japan’s 1 Shareholders and investors 8 Regulators and infrastructure organizations New Energy and Industrial Technology Development Organization 2 Customers and consumers 9 Educational institutions signed memorandum on the construction of a wind diesel power 3 Business partners, suppliers and contractors 10 Local communities station in the Tiksi settlement. 4 Environmental organizations 11 Media ↗↗RusHydro, the Government of the Magadan Region and Polyus Magadan signed cooperation agreements. 5 Employees and trade unions 12 Public social and charitable organizations 6 Professional associations and expert community Key stakeholders 7 Government authorities
1 AA1000AP (2018) Standard.
56 57 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Key mechanisms Responses to requests Key mechanisms Responses to requests and relations stakeholders in 2018 and relations stakeholders in 2018
4. Environmental organizations 7. Federal and local executive authorities Stakeholders’ interests: environmental protection Stakeholders’ interests: ensuring reliable and uninterrupted power supply and heat supply; tax revenues; development regions of presence; improvement of the regulatory framework for energy based on renewable energy sources Environmental impact assessments ↗↗Development and approval of low-carbon development goals as part Agreements on social and economic cooperation ↗↗As part of cooperation with federal authorities, the management Environmental projects in the regions of operations of RusHydro Group’s Environmental Policy. with regions of the Russian Federation of RusHydro took part in commissions and working groups under ↗↗Improvement of the volunteer movement and initiatives aimed Public hearings on plant construction projects the President and the Government of the Russian Federation on at environmental protection. development of the energy sector and social economic development Engagement in joint committees, commissions, and expert ↗↗Environmental awareness raising. of Russian regions, including development of proposals and updates groups on energy sector development ↗↗Implementation of biodiversity protection programs. for the Schemes and Programs to Develop Regional Energy Systems, In 2018, a working group was set up to address matters heating layouts for Russian cities and towns, the general layout of For more information, related to the development of hydropower generating power generation facilities in Russia, and the territorial planning layout see the Environmental Protection section on p. 131. facilities of the Republic of Dagestan and social and for the Russian power industry. economic matters in the regions of the Company’s ↗↗RusHydro works with committees of the Federal Assembly of operations. the Russian Federation on matters related to the Company’s operations. RusHydro is actively involved in the preparation and 5. Employees and trade unions holding of the round table session Development of Hydropower Stakeholders’ interests: professional and career development; safe working conditions; solid remuneration in Russia: Prospects and Challenges arranged by the State Duma Committee on Energy. Personnel training ↗↗RusHydro Group provides voluntary health insurance and non- ↗↗In promoting development of Russian regions, RusHydro and Social support of employees government pension insurance plans. Employees receive support as part government authorities are governed by agreement on social and of existing collective bargaining agreements and internal documents. economic cooperation with regional and a number of municipal Communication through internal channels ↗↗In 2018, Chairman of the Management Board – General Director governments. As at December 31, 2018, agreements and memoranda Interaction with trade unions of RusHydro Nikolay Shulginov and managers of RusHydro met with were signed with government authorities of the following regions: representatives of territorial and regional organizations of the All-Russian Republic of Dagestan, Republic of Sakha (Yakutia), Republic of Electrounion in the Far Eastern Federal District. Tatarstan, Republic of Khakassia, Kamchatka Territory, Chukotka ↗↗Following the meeting, Minutes No. 56pr/2 of December 11, 2018 Autonomous Area, Volgograd Region, Magadan Region, Moscow was signed in order to further improve social partnership at all levels, Region, and Sverdlovsk Region. enhance social dialogue between authorized representatives of ↗↗Preparation of proposals for facilities to be included in RusHydro’s employers and employees of RAO ES East, and maintain the existing Long-term Program for Replacement of Retiring Capacities, primarily level of social guarantees. of the government program of the thermal power plants modernization ↗↗RusHydro has a corporate newsletter and runs an intranet portal. with a return on invested capital of at least 14% (the cost of projects is determined based on design and cost estimate documents), with For more information, all consumers of the wholesale market paying for the cost of new see the HR and Social Policy section on p. 117. projects. ↗↗Calculation of a possible option to complete the construction of Cheboksarskaya HPP at the full reservoir level of 63.0 m as per instruction by RusHydro for the Analytical Center for the Government 6. Professional industry associations and expert community of the Russian Federation was carried out. The calculation served as the basis for the decision of the Government of the Russian Federation Stakeholders’ interests: energy science development; development of innovative technologies; partnership prospects; transparent (No. DK-P9-179pr of October 1, 2018) on maintaining the full reservoir operations level of Cheboksarskaya HPP at 63.0 m. Forums, conferences, exhibitions ↗↗RusHydro’s participation in committees and working groups of 8. Regulators and infrastructure organizations Joint programs a number of non-profit partnerships and international organizations, including: Stakeholders’ interests: compliance with Russian and international laws Public reporting ↗↗Global Sustainable Energy Partnership; Reporting ↗↗Disclosure of information in accordance with the requirements Implementation/association programs ↗↗International Hydropower Association; of the Bank of Russia and other regulators. ↗↗International Commission on Large Dams; Development of proposals to improve legislation ↗↗World Energy Council.
58 59 //STRATEGIC REVIEW PJSC RusHydro | Annual Report 2018
Key mechanisms Responses to requests Key mechanisms Responses to requests and relations stakeholders in 2018 and relations stakeholders in 2018
9. Educational institutions 12. Public social and charitable organizations Stakeholders’ interests: targeted training programs; energy science development; development of innovative technologies, including Stakeholders’ interests: support for social activities and securing financial assistance; environmental protection; support for charitable those which reduce the environmental impact initiatives and volunteers Cooperation in R&D ↗↗Launching the Institute of Hydropower and Renewable Energy Social and charitable programs ↗↗In 2018, RusHydro provided support across all the focus areas outlined Training, retraining, and skills improvement for employees Sources, part of Moscow Power Engineering Institute, in 2018 Public reporting by the Company’s Charity and Sponsorship Policy. In 2018, RusHydro supported by RusHydro; implementation of the advanced personnel provided financial support to 18 kindergartens, 28 secondary schools, Orders for R&D projects development program From School to Workplace; and participation Social events and initiatives 10 music schools and community centers, 13 centers of additional in the organization of various events, including Energy for Education Regular meetings with charitable foundations education and leisure for children and youth, and 5 universities. Industry contest, ProeKTOriYa, a national career guidance forum, and and non‑governmental organizations As part of the Ecological Paths project, an additional tourist route project sessions in the Russian Children’s Education Centers (Sirius, was laid out in the Prielbrusye National Park, RusHydro continued Ocean, Smena, Orlyonok). working on a joint project with Severtsov Institute of Ecology and ↗↗Energy for Development contest for university undergraduates. Evolution (Russian Academy of Sciences) to recover the population of Persian leopards in North Ossetia, having released two animals For more information, of this rare species in the Alaniya National Park (Republic of North see the HR and Social Policy section on p. 117. Ossetia) in summer 2018. As part of the Energy Born charity event, RusHydro provided medical equipment for 14 healthcare facilities. A total of 26 sports schools and clubs in the Company’s regions of 10. Local communities and regions of presence presence received charitable assistance. Financial support was also provided to the Russian Whitewater Slalom Federation, the Russian Stakeholders’ interests: local development; reliable and smooth power supply; creation of new jobs at the Group’s facilities Union of Martial Arts, the Russian Judo Federation, the Karachayevo- Cherkessian Regional Sports Federation of Kyokushin, and the Yenisei- Conducting public hearings on energy construction ↗↗RusHydro builds and commissions energy facilities that help create STM Rugby Club. Last year, the Company provided financial assistance projects new jobs. In 2018, 1,253 new jobs were provided, mainly in the Far for the Russian Geographical Society to put in place a grant fund Eastern Federal District. Providing good working conditions and solid remuneration designed to encourage research on natural disasters and rare animal ↗↗RusHydro helps develop social infrastructure in the regions where it species, while also supporting the organization’s publishing activities operates. As one example, construction of the new department of and environmental and geographical expeditions. Financing was the Srednekansk Central Hospital supported by RusHydro Group makes also allocated to ensure the preservation of cultural and historical free medical care more available to people and creates additional jobs heritage by upgrading a wide range of cultural institutions, including for healthcare professionals. museums, community centers, and libraries. In 2018, 18 orphanages ↗↗Implementation of over 300 charitable projects to provide financial and asylums and nine rehabilitation centers for children and teenagers support to educational, medical, social, environmental, cultural, and became eligible for financial support. Funds were allocated to sports institutions and organizations across the Company’s footprint. support 35 charitable foundations and non-profit organizations at the Involvement of RusHydro Group’s employees as corporate volunteers regional and national levels. In 2018, charitable foundations benefiting in socially important projects and events in the Company’s regions from the Company’s financial assistance included the Vera Hospice of operations. Charity Fund, Center for Humanitarian Programs, Russian Children’s Foundation, Live Now Charity Foundation, and Illustrated Books for For more information, Little Blind Children, a regional charitable foundation. see the HR and Social Policy section on p. 117. For more information, see the HR and Social Policy section on p. 117. 11. Media Stakeholders’ interests: receiving full reliable information on the Company’s operations; quick informed responses to media inquiries; timely handling of media inquiries Preparing and providing the media with press releases, ↗↗Coverage of RusHydro Group’s key projects and focus areas across its statements, and comments of the Company footprint. Media coverage, including arranging and holding of press Publishing information on the corporate website and social tours, of the launches of Vostochnaya CHPP in Vladivostok, the third media hydropower unit of Ust-Srednekanskaya HPP in the Magadan Region, and a wind power plant in the Arctic settlement of Tiksi, as well Preparing background materials, presentations, and other as projects for comprehensive modernization of RusHydro’s HPPs, information construction of power facilities, and HPP operations during high water Organizing and holding briefings, press conferences, seasons and floods. interviews, media scrums, press tours and other media ↗↗Information support for events in the financial sector: the first offshore events renminbi-denominated offering among Russian corporates and Providing information in a timely manner in response Eurobonds offerings in rubles. to media inquiries ↗↗Information support during the engineering and blasting works for clearing a landslide at the Bureyskoye water reservoir. ↗↗Information coverage for RusHydro’s social initiatives, such as a project to recover the population of leopards in North Ossetia, as well as projects aimed at developing internal corporate culture and professional training: RusHydro’s spartakiads and contests among HPP and CHPP operating personnel.
60 61 //OUR IN 2018, IN THE YEAR OF ITS 40TH ANNIVERSARY, THE FULLY MODERNIZED SAYANO-SHUSHENSKAYAHPP,THELARGESTPOWERPLANTINRUSSIA, PERFORMANCE SETARECORDFORELECTRICITYGENERATION–26BILLIONKWH. THE CUMULATIVE YIELD OF HYDROELECTRIC POWER PLANT ENABLED TO AVOID BURNING 160 BILLION CUBIC METERS OF GAS, OR 330 MILLION TONNES OF COAL, OR 190 MILLION TONNES OF OIL FUEL EVEN MORE NECESSARY FOR THE OPERATION OF HEAT POWER PLANTS. //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Factor analysis of EBITDA by segment, RUB bn
ECONOMICS 0 2 1 AND FINANCE -1.5
1 ↗ Strong operating ↘ Termination of several ↗ Launch of Yakutskaya performance in price contracts with major GRES-2 in late 2017 and Key financial results zones consumers BlagoveshchenskayaCH ↗ Sustainable DAM prices PP reaching design in price zones capacity Income indicators ↗ Growth in capacity sales due to indexation
2017 2018 2018-2017 EBITDA, RUB mn 104,180 109,673 5,493
2 10 EBITDA margin , % 27.3 27.0 -0.3 p.p. 10 2
RusHydro S ast PA S RusHydro Su roup t er Su roup se ents Net income, RUB mn 24,774 31,837 7,063 A A 2 1 18 Net margin , % 6.5 7.8 1.3 p.p. Earnings per share (EPS), RUB 0.0656 0.0739 0.0083 Factor analysis of EBITDA (expenses), RUB bn Return on assets (ROA), % 2.8 3.4 0.6 p.p.
3 0 Return on equity (ROE) , % 4.5 5.5 1.0 p.p. 1 Adjusted net income, RUB mn 65,738 70,757 5,019 1 1 1 2 1 1 8
In the reporting period, EBITDA increased ↗↗ recognition of RUB 24,221 mn loss EBITDA, RUB mn 0 by 5.3% year-on-year to RUB 109,673 mn. from impairment of fixed assets and and EBITDA margin, % construction in progress, mostly RusHydro Group’s net income in 2018 connected with Ust-Srednekanskaya grew by 28.5% to RUB 31,837 mn. HPP and Vostochnaya CHPP 2 2 0 2
Adjusted net income in the reporting commissioned in 2018; 10 2
period totaled RUB 70,757 mn, up 7.6% ↗↗ recognition of RUB 13,993 mn loss on 10
o ern ent rants o ern ent ser es o r d operators r d o ser es
and apa ty and e penses e penses
Re enue n lud n n lud n Re enue
le tr ty trans ss on trans ss on le tr ty
n o e ta ta n o e pro ders ele tr ty ele tr ty re enues and and re enues produ ts or resale or produ ts
a es e l e l a es rd party party rd Pur ased Pur ased ro t o ot er ot er o ro t uel osts uel Costs o petroleu petroleu o Costs compared to 2017. fair value of the non-deliverable forward osts a or transaction for shares due to lower A A 1 18 The difference between the reported and RusHydro’s share price in the reporting adjusted figures mainly reflects key non- period; cash metrics, including: ↗↗ recognition of RUB 5,379 mn loss from Margin performance, % Profit distribution for 20171, % ↗↗ recognition of RUB 3,845 mn gain on impairment of receivables due to financial assets at fair value through expected credit losses. 100 1 100 1 profit or loss (PJSC Inter RAO shares); 10 180 10 8 1 1 18 Detailed information on the distribution of EBITDA, RUB mn profit allocated, inter EBITDA margin, alia, to the Company’s 1 development is disclosed on its website at: 2 8 http://www.rushydro.ru
1 18 % n Net margin Company development 64 23,116 Return on e uity (ROE) Dividends 31 11,226 Return on assets (ROA) Reserve fund 5 1,807
1 This section provides data in line with 2018 RusHydro Group’s IFRS consolidated statements incorporating the changes in Group’s accounting policy. 2 This indicator factors in other operating income generated by RusHydro Group in 2017 (RUB 0.7 bn) and in 2018 (RUB 5.5 bn) and is calculated as profits from sales and from changes in the value of financial assets at fair value through profit or loss, dividends received, and income from court rulings awarded. 3 ROE is calculated as net income to the year’s average equity. 1 Net income is as per RAS.
64 65 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Factor analysis of net income, RUB mn Government Operating costs Operating costs by year and type grants [201-4] (excluding impairment losses), 2 Total operating costs of the Group 8 0 RUB bn 10 1 In accordance with the Russian legislation, incurred from day-to-day operations 1 18 2 1 1 8 some companies of the Group received increased by 5.1% to RUB 314,850 mn with 2 1 2 10 government grants to fund the costs revenue up 5.1% in 2018 year-on-year. This 0 1 188 10 for difference between the approved is mainly driven by: 10 2 12 2 10 8 electricity and heat tariffs assumed ↗↗ a rise in fuel costs due to increased in the economic feasibility study and electricity and heat generation the actual reduced tariffs applied to by JSC DGK’s stations, a higher consumers, as well as the costs for fuel price of coal and higher purchase
and purchased electricity and capacity. prices of petroleum products at 0 1 8
2 1 8
n o e ta ta n o e e pense
perat n e penses e penses perat n S are o results o o results o S are e l pa r ent pa r ent e l nan n loss loss pa r ent o nt and asso ates osts n o e net osts n o e entures
t er operat n n o e operat n t er
o ern ent rants o ern ent Re enue PJSC Kamchatskenergo in H2 2018; et et In 2018, the Group received ↗↗ an increase in labor costs due to 8 1 8 n o e n o e RUB 41,648 mn in government grants indexation of rates and salaries 1 18 (2017: RUB 32,745 mn). The grants were according to the effective collective provided to companies in the following bargaining agreements; Revenue reporting period. Key drivers of the ↗↗ growth of other revenue of regions: the Kamchatka Territory, ↗↗ a rise in costs for third party 2 1 change in revenue include: RUB 4,497 mn, mainly from the Republic of Sakha (Yakutia), Magadan services as a result of growing 21 22 The Group’s total revenue in ↗↗ increase of RUB 13,220 mn in total RAO ES East Subgroup driven by Region, Chukotka Autonomous Area and repair and maintenance expenses, 1 18 2018 increased by 5.1% year-on- revenue from electricity sales higher electricity transmission other regions of the Russian Far East. primarily at PJSC Yakutskenergo and Depreciation and amortization year to RUB 400,418 mn against (including government grants) by and volumes of contractual PJSC Sakhalinenergo, and costs for Third party services RUB 380,864 mn in the previous RAO ES East Subgroup mostly due petrochemical sales to third The total grants received by the other third-party services at JSC LCM Grid companies services Fuel costs to higher prices and volumes; parties. Group’s guaranteed suppliers under due to increased use of third party Purchased electricity and capacity Total revenue performance and ↗↗ growth in RusHydro’s revenue of Russian Government Decree No. 895 On services in coal production; Remuneration of employees breakdown, RUB bn RUB 4,807 mn from electricity sales From January 1, 2018, the Group’s the establishment of base rates (tariffs) ↗↗ an increase in costs depreciation and Other costs Taxes, excl.income taxes driven by higher output resulting revenue from offset of electricity for electricity (capacity) in the Far Eastern amortization caused by an uplift in Other materials from the increased water inflow transmission losses and Group’s Federal District grew to RUB 26,300 mn in PP&E costs as a result of the launch Water use costs 80 00 in reservoirs of the Volga-Kama expenses for electricity transmission 2018, a 52.4% increase from the previous of new facilities (namely Yakutskaya 1 2 cascade in H1 2018 and in Siberian services of grid operators under year due to tariff adjustment started in GRES-2 with off-site infrastructure 2 1 1 HPPs in H2 2018; relevant contract has been reported H2 2017. commissioned in 2017 and through 1 8 0 2 ↗↗ growth in revenue from the sale in an aggregated form. Offset of grid 2018) and refurbishment and upgrade to a new settlement system at 0 8 of capacity by RUB 2,952 mn on losses received by the Group from of PP&E at RusHydro’s branches; PJSC Kamchatskenergo; the back of higher sales volume at grid operators shall not be deemed ↗↗ higher costs for taxes (excluding ↗↗ a rise in costs for petroleum 2 1 2 PJSC DEK; as separate obligations under IFRS 15, income tax) due to an increase in products purchased for resale due ↗↗ increase of RUB 1,448 mn in ESK the loss offset contract shall not be property tax rate for grid assets and to an increase in volumes to be RusHydro Subgroup revenue from an agreement with the consumer in higher costs for property tax due to supplied to external buyers under the sale of electricity driven by the IFRS 15 context, therefore, these the launch of Yakutskaya GRES-2 and petroleum product sales contracts; higher net supply and average offsets cannot be recognized as the off-site infrastructure; ↗↗ an increase in other expenses as tariffs; revenue. The grid loss offset received ↗↗ a rise in costs for purchased a result of changes in loss from ↗↗ increase in revenue of RUB 1,243 mn by the Group’s companies for the year electricity and capacity due to write-off or other disposal of PP&E from heat and hot water sales ended December 31, 2018 amounted growing expenses at JSC RAO ES East and assets under construction. 1 18 resulting from increased heat prices to RUB 8,459 mn, including RAO ES Subgroup in the wake of transition Electricity sales and net supply; East Subgroup – RUB 3,375 mn. [102-48] Capacity sales Heat and hot water sales Government grants (regional) Government grants (tariff adjustment) Other revenue
66 67 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Operating costs, RUB bn Fair value of the non-deliverable forward Debt portfolio management for the Group’s shares recognized 1 1 8 in accordance with the terms of Total and net financial debt, RUB bn, 0 0 the transaction with VTB Bank (PJSC) and leverage as at the year-end 1 1 0 2 increased from RUB 20,716 mn (as at 1 1 1 1 1 December 31, 2017) to RUB 31,896 mn 1 2 0 (as at December 31, 2018). The change in fair value of the non-deliverable forward is mainly attributable to movements in RusHydro’s share prices in 2018.
22 1 1 21 2 1 2 2 22 1 1 1 2 2
1 Equity and liabilities,
apa ty
osts
ater als n o e ta n o e depre at on
ser es ele tr ty and and ele tr ty ser es o e ployees o resale or pur ased osts
ater use use ater
t er t er a es e l e l a es PP PP r d o pan es o pan es r d Pur ased Pur ased rd party party rd Re unerat on Re unerat on produ ts Petroleu t er uel osts uel RUB bn 1 1 18 perat n perat n osts osts 8 1 1 1 1 18 Financial debt Net financial debt2 22 0 Net financial debt / EBITDA 28 1 1 8 Direct economic value generated and distributed [201-1] 11 1 1 1 0 8 Metrics, RUB mn 2017 2018 1 8 In 2018, the Group’s short-term debt worth RUB 20 bn3 placed in February 1 Economic value generated 383,534 402,123 20 and leverage decreased, while the long- and two issues worth RUB 15 bn and 1.5 0 Operating profit after impairment loss on receivables 342,162 353,391 8 2 term debt went up. At the end of bn offshore Chinese renminbi placed Government grants 32,745 41,648 2018, RusHydro Group’s total and net in November). On top of that, in April financial debt stood at RUB 226.5 bn 2018, RusHydro and the Far East and Interest income and dividends received 9,575 8,879 and RUB 131.1 bn, respectively. Given Baikal Region Development Fund (Losses)/gains from sale of assets (948) (1,795) higher consolidated operating income entered into a special-purpose loan Economic value distributed 300,789 316,509 in 2018 and smart intesting policy, net agreement worth RUB 5 bn to finance Operating costs 190,539 201,270 financial debt / EBITDA declined to the construction of off-site facilities 1.2x as at December 31, 2018 vs 1.4x of Sakhalinskaya GRES-2. In July 2018, Salaries, allowances and other benefits 74,390 75,876 as at December 31, 2017. This means the Group also successfully raised RUB Payments to capital providers 10,430 11,908 1 18 sustainable improvement of the Group’s 20 bn under a loan agreement with Payments to government 23,666 26,098 E uity financial position since 2016. VTB Bank. At the end of 2018, the rate Long-term borrowings Investments in communities 1,764 1,357 Non-deliverable forward for shares of ruble-denominated borrowings Short-term borrowings The period under review saw an averaged about 8% per annum. In Economic value retained 82,745 85,614 Pyables and other accruals Tax paybles increase in long-term borrowings, December 2018, RusHydro prepaid an Deferred tax liabilities mainly due to the placement of three ECA-covered FX loan of some EUR 69 Other non-current liabilities Eurobond issues in 2018 (one issue mn from UniCredit Bank Austria AG. Assets, equity to Far Eastern distribution company Assets, RUB bn and liabilities mainly by DRSK for grid connection. 8 1 1
As at December 31, 2018, the Group’s As at December 31, 2018, the Group’s 8 1 8 2 0 2 assets grew by 6.9% (RUB 60,228 mn) to liabilities grew by 14.4% (RUB 43,617 mn) 1 2 2 RUB 931,931 mn year-on-year. The change is to RUB 345,712 mn year-on-year. 0 2 1 mainly driven by: The Group’s liabilities changed as ↗↗ an increase in PP&E costs (due to follows: non-current liabilities rose by 2 the implementation of the Group’s RUB 74,787 mn due to an increase in investment program); long-term borrowings, while current ↗↗ an increase in other current assets due liabilities declined by RUB 31,170 mn to a larger share of funds placed on mainly due to a reduction in short-term deposits with maturities of over 90 days; borrowings and current portion of long- ↗↗ an increase in advance payments made term borrowings.
1 18 PP E Non-current assets other than PP E 1 Financial debt is calculated as the sum of long-term and short-term liabilities (less accrued interest payable as at the reporting date), liabilities on the non-deliverable forward with VTB Bank at the Cash and e uivalents end of 2017–2018, and RusHydro’s guarantee obligations on Boguchanskaya HPP loan by Vnesheconombank under the Group’s IFRS financial statements at the end of 2016–2017. Receivables and advances paid 2 Net financial debt is calculated as financial debt less cash and cash equivalents (including bank deposits for up to one year). Therefore, the data for 2016–2017 may differ from the data included in Inventory the Company’s annual report for 2017. Other current assets 3 The issue won annual Cbonds Award 2018 as Best Primary Eurobond Deal.
68 69 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
In 2018, the Group was also bringing obligations of PJSC Boguchanskaya ruble liabilities to issue Eurobonds Bonds down its short-term debt. In February HPP under a loan agreement denominated in offshore Chinese 2018, RusHydro repurchased its with VEB worth RUB 25.9 bn as at renminbi) account for about 98% As at December 31, 2018, the outstanding bonds of RusHydro include seven issues for series 07 and 08 ruble bonds1 under December 31, 2017, which also helped and 91%, respectively. This means a total amount of RUB 70.0 bn (the aggregate value of outstanding bonds is RUB 28.2 bn). the put option for a total of about reduce leverage. the minimum level of currency and RUB 18 bn. In March, the Group repaid interest risks for the Group in terms of Key parameters of RusHydro’s bond issues a loan of RUB 10.6 bn from Sberbank. As at December 31, 2018, the shares financial debt. July saw a successful redemption of of the Group’s ruble-denominated Issue parameters Series 01 Series 07 Series 09 Series Series series BO-P01, BO-P02 and BO-P03 and fixed-rate consolidated financial More information on the main and 02 and 08 bonds BO-P04 BO-P05 bonds bonds exchange exchange exchange bonds worth RUB 15 bn. In debt (excluding liabilities on changes in the structure of long- and bonds bonds February 2018, the Group terminated the non-deliverable forward with short-term debt (excluding forward) is Bond type Non-convertible State 4-01-55038-E 4-07-55038-E 4-09-55038-E 4B02- 4B02- its contract of guarantee to meet VTB Bank (PJSC), including hedging available below. certificated registration 4-02-55038-E 4-08-55038-E 04-55038-E- 05-55038-E- interest-bearing number 001P 001P bearer bonds with mandatory centralized Structure of the long-term debt Structure of the short-term debt custody (to be redeemed after twelve (to be redeemed within twelve months from the reporting months from the reporting Face value RUB 1,000 Registration 23.09.2010 27.12.2012 27.12.2012 01.04 2016 09.06 2017 date date), % date), % FINANCIAL RISKS Nominal Series 01 – Placement 25.04.2011 14.02.2013 28.04.2015 07.04.2016 16.06.2017 amount of RUB 10 bn date ARE CONSIDERED AS each issue Series 02 – Offer date 22.04.2016 13.02.2018 27.10.2017 INSIGNIFICANT RUB 5 bn 21.04.2023 Series 07, 08, 09 – RUB 10 bn each Series BO-P04 – RUB 15 bn Maturity date 12.04.2021 02.02.2023 15.04.2025 04.04.2019 12.06.2020 Series BO-P05 – RUB 10 bn Offering price 100% Coupon rate Coupons 1–10 Coupons 1–10 Coupons 1–5 Coupons 1–6 Coupons 1–6 – 8.0% p.a. – 8.5% p.a. – 12.75% p.a. – 10.35% p.a. – 8.2% p.a. Coupons Coupons Coupons 6–16 11–20 – 9.5% 11–20 – 0.1% – 7.5% p.a. p.a. p.a. Coupons Bonds 52 7 Outstanding short-term part of long-term 84 0 6–16 – coupon (including Eurobonds (LPN)) loans, borrowings and bonds Loans and borrowings 46 9 Short-term loans and borrowings 15 7 rate to be Other long-term borrowings 0 4 Other short-term borrowings 0 3 determined by the issuer Form of Open Yield 8.16% 8.68% 13.16% 10.62% 8.37% offering subscription, In 2018, the long-term part of In 2018, the short-term part of drawdown for the Group’s current bookbuilding the Group’s borrowings surged by the Group’s borrowings dropped by loan agreements amounted to more Coupon semi-annual Last trade Series 01 – Series 07 – Series 09 – Series BO- Series BO- RUB 67.036 bn (73.7%) to RUB 157.9 bn, RUB 39.7 bn (50.5%) to RUB 38.9 bn, than RUB 191 bn at the end of 2018 payments yield as at 7.75% 8.1% 8.22% P04 – 7.69% P05 – mainly driven by long-term financing primarily due to the maturity of long- and substantially exceeds the need for December Series 02 – Series 08 – 7.75% raised through three Eurobond issues term loans and bonds (including short-term debt refinancing, financial 28, 2018, % 8.19% 8.93% in 2018 (two denominated in rubles and exchange and local bonds totaling risks are considered as insignificant. p. a. one – in offshore Chinese renminbi) and about RUB 15 bn and about RUB 18 bn, bilateral loan agreements. respectively). As the remaining Eurobonds
As of December 31, 2018, the outstanding DAC company on Irish Stock Exchange bonds of RusHydro include four issues under Reg S rules. All issues have the of Eurobonds for a total of RUB 55 bn confirmed long-term rating from S&P / and 1.5 bn of offshore Chinese renminbi Moody’s / Fitch / ACRA aligned with placed by RusHydro Capital Markets RusHydro’s credit rating.
1 In February 2018, the holders of of RusHydro’s series 07 and 08 ruble bonds issued in February 2013 for a total amount of RUB 20 bn, partially used their put option for securities. Bonds that were not put by the holders for early redemption, with the nominal value of RUB 2,196 mn will be floating before the maturity date in 2023.
70 71 PJSC RusHydro | Annual Report 2018
Key parameters of Eurobond issues Cash flows Offering Maturity Issue Amount, Coupon Coupon ISIN date date currency bn rate, % payments 28.09.2017 28.09.2022 RUB 20.0 8.125 Semi- XS1691350455 In 2018, the Group’s cash flow from Cash spent to purchase PP&E In 2018, RusHydro Group for annual operating activities (after changes decreased by RUB 4,270 mn, or 6.0% the first time generated positive free 15.02.2018 15.02.2021 RUB 20.0 7.4 Semi- XS1769724755 in working capital) increased to RUB 67,423 mn in 2018 due to the cash flow sufficient to fund dividend annual by RUB 6,426 mn (up 8.2%) to completion of the investment cycle of payments. 21.10.2018 21.11.2021 CNH 1.5 6.125 Semi- XS1912655054 RUB 84,551 mn. the Far Eastern investment projects. annual 27.10.2018 27.01.2022 RUB 15.0 8.975 Semi- XS1912654677 annual Cash flows, RUB mn Credit ratings 2017 2018 2018/2017, % Cash flows from operating activities (after accounting for 78,125 84,551 8.2 changes in working capital) RusHydro’s high credit quality is in the Company’s history, its long- confirmed by S&P, Moody’s and Fitch, term credit rating was upgraded to Cash for PP&E acquisition -71,693 -67,423 -6.0 the three leading international rating the investment grade to become on Proceeds from sale of PP&E 213 977 358.7 agencies. a par with the sovereign rating of Proceeds from sale of Inter RAO shares – 2,160 – the Russian Federation by all three Proceeds from disposal of joint venture – 871 – The Company’s strong operating rating agencies. performance, solid position in Interest received 7,848 5,545 -29.3 the domestic electricity market, RusHydro’s rating is assigned under Interest paid -15,794 -14,217 -10.0 coupled with healthy liquidity and the national scale by the Analytical Free cash flow (FCF) -1,301 12,464 – leverage levels contributed to Credit Rating Agency (ACRA). In RusHydro’s improved credit standing in the reporting period, the Group 2018 and early 2019. For the first time enjoyed the top credit rating by ACRA. Tax payments
Credit ratings as at March 31, 2019 RusHydro Group is one of the main taxpayers in the regions of its operation. Rating agency Long-term credit Credit rating Changed/ In 2018, tax payments to budgets of all levels totaled RUB 81.2 bn, including rating1 outlook reaffirmed RUB 34.3 bn - to regional budgets.
S&P “BBB–” Stable April 27, 2018 Tax payments to budgets of different levels, RUB mn1 RusHydro Subgroup JSC RAO ES East Subgroup RusHydro Group Moody’s “Baa3“ Stable February 12, 2019 Level of budget 2016 2017 2018 2016 2017 2018 2016 2017 2018 Federal 17,093 22,026 29,432 19,873 20,878 16,736 36,966 42,904 46,168 Fitch “BBB–“ Stable August 1, 2018 including 4,302 4,494 4,954 11,404 11,469 11,910 15,706 15,963 16,864 insurance АКРА “AAA(RU)“ Stable June 29, 2018 contributions Regional 21,647 23,578 23,971 8,992 10,075 10,304 30,639 33,653 34,275 Local 434 424 403 371 364 330 805 788 733 Total 39,174 46,028 53,806 29,236 31,317 27,370 68,410 77,345 81,176
IN THE REPORTING PERIOD, THE COMPANY ENJOYED THE TOP CREDIT RATING
1 In the table for 2017–2018, tax payments are allocated to the federal and regional budgets according to the budget level (income tax, water tax, mineral extraction tax, payment for the use of 1 International scale foreign currency credit ratings by S&P, Moody’s, and Fitch. water bodies, pollution charge).
72 73 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
The construction of 110, 35 kV approach The number of utility connection In 2018, total electricity fed to the grids PRODUCTION lines to the 220 kV Maya substation contracts executed during the year rose of JSC RAO ES East Subgroup stood was completed that helped integrate by 1% (to 22,500). The Group made it at 35,427.2 mn kWh, up 1,139.3 mn kWh AND SALES the Central and Western energy hubs technologically possible to connect year-on-year. The grid losses amounted of Yakutia into UES East. consumers (including in ASEZs) to to 9.6%. [EU12] Key production assets the maximum capacity of 884.3 MW.
Electricity and heat production is The growth in the installed capacity The installed capacity structure shows Length of transmission and distribution power lines by regulatory regime, km [EU4] the key business of RusHydro Group. of the Group’s facilities was driven also the prevalence of large HPPs generating Length of transmission power lines1 The Group’s asset structure includes by the commissioning of Vostochnaya 28,966 MW2, or 74% of the total Grid class 2017 2018 2018-2017 over 90 renewable energy facilities, both CHPP (139.5 MW, 432.6 Gcal/h) installed capacity, while 8,598 MW, in Russia and abroad, along with some in Vladivostok and hydroelectric unit or 22% of the installed capacity, is WECM thermal power plants and electrical grid No. 3 at Ust-Srednekanskaya HPP generated by the TPPs of RAO ES East Overhead power lines assets in the Far East. As at January 1, (142.5 MW) as well as the implementation Subgroup. The Group’s assets also 110 kV 7,940 7,975 35 2019, the installed capacity of RusHydro of the Comprehensive Modernization include 1,200 MW Zagorskaya PSPP, power plants, including Boguchanskaya Program at Saratovskaya HPP (+12 MW), 300 MW Zelenchukskaya HPP-PSPP and 35 kV 8,807 8,856 49 HPP, totaled 39,370 MW1, up 331 MW Nizhegorodskaya HPP (+3 MW), 16 MW Kubanskaya PSPP. The Group’s Cable power lines year-on-year. The installed heat Novosibirskaya HPP (+5 MW) and renewable energy facilities, including 110 kV 40 40 0 capacity increased to 18,924 Gcal/h, Rybinskaya HPP (+10 MW). SHPP (up to 30 MW), GeoPP, WPP 35 kV 84 92 8 up 426.9 Gcal/h. and SPP, account for a total installed capacity of 290 MW. REM Overhead power lines 220 kV 5,180 5,180 0 Installed capacity1, MW Installed capacity structure Installed capacity structure Структура установленной мощности по источникам энергии (EU1) 110 kV 5,904 5,898 –6 Установленная мощность*, МВт by generation type [EU1] Структураby regulatory установленной regime [EU1] мощности по режимам регулирования, МВт (EU1) 35 kV 6,997 6,917 –80 8 8 8 0 0 Cable power lines 110 kV 2 5 3 02 1 8 2 35 kV 4 4 0 0 Total transmission power lines 34,958 34,967 9 0 Length of distribution power lines1 WECM 2 8 2 8 1 0 0 Overhead power lines 6 (10) kV 20,540 20,622 82 1 1 18 0.4 kV 20,532 20,503 –29 RusHydro Subgroup HPPs 74 28,966 Price zone 1 38 14,823 RAO ES East Subgroup TPP 22 8,598 Price zone 2 26 10,198 Cable power lines 1,156 1,268 112 HPP-PSPP 3 1,516 Non-price zone of UES East 24 9,276 RES 1 290 Isolated areas 11 4,511 6 (10) kV 1,120 1,120 0 Armenian market 1 562 0.4 kV REM RAO ES East electrical grids grids – by AO-energo. At the end of At the end of the reporting period, Overhead power lines 2018, the total length of 35–220 kV the total number of transformer 6 (10) kV 10,957 11,025 68 The businesses of JSC RAO ES East transmission grids was 34,966 km. substations increased to 22,000, ensure power transmission and up 336, with their total capacity hitting 0.4 kV 11,459 11,677 218 distribution both in UES of the East The distribution grid transmits power 29,317.3 MVA, up 540 MVA. For the low- Cable power lines and in isolated energy systems. from a 35–220 kV grid to low and voltage category, changes in the length 6 (10) kV 2,041 2,085 44 medium (MV-2) voltage consumers. of transmission power lines and in 0.4 kV 1,451 1,480 29 In UES East, the power from higher At the end of 2018, the total length the number and capacity of transformer voltage grids in 220 kV UNEG of low voltage overhead and cable substations are primarily associated with Total distribution power lines 69,256 69,780 524 is transmitted to the consumers by JSC power lines made up 69,781 km, the housing construction in large cities of Total length of power lines 104,214 104,747 533 DRSK, while in isolated electrical up 526 km year-on-year. the Far East, recognition of abandoned rural grids and grid reconstruction.
1 Including PJSC Boguchanskaya HPP (a joint venture of PJSC RusHydro and RUSAL) and HPP-2 of PJSC KamGEK, and excluding HPP-1 and HPP-3 of PJSC KamGEK, assets held in trust. 2 Large HPPs are those with the capacity of over 30 MW that do not fall into the category of small HPPs. 1 Measured by chain.
74 75 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Number and installed capacity of 06–220 kV transformer substations In 2018, the electricity generation Generation structure for simplifying business procedures at the Group’s HPPs, PSPPs, and by primary energy source, and enhancing investment appeal of Unit 2017 2018 2018–2017 Структура выработки по первичным источникам энергии, млн кВт•ч (EU2) geothermal power plants increased GWh [EU2] the Russian regions dated January 31, WECM by 2% year-on-year, reaching 2017 (the “Program”). Number of 220 kV transformer substations pcs 1 1 0 109.8 bn kWh. During the same period, Capacity of 220 kV transformer substations MVA 80 80 0 the electricity generation at the Sevan– The project seeks to simplify Number of 110 kV transformer substations pcs 242 246 4 Hrazdan Cascade HPPs in Armenia fell the procedure for utility connection by 11.5%, accounting for 412 mn kWh. (the “UC”) for legal entities or sole Capacity of 110 kV transformer substations MVA 7,370.8 7,667.4 296.6 1 proprietors requesting the power of Number of 35 kV transformer substations pcs 476 479 3 The Group’s thermal power plants up to 150 kW with reliability category Capacity of 35 kV transformer substations MVA 4,380.8 4,445.9 65.1 in the Far East demonstrated a positive 2 and 3 (shorter timing, enabling Number of 6 (10) kV transformer substations pcs 10,943 11,121 178 trend with their generation of interaction with the grid company via 31.7 bn kWh, up 3.9% year-on-year. a personal account without a need Capacity of 6 (10) kV transformer substations MVA 3,511.8 3,565.1 53.3 The Group’s wind, solar and geothermal to visit the client office). The Group’s h REM power plants generated 431 mn kWh, participants in the Program comprise Hydro resources 78 112 0 Number of 220 kV transformer substations pcs 28 27 –1 while the heat supply stood Fossil fuel 22 31 7 JSC DRSK, PJSC Kamchatskenergo, at 29.9 mn Gcal. RES 0 002 0 4 PJSC Sakhalinenergo, PJSC Capacity of 220 kV transformer substations MVA 3,652.3 3,351 –301.3 Magadanenergo, JSC Chukotenergo Number of 110 kV transformer substations pcs 140 139 –1 In 2018, the main factors affecting and PJSC Yakutskenergo. Capacity of 110 kV transformer substations MVA 4,496.3 4,694 197.7 the Group’s electricity generation ↗↗ heat output of 29.650 mn Gcal, down Number of 35 kV transformer substations pcs 383 386 3 and heat supply included: 0.9% year-on-year, by the Group’s The Program made it possible ↗↗ water inflow to most Volga and power plants and boiler houses to introduce an online service Capacity of 35 kV transformer substations MVA 1,613 1,715.2 102.2 Kama reservoirs at a level higher in the Far Eastern Federal District to the energy companies’ websites Number of 6(10) kV transformer substations pcs 9,451 9,601 150 than the long-term annual average; due to higher actual outdoor featuring personal accounts for Capacity of 6(10) kV transformer substations MVA 3,672.3 3,798.7 126.4 ↗↗ water inflow to HPPs in Siberia temperatures across the Far East but the applicant to interact with the grid Total substations pcs 21,664 22,000 336 at the same or slightly higher level for the Kamchatka Territory. company and to make preliminary than the long-term annual average; calculations of the UC cost (UC tariff Total capacity of substations MVA 28,777 29,317 540 water inflow to HPPs in the South of calculator), apply for a UC, receive Russia at a level equal to the long- Measures for simplifying utility a UC contract and sign the necessary term annual average; connection to electrical grids UC documents, including their ↗↗ growing electricity generation [EU23] electronic versions. Operating performance at TPPs in the Far East, up 5.0% (to 34,464 mn kWh) due to In 2018, the Group’s businesses were The applications filed by the Electricity and heat Electricity generation, Generation structure the year-on-year drop in electricity involved in implementing the Target applicant through the Personal generation bn kWh by regulatory regime, generation at HPPs in UES of Model for Utility Connection Account differ in their share, with, for Выработка электроэнергии, млрд кВт•ч 0 СтруктураGWh [EU2] выработки электроэнергии по режимам регулирования,the East and млн a 3.7% кВт•ч increase (EU2) to Electrical Grids approved example, 1% at JSC Chukotenergo, 2018 saw a new record for 1 8 8 1 0 1 in electricity consumption in by the Russian Government’s 17% at JSC DRSK and 44% at PJSC the Group’s electricity generation. the Far East; Decree No. 147-r On target models Sakhalinenergo. In the reporting period, the Group’s Отпуск тепла, тыс. Гкал (EU2) 2 8 1 power generation, including 1 Heat supply, ‘000 Gcal [EU2] КоэффициентHPP and TPP installed использования capacity установленнойutilization factor мощности (ICUF), % ТЭС и ГЭС, % Boguchanskaya HPP, added 10 8 10 1 10 2.8% year-on-year, peaking at 144.3 bn kWh. According 1 to the System Operator of the Unified Energy System, last year saw the growth in Russia’s electricity generation and consumption by 1.7%
and 1.6%, respectively. The Group’s h electricity generation made up 13.2% 1 1 18 Price zone 1 36 52 3 of the Russian total power generation, Price zone 2 30 43 2 UES East (non-price zone) 26 36 8 demonstrating an upward trend RusHydro Subgroup Isolated non-price area 8 11 6 1 1 0 0 0 1 1 1 RAO ES East Subgroup 1 1 0 12 2 8 for the fourth year in a row. Armenian market 0 002 0 4
1 1 18 1 1 18 HPP TPP
1 Excluding RES ICUF.
76 77 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Sales of electricity and heat electricity market (REM) only, to the System Operator. of the capital and maintenance while power plants with a capacity The discrepancies are priced expenditures and the target level RusHydro Group’s steady WECM performance rules apply to the non-price zones between 5 MW and 25 MW can trade in such a way as to encourage of return. The capacity price under development depends on stable that include the Arkhangelsk and in both WECM and REM. market participants to adhere capacity supply agreements and electricity and capacity sales The wholesale electricity and Kaliningrad Regions, Komi Republic, to the planned electricity capacity sale agreements for in the wholesale market and capacity market (WECM) participants and regions in the Far East, including The WECM has several sectors that consumption and production new NPPs/HPPs is paid by all the growing retail business providing include generating companies, the Western and Central Energy offer different transaction terms and volumes as determined in the DAM consumers of the relevant price for smooth and efficient power supply electric power exporters/importers, Districts of the Republic of Sakha delivery times: and to follow the System zone. The main restraining factor to consumers, which remains one electricity retailers, electric grid (Yakutia). ↗↗ regulated contracts (RC) cover Operator’s instructions; for prices under capacity sale of its priorities. companies (electricity purchases to electricity and capacity volumes ↗↗ capacity auctions (KOM) enable agreements for new NPPs/HPPs is cover transmission losses), and large Under the Russian law, all electricity supplied to households and capacity trading at market the decrease in the average yield The Group sells electricity in Russia consumers. The wholesale electricity and capacity facilities with equivalent consumer categories (unregulated) prices determined of long-term Russian Government both in the wholesale electricity and and capacity market covers both an installed capacity of over 25 MW under regulated prices (tariffs) through a competitive bidding bonds used to calculate the capacity market (first and second price and non-price zones. The first located in the price and non-price approved by Russia’s Federal process. Close to 50% of capacity price for suppliers from price zones of the wholesale market price zone comprises the European zones are required to sell their Antimonopoly Service. Total the capacity in the first price zone 10.04% in 2017 to 8.393% in 2018; and UES East’s non-price zone) part of Russia and Urals, while products in the WECM only. Power electricity and capacity supplies and the overwhelming majority ↗↗ capacity sale contracts for must- to major consumers and to retail the second price zone encompasses plants with a capacity below 5 MW under regulated contracts may of capacity volumes in the second run generating facilities are signed consumers via its retail companies Siberia. Special wholesale trading are required to trade in the retail not exceed 35% of electricity price zone of the wholesale market by suppliers with respect to and guaranteed suppliers. and capacity output; are sold through capacity auctions; generating facilities designated by ↗↗ the day-ahead market (DAM) is ↗↗ capacity supply agreements (DPM) the Russian Government (based on a place where power generated target power generating facilities proposals from the Government WECM price zones in excess of the RC volumes is included in the designated Commission on the Development traded at market prices. Prices are list approved by the Russian of the Electric Power Industry) determined through a competitive Government’s Decree No 1334‑r or generating facilities ordered bidding process one day ahead of dated August 11, 2010. Similar by an authorized body to suspend the delivery, with bids accepted capacity sale agreements exist decommissioning in accordance from both the suppliers and with respect to newly built HPPs with the rules for decommissioning buyers. The DAM market uses (PSPPs) and NPPs (capacity sale of electric power facilities and the marginal pricing mechanism, agreements for new NPPs/HPPs). their shutting down for repairs. which balances supply and Capacity supply agreements and The capacity of must-run facilities demand and applies to all market capacity sale agreements for new generating electricity to avoid participants; NPPs/HPPs ensure fulfillment power shortages is paid for ↗↗ the balancing market (BM) of supplier obligations under by consumers of the relevant free is a real-time vehicle used approved investment programs, power transfer zone. The capacity to balance discrepancies between while also providing payment of must-run facilities generating the power volumes actually guarantees for the capacities of power to avoid heating shortages produced/consumed and those newly built (upgraded) generating is paid for by consumers of originally planned. Discrepancies facilities. A thermal power plant the relevant Russian region; between the planned and built under a capacity supply ↗↗ unregulated bilateral contracts, actual consumption occur as agreement is provided with as well as unregulated electricity a result of internal and external capacity payment guarantees and/or capacity sales contracts initiatives. Internal initiatives come effective for a period of 10 years (FBC, FECC, FCC) allow the WECM from the market participants (20 years under capacity sale participants to sign electricity (consumers or suppliers), while agreements for new NPPs/ and/or capacity sales contracts external initiatives are reserved HPPs), which ensures recovery at unregulated prices.
First price zone Second price zone Non-price zones and isolated energy systems
78 79 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
The Russian energy system is served The activities of infrastructure was approved by FTS Order No. Average tariffs under regulated contracts (RC) and gross revenue requirement (GRR) for electric power by dedicated technological and operators, including their pricing 210-e/1 On Approval of Indexation generation commercial infrastructure operators. policies and counterparty relations, Formulas for Regulated Prices (Tariffs) Item 2017 2018 2018−2017 2018/2017, % are subject to government regulation of Electricity (Capacity) Used in Average tariff under RC, 340.67 357.39 16.72 4.9 Non-Profit Partnership Council for and control. Electricity (Capacity) Sale Contracts, RUB / ‘000 kWh Organizing Efficient System of Trading Procedure for their Application, and at Wholesale and Retail Electricity the Procedure for Calculating Planned GRR, RUB ‘000 23,050 23,131 81 0.4 and Capacity Markets (Market Council Regulatory framework for tariff- and Actual Indicators for the Purposes Non-Profit Partnership established related decision making of Such Formulas dated August 28, under Federal Law No. 35-FZ On 2014. The base tariff calculated in Key WECM tariff drivers: for the purpose of electric power ↗↗ RusHydro’s Sales Policy Regulations; Power Industry dated March 26, Federal Law No. 35-FZ On Electric 2007 is annually adjusted to factor ↗↗ tariff indexation, with the 2018 generation with no water withdrawal ↗↗ Regulations for Developing Annual 2003) is responsible for running Power Industry dated March 26, in the index of changes in semi-fixed deflator index standing at 4% (in line operations by approximately 10%. and Forward-Looking Long-Term the wholesale market’s commercial 2003 outlines the basic principles costs as determined by the Russian with the PPI, excluding the energy These amendments have been in effect Balance Projections for Production infrastructure. and methods of state regulation Ministry of Economic Development. sector’s contribution); since 2018. and Consumption of Electricity and in the electric power industry and The 4% deflator index in the 2018 tariff ↗↗ increase of tax rates for facilities Capacity and Heat in the Areas Trading System Administrator of the regulators’ scope of authority. was in line with the PPI (excluding using water bodies for the purposes outside of the Price Zones the Wholesale Electricity and contribution from the energy sector). of hydropower generation without Electricity sales in the first and of the Wholesale Market; Capacity Market (JSC TSA) is The Russian Government’s Resolution This methodology is also used for water withdrawal (as required by second price zones ↗↗ Regulations on RusHydro’s Sales responsible for administering No. 1172 On Approval of Rules for new generating facilities starting from Russia’s Tax Code, a coefficient of Management; electricity transactions in the the Wholesale Electricity and Capacity the second year of their operation. 1.75 was applied to the tax rates RusHydro directly sells electricity ↗↗ Regulations for Interaction wholesale market (the trading system Market and on Amendments to Certain With respect to the facilities operating in 2018). in the WECM’s first and second price between RusHydro’s Business Units of the wholesale market). Acts of the Government of the Russian under supply and sale agreements, zones. Following up on Contracts Related Federation Concerning Organization the methodology applies to electricity Major regulatory changes included to Electricity and Capacity Sales. Financial settlements between of the Wholesale Electricity and generation only. amendments to the Russian Electricity sales are governed by the WECM participants are handled Capacity Market dated December 27, Government’s Resolution No. 876 dated the Company’s local internal documents: through the Center for Financial 2010 establishes the legal framework During the first year in the wholesale December 30, 2006 which, among ↗↗ Regulations for Information Settlements (CFS). governing the wholesale electricity market, the tariff for generating other things, raised the fees paid for Exchange in the Economic and capacity market. facilities located in non-price zones is using water bodies or parts thereof Dispatching Business Process; The WECM technological infrastructure set based on economically justified is administered by the System The procedure and timing for financial expenses approved by FTS Decree No. Operator of the Unified Energy settlements and approval of electricity 199-e/6 On Approval of Guidelines for Sendout of electricity and capacity by RusHydro (branches) System which exercises exclusive and and capacity tariffs are set out in Calculation of Regulated Wholesale Item 2017 2018 2018/2017, % centralizedoperational management the Russian Government’s Resolution Electricity and Capacity Tariffs (Prices) Output, mn kWh 91,146 92,927 2.0 of Russia’s Unified Energy System and No. 1178 On Pricing in the Field of under Sale Contracts dated September monitors compliance with the system’s Regulated Prices (Tariffs) for Electric 15, 2006. This methodology determines Sendout (excluding electricity purchases), mn kWh 89,887 91,684 2.0 technological parameters. The System Power dated December 29, 2011. the economically justified amount of Electricity purchased, mn kWh 9,192 10,116 10.1 Operator supports the wholesale financial resources a company needs Total sales, mn kWh 96,350 99,093 2.8 electricity and capacity market by Tariff setting for generating facilities to operate at regulated tariffs within Capacity, MW 21,645 21,423 –1.0 updating the calculation model, based across WECM price zones: a specific regulation period (the return on which the Commercial Operator on investments, which is accrued determines the WECM power volumes Tariffs for the generating facilities through amortization, is not taken into The Group increased actual output and thus boosting sales volumes, including for the European part of Russia and and prices. In addition, it decides on operating within the WECM are set by consideration). sendout of electricity by 2.0% y-o-y, in the day-ahead market (DAM). RUB 825 per MWh (-3.6%) for Siberia. the structure of operating generating Russia’s Federal Antimonopoly Service mainly due to higher power generation In 2018, RusHydro’s average DAM facilities, administers capacity (FAS) in line with a methodology For facilities operating under sale by HPPs in Siberia and in the Far East price was RUB 1,285 per MWh (+ 6.0%) auctions, and provides support to the developed by the Federal Tariff agreements for new NPPs/HPPs, balancing market. Service (FTS abolished in 2015 to be the capacity price is calculated by succeeded by FAS). FAS in line with the methodology The market’s technological approved by FTS Decree No. 486- infrastructure is also supported by The primary tariff calculation e On Approval of Capacity Pricing the Federal Grid Company (FGC UES), methodology for the WECM Procedure for Newly Built Nuclear and which manages the unified national generating facilities (including those Hydroelectric Power Plants (including electric grid (UNEG), and interregional located in the non-price zone) is Pumped Storage Power Plants) dated distribution grid companies (IDGC). the one based on indexation. It October 13, 2010.
80 81 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
1 ElectricityДинамика ценprices, на электроэнергиюRUB/MWh в первой ценовой зоне по данным АТС, руб/МВт•ч to collect and transfer the surcharge market, the retail electricity price tariff for households in excess of amount to the Far East in order to for end consumers is set based the social consumption limit and The first price zone bring the region’s tariffs in line with on the wholesale market prices. formulas for calculating tariffs
1 2 the Russian base rate. Prices aligned with the wholesale for the transmission of electric power 1 202 1 20 market apply to all end consumers, supplied to households within and 1 1 1 1 RusHydro’s electricity and capacity with the exception of households and in excess of the social consumption 1 10 sales rose mainly due to the rising equivalent consumer categories. limit. Finally, the maximum value power generation and a higher of coefficient reflecting alignment base of funds used for calculating Households and equivalent consumer of multiple rate tariffs for households the capacity price surcharge. categories are supplied with power with the single-rate electricity
at regulated prices (tariffs) approved (capacity) tariff was raised to 4.0.
1 2
1 1
1 11 1 20 1 002 1 120
1 1 1 18 1 2 8 1 18
1 1 1 02 1 1 8 1 221
1 1 1
1 0 1 2 1 22
1 122 1 0 1 180 1 20 1 1 1 2 by the regional executive authorities 1 2 1 2 1 2 1 2 1 2 1 2 Sales of electricity and heat in charge of tariff regulation. The sales in the first and second 1 1 1 1 1 18 in retail markets price zones are consolidated On November 16, 2018, FAS published within JSC ESC RusHydro ДинамикаAverage uarterly цен на DAM электроэнергию price в первой ценовой зоне по данным АТС, руб/МВт•ч The secondAverage annual price DAM pricezone Companies operating within Order No. 1413/18 of October 12, Subgroup (JSC ESC RusHydro, the designated price zones of the 2018 introducing amendments to PJSC Krasnoyarskenergosbyt, PJSC retail electricity market are guided by the Guidelines for Calculation of Ryazanenergosbyt, JSC Chuvashskaya the retail market pricing rules based on Electricity (Capacity) Tariffs for Electricity Sales Company) whose core 1 8 0 the WECM tariffs, while also taking into Households and Equivalent Consumer business is to supply electricity both 8 8 account approved tariffs for services Categories. These amendments directly and via its retail subsidiaries 8 subject to government regulation. updated the formulas for calculating acting as guaranteed suppliers the electricity (capacity) tariff in three Russian regions. In 2018, 18 Electricity sold in the retail market for households within the social ESC RusHydro Subgroup supplied
is either purchased in the WECM or consumption limit differentiated electricity to 1,843,222 consumers in
2 2 8
8 1 28
22 8 2 0 888
8 0
2 8
1 02 28 1 800 828 sourced from generating companies by the time of use during the day (two the retail market, including 1,786,334 1 2 1 2 1 2 1 2 1 2 1 2 that do not operate in the wholesale and three-rate tariffs). In addition, households on direct contracts. Total 1 1 1 1 1 18 market. In the Russian regions included they adjusted the formulas for sendout of electricity amounted in non-price zones of the wholesale calculating the electricity (capacity) to 20,272.5 mn kWh in 2018. Average uarterly DAM price Average annual DAM price
The number of consumers (households and corporates) in service in the first and second price zones[EU3] Consumer Active contracts RusHydro’s electricity and capacity sales prices for electricity 2018- 2018/ Manufacturing industry 3,761 2014 2015 2016 2017 2018 2017 2017, % Transport and communications 1,135 DAM price, RUB/MWh 1,072.9 1,096.0 1,080.0 1,094 1,114 20 1.8 Agriculture 2,282 1 PZ DAM price, RUB/MWh 1,226.9 1,207.1 1,267.2 1,224 1,285 61 5.0 State-financed 5,628 2 PZ DAM price, RUB/MWh 776.8 882.5 793.3 824 825 1 0.1 Management companies, condominiums, housing associations, etc. 1,864 KOM price, RUB / MW per month 116,190.6 127,564.1 139,780.8 580,558 783,822 203,264 35.0 Resource providers 75 1 PZ KOM price, RUB / MW per month 140,566.7 125,524.0 111,627.7 3,212,516 4,312,779 1,100,263 34.2 Housing and utilities 908 2 PZ KOM price, RUB / MW per month 68,492.8 131,695.6 178,724.1 283,873 342,675 58,802 20.7 Heat suppliers 89 Other 41,146 The DAM price in the first price zone The DAM price in the second price The KOM price growth was driven Households on direct contracts 1,786,334 grew on the back of lower price- zone changed only marginally. by the capacity price surcharge taking supply of HPP electricity effective from January 2018 (vs 2017 Total accounts 1,843,222 in the first price zone in H2 2018 Capacity sales price changes were when the surcharge was introduced and the rising supply of expensive mainly attributable to rising KOM effective from July 2017) as the Russian TPP electricity. (capacity auction) prices. Government designated RusHydro
1 Trading System Administrator data.
82 83 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
JSC ESC RusHydro seeks to: ↗↗ acquire guaranteed consumers for DGK, JSC Teploenergoservis and Results of activities aimed at Receivables from buyers and campaign ‘New Year Without Debts’ ↗↗ Consolidate retail companies and electricity produced by RusHydro’s JSC Sakhaenergo supply retail reducing consumer debt consumers,Структура дебиторской RUB bn задолженностиwriting покупателей off penalties и accruedзаказчиков, in unpaid млн руб. create a unified sales framework HPPs. consumers with heat only. electricity and heat bills (unless to introduce uniform operating Debt recovery is one of RusHydro claimed through court) for the debtors standards in line with RusHydro’s The companies selling electricity In 2018, RAO ES East Subgroup served Group’s key focus areas for reducing from the Primorye and Khabarovsk approved corporate standards; to retail consumers in the Far East are: retail consumers under 2,565,255 receivables. As at December 31, 2018, Territories, Amur Region and Jewish ↗↗ create a single retail name brand, ↗↗ PJSC DEK acting as a guaranteed electricity supply contracts, including RusHydro Group’s receivables from Autonomous Region who had paid common standards of retail sales; supplier in UES East’s non-price 2,478,200 households, and 884,542 buyers and consumers grew by 6% 2 their electricity and heat arrears before ↗↗ expand its footprint elsewhere zone. heat supply contracts, including to RUB 65,147 mn. December 20, 2018. in Russia, establish a center of ↗↗ In the Far East, retail sales of 864,182 households. excellence for retail sales; electricity and heat in isolated As at December 31, 2018, payments ↗↗ minimize costs through centralization energy systems are covered by PJSC In 2018, total sendout of electricity received by RusHydro for electricity Debt recovery through court of certain functions of acquired retail Yakutskenergo, PJSC Sakhalinenergo, under RAO ES East Subgroup’s supplies to WECM stood at 99.1%. companies within ESC RusHydro as PJSC Magadanenergo, retail contracts amounted In the same period, payments As part of its efforts to reduce On time 24 7 RusHydro’s specialized subsidiary; JSC Chukotenergo, PJSC to 30,153.6 mn kWh, while sendout received for electricity supplies to Overdue for over one year 24 3 receivables, RusHydro Group works to ↗↗ increase margins for RusHydro Group Kamchatskenergo, and JSC UESK. of heat reached 22,370,500 Gcal. retail markets of the European part Three months to one year overdue 9 0 enforce debt recovery through court Overdue for under three months 7 2 through vertical integration; and of Russia and Siberia stood at 100.2% action: at PJSC Krasnoyarskenergosbyt ↗↗ In 2018, ESC RusHydro Subgroup (RUB 41,820 mn, incl. VAT), 98.3% at JSC filed 40,876 claims to recover debt Chuvashskaya Electricity Sales Company Improvement of payment on electricity bills for a total of (RUB 13,143 mn, incl. VAT), 99.3% at PJSC discipline through outreach RUB 4,514 mn, of which 4,598 claims The number of consumers (households and corporates) in service in the Far Eastern Federal District Ryazanenergosbyt (RUB 12,034 mn, incl. measures against legal entities, including 1 (RAO ES East Subgroup) from January 1, 2018 to December 31, 2018 [EU3] VAT), and 99.4% at JSC ESC RusHydro 94 claims of RUB 918 mn against grid Consumer Active contracts (RUB 5,963 mn, incl. VAT). Drawing attention to systemic non- companies purchasing electricity Electricity Heat payment of energy bills is an effective to offset grid losses, 643 claims of At JSC RAO ES East Subgroup, as at way to improve payment discipline RUB 454 mn against state-funded Manufacturing industry 3,169 436 December 31, 2018, total payments among households, businesses and organizations, and 36,184 claims Transport and communications 2,137 59 received for electricity and heat public sector. of RUB 249 mn against individuals. Agriculture 1,655 32 in the retail market totaled 97.2%, Courts of different instances State-financed 11,179 3,308 with receivables of RUB 33,869 mn The prompt payment culture is created satisfied 30,204 claims for RUB (incl. VAT). The company received through measures encouraging regular 2,945 mn, and issued 31 759 writs Management companies, condominiums, housing associations, etc. 12,154 2,497 97.6% of payments for electricity and and timely payment. Given that of execution for over RUB 2,394 Resource providers 24 2 96.4% for heat in the retail market. utility service providers are among mn. The measures that bailiffs Housing and utilities 957 23 The receivables for electricity and the biggest debtors, these initiatives may use for non-payment include Heat suppliers – 8 heat amounted to RUB 15,148 mn (incl. seek to incentivize those management direct debiting, freezing injunction, VAT) and RUB 18,721 mn (incl. VAT), companies, condominiums and housing travel restriction, and restriction on Other 55,780 13,995 respectively. associations that fulfil their payment disposal (sale, transfer by gift, etc) Households 2,478,200 864,182 obligations promptly. of cars and real estate. Total accounts 2,565,255 884,542 RusHydro Group companies use ↗↗ In 2018, RAO ES East Subgroup filed the following three approaches Other actions include regular posting 197,021,000 claims to recover debt to improve debt recovery: of ‘black lists’ of persistent non-payers on electricity and heat bills for a ↗↗ interacting with consumers featuring organizations with the worst total of RUB 12,144 mn, including and executive authorities and payment discipline and the highest 7,191 claims of RUB 9,336 mn introducing outreach measures debt levels. against legal entities, of which aimed at improving payment 1,089 claims against state-funded discipline; Encouraging early payment has also organizations, and 189,830 claims of ↗↗ recovering debt through court; been proven effective in addressing RUB 2,808.3 mn against individuals. ↗↗ disconnecting the electricity supply the debt issue. In 2018, Far Eastern Courts of different instances satisfied for non-payment. Energy Company and DGK ran a joint 186,139 claims for RUB 9,364 mn.
1 Data provided for retail subsidiaries.
84 85 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Disconnection for non-payment put in place, with suppliers selling Electricity tariffs and supply in the and the sales surcharge approved Power transmission tariffs at electricity and capacity to a single Far Eastern Federal District by the regulator, the tariff increase in DRSK Disconnection for non-payment is purchaser at set rates. Wholesale the WECM non-price zone ranged from an effective measure, but a last resort customers buy electricity and capacity Federal Law No. 35-FZ On Electric Power 0.35 to 23.64%. For the branches of JSC DRSK (Primorye in ensuring debt recovery. The supply from the single purchaser at prices Industry dated March 26, 2003 outlines Power System, Amur Power System, is disconnected upon notice made calculated by the Trading System the basic principles and methods of state In 2018, the overall increase in average Khabarovsk Power System, and Electric in accordance with the applicable Administrator ), based on indicative regulation in the electric power industry electricity tariffs for consumers Networks of the Jewish Autonomous legislation and delivered by hand, buyer prices set by FAS. and the regulators’ scope of authority. in the isolated zone of the Far Eastern Region (ES EAO)), 2018 marked on signature of a delivery receipt, The basic principles and methods of Federal District amounted to 14.44% the beginning of the second long-term by registered post, via text message In accordance with paragraph 170 of price (tariff) regulation in the electric y-o-y. The smallest increase was regulation period. During this period or by phone. The notice is sent 10 days the Russian Government’s Resolution power industry and the procedure for registered by JSC UESK (6.1%), while (2018–2022), electricity transmission before the actual disconnection. After No. 1172 of December 27, 2010, Far setting tariffs are set out in the Russian the largest one (88.1%) was delivered by tariffs for Amur and Khabarovsk Power disconnection, the electricity supply Eastern Energy Company (DEK) Government’s Resolution No. 1178 JSC Chukotenergo (owing to inclusion Systems will be regulated using may not be resumed until the debt has has been designated as the single On Pricing in the Field of Regulated of additional costs to the required gross the ROIC method, while tariffs for been paid in full (or a debt restructuring purchaser in the Far East. Accounting Prices (Tariffs) for Electric Power dated revenue to offset the cost of electricity Primorye Power System and Electric agreement has been signed), including for over 50% of retail electricity December 29, 2011. purchased from Bilibino NPP in 2017). Networks of the Jewish Autonomous the penalties and reconnection fees. supplies in the Far East, DEK is an Region will be set using long-term electricity retailer created through For the purpose of tariff determination, The average annual increase indexation of required gross revenue. ESC RusHydro Subgroup: in 2018, restructuring of regional energy regulators used the following regulation in wholesale energy price of DGK RUB 14,963 mn of debt was repaid by and electrification companies. The methods: in 2018 amounted to 0.97% y-o-y, with For South-Yakutsk Power System, 300,000 consumers after receiving company is the guaranteed supplier in ↗↗ tariffs for DGK electricity (capacity) the electricity rates declining by 0.5% 2018 was the last year of the long-term notices, RUB 466 mn by 22,522 the Amur Region, Jewish Autonomous supplies in the WECM non-price and capacity rates growing by 4.1%. regulation period, with tariffs for 2014– consumers after disconnection, Region, and Khabarovsk and Primorye zones (as approved by FAS Order 2018 set using the long-term indexation including RUB 73 mn by households. Territories. DEK’s share in the total retail No. 1736/16 of December 8, 2016) The weighted average energy rate for method. Total number of consumers UES of the East electricity consumption were calculated using the indexation all of the DGK plants was: RUB 1,321.33 disconnected in 2018 amounted to stands at over 85%. methodology; per MWh in H1 2018 and RUB 1,327.98 In 2018, the average power transmission 66,577, including 64,093 consumers ↗↗ DRSK electricity transmission tariffs per MWh in H2 2018 (an increase of 0.5% tariff growth within the footprint of from the Households group. In some areas of the Far East, including for services provided by Amur and over H1 2018). DRSK was 1.14% y-o-y, with sendout and the isolated energy systems of Khabarovsk Power Systems were required growth revenue increasing RAO ES East Subgroup: total number of the Kamchatka Territory, Magadan determined based on the regulatory Key factors behind changes in the DGK by 2.28% and 3.44%, respectively. disconnections for non-payment in 2018 Region, Chukotka Autonomous Area, asset base method (RAB), while electricity tariff rates in H2 2018 amounted to 244,775, including 239,550 Western and Central districts of the tariffs for services provided by compared to the rates approved for For the purposes of transition to disconnections in the Households Republic of Sakha (Yakutia) and Sakhalin Primorye Power System, Electric H2 2017 included lower per unit fuel the next long-term regulation period group. Region, retail market is the only available Networks of the Jewish Autonomous consumption at production facilities, (effective for all branches except for option as these areas are not linked to Region and South-Yakutsks Power 2018 gas prices under the Consortium-1 South-Yakutsk Power System), the base the Unified Energy System of Russia. System were set using long-term project, and application of growth level of controllable expenses was Electricity markets in the Far indexation of required gross revenue; indices for coal and fuel oil in 2018 determined using the comparative Eastern Federal District According to the Russian Government’s ↗↗ sales surcharge for PJSC DEK was with downward adjustment based on method, with the company-wide Resolution No. 1496 On Connecting determined using the comparative the actual 2016 indices. controllable costs growing by 19.06%. Tariffs in the non-price and isolated the Western and Central Energy method; The opex efficiency ratio was approved zones of the Far Eastern Federal Districts of the Republic of Sakha ↗↗ electricity tariffs for end consumers The average DGK capacity tariff rate was: at 2% for the entire duration of District are set by the federal executive (Yakutia) to the Unified Energy System in isolated zones were determined ↗↗ RUB 262,332 / MW per month in the long-term regulation period. authorities (FTS until July 21, 2015, and of Russia, and on Amending and using the method of economically H1 2018; FAS after July 21, 2015) and the regional Classifying as Invalid Certain Acts of the justified expenses. ↗↗ RUB 272,172 / MW per month in The company-wide per unit opex executive authorities in charge of tariff Government of the Russian Federation H2 2018 (an increase of 3.7% over accounted for in the 2018 tariffs rose regulation (regional regulators). There dated December 8, 2018 and published Since July 1, 2016, in the WECM non- H1 2018). by 15.38% compared with 2017. are no unregulated tariff zones in the Far on December 10, 2018, the Western price zone numerical tariff values are Eastern Federal District. and Central Energy Districts of the no longer set for other consumers. Republic of Sakha (Yakutia) are included In accordance with the estimated tariff In the non-price zone of the WECM, in the non-price zone of the Far Eastern values determined based on indicative a single purchaser model has been WECM effective from January 1, 2019. prices, the uniform transmission tariff
86 87 //OUR PERFORMANCE
ДинамикаAverage electricity среднеотпускных tariffs in theтарифов Far Eastern на электроэнергию Federal District, в Дальневосточном RUB/MWh федеральном округе, price zones, with proceeds from In 2018, the Group was actively руб/МВт•ч the surcharge transferred to the involved in the work on the Russian 25 000 regional budgets of the Far Eastern Government’s draft resolution aimed Federal District in the form of target at changing the tariff system. The new 20 000 non-repayable contributions. system provides for a switch to long- 15 000 term tariff regulation for existing As part of the effort to bring power generation facilities to reflect 10 000 electricity (capacity) prices (tariffs) the actual fuel costs incurred by for the Far Eastern consumers other energy companies. 5 000 than households to the base rate, the Government issued Decree No. 2527 Long-term regulation takes into 0 dated November 15, 2018 to set account, among other things: the base electricity (capacity) price ↗↗ base operating costs;
S (tariff) for 2018 at RUB 4.3 per kWh. ↗↗ opex efficiency ratio (X factor); Currently, the effective average ↗↗ energy saving and energy efficiency
C u otener o
a uts ener o
on pr e one Sa al nener o tariff for industrial consumers in the indicators.
a adanener o
a ats ener o above areas ranges from RUB 4.58 to
2016 2017 2018 RUB 32.3 per kWh. This project is currently assessed for its regulatory impact and is awaiting As part of the effort to align prices the conclusion of the Russian Ministry in the Far East with the Russian of Justice. Alignment of tariffs in the Far The amount of the surcharge with a breakdown by regions of the Far base rate, the surcharge amount for Eastern Federal District with Eastern Federal District, RUB bn 2018 was approved by the Russian national averages: impact on the Government at RUB 35,032.3 mn. Electricity sales in the Far East’s regions and RusHydro [EU23] 2 non-price zone In 2018, the alignment mechanism Federal Laws No. 508-FZ dated 8 was used in five out of nine regions of In 2018, PJSC DEK acting as the single December 28, 2016 and No. 129-FZ the Far Eastern Federal District. In all purchaser in the non-price zone of CH A dated June 30, 2017 On Amendments A S AR A of those regions, before introducing the Far East’s wholesale electricity to the Federal Law On Electric Power this mechanism, the average electricity (capacity) market purchased Industry introduced a surcharge tariff for consumers was higher than 30,998 mn kWh. Its commercial 2 to the capacity price in the first RUB 4.3 per kWh. Tariff reduction does purchases of electricity and capacity in and second price zones, helping to not result in lower revenue, as it is the WECM for PJSC DEK amounted to bring tariffs in the Far East down to fully offset by government subsidies RUB 51,646 mn in 2018. A A A R the Russian base (average) rate. 2 paid from the budget funds generated by surcharge to the capacity auction Electricity sales stood at 11,157 mn kWh
These amendments provide for 2 rate. Total subsidies received by in the WECM (besides, the company 1 a surcharge to be applied to A CHA A guaranteed suppliers from RusHydro sells electricity in the retail market). RR R the capacity price in the WECM 2 2 Group as compensation for the shortfall DEK’s commercial sales of electricity in income following tariff alignment and capacity in the WECM amounted 1 amounted to RUB 26,480.6 mn in 2018. to RUB 20,198 mn 2018.
R P C SA HA A A
SA HA R IN 2018 THE TARIFF ADJUSTMENT MECHANISM WAS IMPLEMENTED IN FIVE REGIONS OF THE FAR EASTERN FEDERAL DISTRICT 2 1
1 18 H2
88 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
WECM electricity sales in non-price zone Consumer tariffs for heat supplies in the Far Eastern Federal District, RUB/Gcal1 Динамика тарифов на тепловую энергию, отпускаемую потребителям на территориях Дальневосточного Item 2017 2018 2018/2017, % федерального округа, руб/Гкал* WECM electricity purchases by PJSC DEK, mn kWh 30,738 30,998 1 14,000 12,000 Cost of WECM electricity (capacity) purchases by PJSC DEK, RUB mn 50,388 51,646 2 10,000 WECM electricity sales by PJSC DEK, mn kWh 8,229 11,157 36 8,000 Cost of WECM electricity (capacity) sales by PJSC DEK, RUB mn 15,202 20,198 33 6,000 Supply of electricity by DGK, mn Wh 21,388 22,391 5 4,000 Cost of WECM electricity (capacity) supplied by DGK, RUB mn 48,445 49,711 3 2,000 0 As new consumers were tapping RusHydro is represented by RAO ES calculating and approving heat tariffs. into the wholesale market, the East Subgroup and Bureyskaya and volumes and cost of electricity Zeyskaya HPPs. On July 19, 2017, amendments were (capacity) sales grew by a sound introduced to Federal Law No. 190‑FZ 36% and 33% y-o-y, respectively. Heat is supplied on a centralized On Heat Supply dated July 27, 2010
The bulk of demand came from basis from the thermal power to enable transitioning from fully
eploener oser s
a ut a a ut a a ats ener o Sout Sout Sa al nener o a uts ener o a ut a Sa aener o a ut a a adanener o a ut a a ut a
Repu l o Sa a o Repu l a at a err tory a at a Area C u otener o Area Pr orye err tory err tory Pr orye Sa al n Re on Sa al n A ur Re on Re on A ur Re on Re on a ut a a ut a Repu l o Sa a Sa a o Repu l a adan Re on a adan S Repu l o Sa a Sa a o Repu l u e ors u e ors
C u ot a Autono ous Autono ous C u ot a Je s Autono ous Je s Repu l o Sa a o Repu l a at a err tory a at a a aro s err tory err tory a aro s Rusenergosbyt LLC building up plants and boiler stations operated regulated prices (tariffs) for heat err tory Pr orye purchases for JSC Russian Railways by energy systems. Some energy supplies to contractual prices (with 2016 2017 2018 in the Amur Region. systems engage in both heat certain caps provided for the benefit production and distribution, while of consumers). This approach is based In 2018, PJSC DEK supplied others do not go beyond production on the so-called “alternative boiler” 22,391 mn kWh in the non-price zone operations. principle, which provides for capping of the Far East’s wholesale electricity the contractual consumer price at The average tariff in DGK zones between the actual tariff calculation JSC Chukotenergo. JSC UESK reported (capacity) market. Its commercial Unless stipulated otherwise, sale a level sufficient to cover for the of operation rose by 4.44%, with metrics and the metrics used for an average tariff decline of 8.17% sales of electricity and capacity in of heat is fully regulated under construction and maintenance of an the smallest increase (2.74%) setting the 2016 tariff). compared to the rate approved for 2017 the WECM for DGK amounted to RUB the Russian law. alternative boiler station not included registered by LuTEK in the Primorye due to the exclusion of RUB 72.2 mn 49,711 mn in 2018. in the centralized heat supply system. Territory and the largest increase In the isolated zones, average consumer excess fuel income received in 2016 Federal Law No. 190-FZ On Heat In some municipalities, a transition to (56.97%) recorded by Volochayevskaya tariffs for heat supplies added 5.57%, from the required gross revenue for The cost of electricity (capacity) Supply dated July 27, 2010 sets out this model has been underway since boiling station in the Khabarovsk with the smallest increase (4.24%) Penzhinsky Municipal District. Tariffs set supply grew by 3% y-o-y, mainly due the basic price (tariff) regulation 2018. Territory (due to revenue adjustment recorded by PJSC Kamchatskenergo and for PJSC Sakhalinenergo for 2018 were to the rising electricity sales volumes principles for heat supply and to account for the discrepancy the largest increase (11.4%) registered by the same as in 2017. and tariff indexation. the scope of authority of regulators In the Far East, heat tariffs in 2018 in charge of heat supply price (tariff) were set using the long-term regulation. The Russian Government’s indexation method in line with Heat market Resolution No. 1075 On Pricing in the the Guidelines for Calculation of Field of Heat Supply dated October Regulated Prices (Tariffs) for Heat In the heat generation market of 22, 2012 outlines the main regulation Supplies approved by FTS Order the Far Eastern Federal District, principles and procedures for No. 760-e dated June 13, 2013.
1 Sakhalinenergo and Chukotenergo supply heat from power plants and boiling stations to the wholesale reselling consumers.
90 91 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018 Reliability and safety of production facilities
Allocation of industrial safety responsibilities RusHydro Group’s reliability Recorder for the Analytical Database ↗↗ to establish and maintain an efficient Functions Responsible and safety policy [103-2] of Supervisory Activities. Decree on-site safety monitoring system to ↗↗General control of compliance with industrial safety requirements at hazardous Boris Bogush, Member of the Management No. 157r of May 14, 2018 On Using enable industrial safety planning and production facilities of RusHydro and production subsidiaries; Board, First Deputy Director General — One of RusHydro Group’s strategic goals a Data Reporting Form – Integrated tackling major challenges faced by ↗↗Methodological support and coordination of industrial safety efforts at the Company’s Chief Engineer is to provide reliable power supply that Recorder for the Analytical Database the Company. hydropower facilities, including recording of violations, emergency prevention and will be safe for people, environment in of Supervisory Activities redistributed response; the responsibilities for the KRAB-3 Meeting the above industrial safety which the equipment operates, hydraulic ↗↗Setting up and running internal controls of compliance with industrial safety Industrial and Fire Safety Office of structures, and production facilities. recorder and monitoring compliance goals helps reduce industrial risks requirements at hazardous production facilities and hydropower facilities of RusHydro the Industrial and Occupational Safety with supervisory bodies’ instructions associated with hazardous production and its production subsidiaries; Department The RusHydro Group’s Technical Policy among departments of the Production facilities as a result of better process ↗↗Coordination and control of HQ units, branches and subsidiaries as regards in-process monitoring and compliance with industrial safety requirements; Unit at RusHydro’s HQ . control, quality of repairs and industrial defines requirements for the integrated ↗↗Methodological support of the Company’s branches and subsidiaries as regards in- process safety management system, ↗↗ RusHydro’s methodology of safety audits. process monitoring of compliance with industrial safety requirements, operation of including the industrial safety identification, classification and industrial safety management systems; management subsystem. recording of hazardous production Ways of ensuring reliable and safe facility ↗↗Control over the development and implementation of action plans by Company branches and subsidiaries, to eliminate industrial safety gaps identified by facilities in the State Register of operation include: supervisory bodies, as well as annual industrial safety action plans. The following documents were Hazardous Production Facilities ↗↗ quality assurance at design and developed and adopted as part of with due regard to operational construction phase; ↗↗Ensuring operation of hazardous production facilities as required by the Russian laws Industrial and occupational safety functions the industrial safety management system: risks and new requirements of ↗↗ external regulatory supervision; and RusHydro Group’s internal regulations; in branches and subsidiaries ↗↗In-process monitoring along with the development and implementation of industrial ↗↗ Standard Regulations on In-Process the Russian laws on industrial safety ↗↗ internal process monitoring; safety efforts. Monitoring of Compliance with (the “Methodology”) approved by ↗↗ compliance with industry and Industrial Safety Requirements the Federal Environmental, Industrial corporate operating standards at Subsidiary’s Hazardous Production and Nuclear Supervision Service of and procedures; All of RusHydro Group’s production at hazardous production facilities. Facilities, including: 177 RusHydro’s Facilities approved by RusHydro’s Russia (Rostechnadzor) as compliant ↗↗ implementation of the Technical Policy facilities have put in place regulations RusHydro Group has 478 hazardous hazardous production facilities and Order No. 190 of March 11, 2015; with Russian industrial safety laws and engineering system controls. on in-process monitoring of production facilities registered in the 301 subsidiaries’ hazardous production ↗↗ RusHydro’s In-Process Monitoring (Rostechnadzor letter No. 00-02- compliance with industrial safety State Register of Hazardous Production facilities. Information System (“IPMIS”) 07/1695 of September 29, 2014). In pursuance of RusHydro’s Decree requirements commissioned by RusHydro’s Order ↗↗ RusHydro’s Regulations on the No. 50r of February 22, 2018 On No. 1170 of November 27, 2013. Reliability and Safety Management the Approval of Target Audit Schedule, AccidentЧисло аварий rate вat Группе RusHydro РусГидро ЧислоNumber аварий of accidents в Группе РусГидро Causes of accidents in 2018, % The IPMIS has been deployed across all System for Hydraulic Structures and Production Unit departments performed Group’s facilities across RusHydro Group RusHydro’s branches; Hydroelectric Power Plants (approved target audits of branches and subsidiaries ↗↗ Integrated analytical database by RusHydro’s Order No. 515 of to improve the effectiveness and control RusHydro Group accident rate was recorder (KRAB-3) improving August 8, 2017). of process compliance with applicable down 11.5% year-on-year. The vast monitoring efficiency and automating safety requirements. majority of accidents (over 90%) the recording, analysis, and The industrial safety priorities are: occurred at RusHydro Group’s grid planning of measures prescribed ↗↗ to continuously enhance and improve The dual control and monitoring of facilities. In 2018, most accidents by federal, institutional and internal industrial safety of the Company’s compliance with industrial safety (52%) were caused by adverse health, industrial and fire safety hazardous production facilities in line requirements at hazardous production weather conditions, third parties, supervisory bodies. The recorder was with the global best practices by facilities – both internally and externally animals, or birds. 21% of accidents commissioned by Decree No. 467r ensuring timely upgrades of process (by state supervisory bodies) – secures were due to untimely or insufficient of December 8, 2015 On Using equipment and its safe, reliable and efficient control over safety and reliability equipment maintenance and repair. a Data Reporting Form – Integrated trouble-free operation; of existing assets.
218 01 Recurrent natural hazards 35 Failure to fully comply with 21 the maintenance schedule and work plan 1 1 18 Unidentified reasons 19 Impacts caused by animals and birds 9 Third party impacts 8 Project, structure, manufacturing 7 and assembly flaws (deficiencies) Employee errors (incl. contractors) 1
92 93 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
1 System Average Interruption Frequency Index (SAIFI) [EU28] Preparedness for natural disasters residential buildings. and emergency recovery operations, ↗↗ technological emergencies the Company has established an Grid subsidiaries 2016 2017 2018 and emergencies affecting equipment (including insurance fund of documentation for JSC UESK 0.31 0.20 0.35 RusHydro Group is responsible electrolysis plants (hydrogen RusHydro Group’s hazardous facilities. PJSC Kamchatskenergo 0.557 2.05 1.318 for reliable and uninterrupted receivers), gas distribution stations, The insurance fund is held on file by JSC Sakhaenergo 12.9 11.43 11.79 operation of its facilities. To this boiler units and turbo generators) authorities. end, a system was implemented at and grid infrastructure may cause PJSC Yakutskenergo 4.726 3.26 3.76 the Group’s assets to prevent and interruptions or failures of power All RusHydro Group’s facilities have: PJSC Sakhalinenergo 31.955 12.84 6.21 respond to natural disasters and and heat generation or supply; ↗↗ action plans for natural and PJSC Magadanenergo 2.60 1.83 2.30 emergencies. In particular, efforts ↗↗ accidental oil spill affecting industrial emergency prevention Far Eastern Distribution Company 3,70 6.39 6.22 are made to prevent process upsets economic assets and people. and response, as well as action and accidents, and if an interruption plans for oil and petrochemicals JSC Geoterm 6.70 9.00 1.23 occurs, the Company does its best In RusHydro Group, the following spill prevention and response JSC Chukotenergo 4.72 6.99 5.26 to bring the facility operation back to parties are responsible for approved by local bodies of the PJSC Mobile Energy 0.005 0.0043 0.0054 normal as soon as reasonably possible. the protection of population and Ministry of the Russian Federation Furthermore, employees of RusHydro territories from emergencies: for Civil Defense, Emergencies and 2 System Average Interruption Duration Index (SAIDI) [EU29] have regular trainings in civil defense ↗↗ Situation Analysis Center and Elimination of Consequences of and emergency response. Industrial and Occupational Safety Natural Disasters (EMERCOM); Grid subsidiaries 2016 2017 2018 Department (as regards fire safety) ↗↗ hydraulic structures safety JSC UESK 2.14 2.14 1.31 Key potential sources of natural at the Headquarters. They report to declarations updated (revised) at PJSC Kamchatskenergo 3.25 5.08 1.86 disasters at RusHydro’s production Member of the Management Board, least once in every five years subject JSC Sakhaenergo 45.54 44.90 35.88 facilities: First Deputy Director General – to obligatory audit of such hydraulic ↗↗ high magnitude low-frequency Chief Engineer of the Company; structures by ad hoc commissions in PJSC Yakutskenergo 4.93 8.91 9.05 flood may result in boosting ↗↗ first deputy directors – chief collaboration with design and R&D PJSC Sakhalinenergo 18.34 39.30 20.97 the headrace, overflowing engineers with the direct institutions; PJSC Magadanenergo 7.83 4.33 5.45 hydraulic structures, waterfront involvement of civil defense and ↗↗ facility safety certificates; Far Eastern Distribution Company 9.19 13.22 26.03 destruction in junction areas, and emergency response engineers ↗↗ special machinery for prompt a hydrodynamic accident followed reporting to them – at the Group’s response to potential damage or JSC Geoterm 10.80 7.20 0.48 by the flooding of adjacent areas; branches; accidents (for facilities with own JSC Chukotenergo 60.06 52.51 50.17 ↗↗ during emergency alerts, ↗↗ employees authorized to deal (or contractor’s) fire stations); PJSC Mobile Energy 2.5 1.9 2.6 there is a risk of electrical grid with the issues of civil defense ↗↗ emergency and rescue equipment. accidents caused by wire breaks and protection of population from or overlapping and short circuits natural and industrial emergencies – Volunteer emergency response Program of Stable Power Grid developed the Program of Stable Sakhalinenergo’s (included in RusHydro at transformer stations followed at RusHydro’s subsidiaries. teams and contractors’ professional Operation in the Sakhalin Region Power Grid Operation in the Sakhalin Group) area of responsibility and by power outages in residential emergency response teams have Region. operation, including renovation/ areas, administrative buildings, and RusHydro prevents and responds been established and maintained at all ↗↗ The Sakhalin Region has one of ↗↗ The Program is expected to help construction projects for 35–220 production facilities; to emergencies in full accordance RusHydro Group’s facilities operating the most troublesome power grids tackle the key issues causing kV overhead power lines (33 lines, ↗↗ river overflowing its banks may with regulatory requirements of extremely dangerous and highly in terms of power outages, as the disruptions in Sakhalin’s power 936 km) and 22 substations (789 cause the flooding and failure Russian laws applicable to hydraulic dangerous hydraulic structures or class island is exposed to violent winds grid, including inadequate design MVA). With total investments over of pylons, possibly resulting in structures and hazardous production 2 and class 3 hazard class facilities with and heavy snowfalls. solutions used in the construction a ten-year horizon estimated at power outages in commercial and facilities. For the purpose of rescue civil defense categories duly assigned. ↗↗ As instructed by Minutes No. of high-voltage overhead power RUB 40 bn, the projects are now facing YUT-P9-13 of March 18, 2016 of lines, which do not take into account a financing shortage of RUB 25 bn. the meeting at the office of Yury actual local weather conditions, The Program has been approved by Trutnev, Deputy Prime Minister as well as increasing wear and the Government of the Sakhalin Region, of the Russian Federation and tear of the equipment and power Russian Ministry of Energy and PJSC Presidential Plenipotentiary Envoy transmission lines. RusHydro. To the extent permitted by to the Far Eastern Federal District, tariffs, Sakhalinenergo is implementing the Government of the Sakhalin The Program saw 55 priority the Program as part of its own Region and RusHydro Group projects listed with respect to PJSC investment program.
1 The System Average Interruption Frequency Index (SAIFI) is calculated using the formula (∑li*Ni)/NT, where li is the failure rate, Ni is the number of customers for location i, and NT is the total number of customers served. The index is calculated for the entire location served. 2 The System Average Interruption Duration Index (SAIDI) is calculated using the formula 1), where Ni is the number of customers and Ui is the annual outage time for location i, and NT is the total number of customers served. The index is calculated for the entire location served.
94 95 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Functional subsystem Federation and internal documents of Pursuant to the schedule for 2018, Occupational health and workplace injuries of the National Emergency the Company. RusHydro Group conducted: Management System ↗↗ 32 comprehensive exercises; Workplace safety ↗↗ and Temporary Regulations for ↗↗ improving working conditions on Management bodies responsible ↗↗ 433 facility-based exercises; management framework Authorization of Building and an ongoing basis. In pursuance of the Order of the Russian for day-to-day operations of ↗↗ 97 table top exercises and training [103-2] Fitting Contractors and Seconded Ministry of Energy1, RusHydro Group the Company’s functional subsystem – sessions; Staff to Operate at RusHydro’s Sites Occupational health and safety established functional subsystem of the Situation Analysis Center’s duty ↗↗ 60 tactical training exercises. The fundamental document that (approved by Order No. 736 of management [403-1] includes: the National Emergency Management shift and duty shifts at generating defines the principles of workplace November 13, 2008). ↗↗ management decisions on System (NEMS). branches and subsidiaries – conduct In 2018, 244 people passed training safety at RusHydro is the Health and organizational, technical, sanitary 24/7 situation monitoring at facilities, or advanced professional training Safety Policy (approved by RusHydro’s RusHydro Group’s labor protection and hygienic, treatment and The Company’s emergency prevention give notices of any equipment failures at training centers and civil defense Order No. 327 of April 20, 2015). and industrial safety objectives: preventive, medical and social and response and fire safety identified, and carry out priority courses, including three civil defense ↗↗ protecting the life and health of measures aimed at ensuring safety; commission (the “Commission”) is emergency prevention activities. managers and 53 chairmen and Also, the Company has health and the Group’s employees in the ↗↗ protection of employee capability, the supervisory body of the subsystem members of emergency prevention safety regulations in place as follows: workplace; health and life in the workplace, responsible for the timely situation Local alarm systems are in place at and response and fire safety ↗↗ regulations on Occupational and ↗↗ preventing occupational injuries monitoring of employee assessment and decision-making 31 facilities of the Group. commissions. Fire Safety Day at RusHydro’s and diseases; compliance with occupational on emergency prevention. branches (approved by Order No. ↗↗ creating safe employee behavior safety, fire prevention and industrial The Commission’s annual action For the purpose of emergency 300 of April 25, 2016); patterns and hazard prevention skills; safety requirements. plans stipulate efforts to facilitate prevention and response, RusHydro Prevention of injuries and the safe passage of flood water established resource stockpiles at fatalities involving the Company’s during the spring and summer its branches operating hydraulic assets [EU25] period, prepare for the fall and winter structures and a dedicated financial peak loads, and secure the stable reserve at RusHydro. The dedicated ↗↗ A special occupational safety focus Distribution of responsibility for occupational health and safety management at RusHydro [103-2] operation during the fire and storm financial reserve for emergencies was is the prevention of individual seasons. The Commission manages established on a centralized basis in injuries arising from interaction with Member of the Management Industrial and Occupational Health and safety functions and coordinates the operations of the interests of RusHydro’s branches by the Company’s assets. This issue Board, First Deputy General Safety Department at branches and subsidiaries permanent bodies and management transferring 1% of the average monthly is primarily covered through mass Director – Chief Engineer bodies responsible for day-to-day revenue from electricity and capacity media (articles published in printed operations of the functional subsystem. sales. All subsidiaries have established and online media) and safety lessons the required financial reserves and at school on hazardous and harmful ↗ Management of health ↗ Development, oversight ↗ Development, oversight Permanent bodies of the Company’s resource stockpiles for emergency health impact of various power and safety activities at and control of occupational and control of occupational functional subsystem management – prevention and response. installations in the event of exposure hydropower facilities health and industrial safety health and industrial safety the Situation Analysis Center’s team within the hazard distance. measures at the Company level measures directly at branches specializing in civil defense, emergency ↗↗ Legal proceedings were launched ↗ Setting up and ensuring and subsidiaries prevention and response, and civil Emergency recovery exercises in 2018 in connection with two oversight over health and defense and emergency engineers at individual injuries, including those safety activities, including generating branches and subsidiaries – Employees are trained in emergency taking place at JSC DRSK assets. A preventive measures are responsible for the planning of recovery as part of the corporate civil compensation for moral damages of to minimize operational risks emergency prevention and response, defense and emergency response RUB 200,000 was awarded on one and protect employee health coordination of emergency prevention training program. The list of persons of the cases (injury suffered in 2016), and response activities in accordance to be trained was made in accordance while the second suit was dismissed with laws and regulations of the Russian with Russian laws and regulations. without hearing.
1 Order of the Russian Ministry of Energy No. 222 On the Functional Emergency Management Subsystem at Organizations (Facilities) of the Energy Industry and Organizations (Facilities) Subordinate to the Russian Ministry of Energy dated June 9, 2011.
96 97 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Key focus areas in occupational health and safety management for 2018 Health and safety ↗↗ health and safety briefings; Assessment of workplace Occupational safety training and knowledge assessment measures [103-2] ↗↗ inspections of workplaces; conditions and identification ↗↗ setting up health and safety rooms of occupational hazards ↗↗Free-of-charge occupational safety ↗↗Thematic events, including those ↗↗Training staff for maintenance campaigns. training and knowledge assessment for aimed at: Staff training in safe work methods, In 2018, health and safety measures and areas across the Company, [403-2], [403-3] employees and labor safety officers. ↗↗venting injuries in electrical adequate use of tools and personal taken at RusHydro Group included: purchasing stands, equipment and ↗↗Employee training for a new job with installations, work at height, protective equipment. ↗↗ on-site control of occupational simulators, visual aids, learning One of the Company’s priorities internship in the workplace. confined spaces, pressure ↗↗Training efficiency is assessed based on hazards to reduce their impact on software; is to make sure that the special ↗↗Emergency and fire response drills. equipment, construction work, tests and knowledge checks (protocols). ↗↗Occupational health and safety briefings loading and unloading operations, ↗↗Training efficiency can be assessed by employees; ↗↗ buying technical standards assessment of workplace conditions for in-house and contractor staff. lifting equipment, appliances and both trainees and managers, training ↗↗ ensuring compliance with health and documents, including their electronic covers more employees and workplaces ↗↗Special and advanced staff training. mechanisms; officers, teachers, experts and dedicated safety requirements by contractors’ versions; comply with statutory health and safety ↗↗Demonstrations for crews before work ↗↗enhancing workplace culture; assessment teams. teams engaged by the Company’s ↗↗ holding health and safety trainings requirements. The assessment of 100% authorization. ↗↗promoting traffic safety; ↗↗Occupational Safety Days on a monthly ↗↗training staff for winter seasons; branches; and employee knowledge checks; workplaces takes place as scheduled. basis; ↗↗ drafting RusHydro Group’s accident ↗↗ training employees on first aid to response guidelines to prevent the injured using robot simulators Overall, review of occupational injuries Identification of occupational hazards injuries; and distance learning; and diseases helped identify six ↗↗ monthly and quarterly Group-wide ↗↗ overviews of injuries in the Russian occupational hazards that had led to a ↗↗Special assessment of working conditions ↗↗Staff interviews and meetings. [403-1] ↗↗Reviews of proposals from employees, to identify occupational hazards. ↗↗Overviews of injuries in electrical trade unions or other employee occupational safety (including fire electric power industry; serious injury or occupational disease. Assessment of workplace conditions, installations and development of injury authorized bodies aimed at improving safety) days with progress reviews; ↗↗ arranging for employee visits to definition of their class. prevention measures. working conditions and occupational ↗↗ measures to prevent occupational sports facilities and swimming pools; Health and safety expenses, ↗↗Operational control of compliance with ↗↗Workplace rounds to identify violations safety. [403-1] ↗↗ centralized procurement of sanitary rules as well as sanitation and of occupational, industrial and fire safety ↗↗Occupational health and safety provisions injuries; RUB mn epidemic prevention measures (laboratory rules by in-house and contractor staff. in formal agreements with trade ↗↗ mandatory medical examinations protective clothing and footwear 2 20 1 2 1 22 08 8 08 8 tests, working environment surveys). unions. [403-1] of employees working in hazardous for the Company’s branches; and harmful conditions, and ↗↗ providing employees with protective 1 2 8 Employee health screening and voluntary health insurance for the working environment and operating process implementation of measures clothing, footwear and personal 1 8 1 ↗↗Social guarantees and compensations ↗↗Medical aid to the insured according ↗↗Annual preventive measures (employee recommended in post-examination protective equipment (PPE); to employees working in hazardous to the programs of outpatient care, vaccination and examinations) to reduce reports; ↗↗ organizing PPE storage, care, repair conditions following the special stationary, emergency medical aid as threats to human life or health, as part of ↗↗ mandatory psychiatric examination and replacement; assessment (reduced hours, additional part of VHI. VHI. of employees engaged in certain ↗↗ providing employees with leave, therapeutic and preventive ↗↗Outpatient care, emergency nutrition). and routine inpatient treatment, activities, including high-hazard detergents and decontaminants; ↗↗Mandatory regular medical and psychiatric emergency medical aid and foreign operations (with exposure to harmful ↗↗ providing milk or equivalent products examinations (check-ups). travel insurance as part of VHI. substances and occupational to employees working in hazardous
hazards), or working in a high-risk conditions; 1 0 environment; ↗↗ disinsection and deratization 8 2 2 1 8 ↗↗ purchasing and restocking first-aid measures; 210 1 kits; ↗↗ assessment of working conditions ↗↗ potable water supply to employees; and implementation of follow-up 1 1 18 RusHydro ↗↗ infectious disease prevention; action plans to provide better and RusHydro’ subsidiaries (excluding PJSC ↗↗ personnel preventive vaccination; healthier working conditions. RusHydro and RAO ES East Subgroup) RAO ES East Subgroup
98 99 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Hazardous factors (occupational hazards) that may cause injuries or occupational diseases Hazard Number of severe injuries and Action taken PLANS FOR IMPROVING HEALTH AND occupational diseases caused by an occupational hazard SAFETY IN 2019 [103-2] Mechanical hazards 5 The Company has taken urgent preventive measures and Electrical hazards 1 developed an action plan to eliminate the impact on others ↗↗ Draft a policy in line with the Group’s ↗↗ Maintain strong employee initiatives to identify, eliminate or Thermal hazards 1 risk-based approach. competencies, leverage innovative limit hazards and risks and preserve Labor severity and intensity hazards 2 Control over medical examinations, PPE availability and use, ↗↗ Actively engage employees in health and safety practices, ensure employee life and health throughout Noise hazards 2 supervision of weight lifting in excesses of approved limits occupational health and safety collaboration and exchange of the employment period. improvements to boost performance information between health and Other 1 Control of medical examinations and reduce occupational diseases safety experts and employees, and workplace accidents develop and implement effective Injuries and occupational fatalities. The accidents caused injuries by contractors’ employees in charge diseases [403-2], [403-3] to six managers, five skilled specialists (code 08). Each accident was and 30 workers. investigated, with urgent preventive In 2018, RusHydro Group had measures put in place. 32 accidents to their own staff that Injuries mainly occurred due In 2018, RusHydro Group recorded five The following measures were taken ↗↗ educating on how to prevent resulted in 41 injuries, including six to inadequate work management occupational diseases. Occupational to prevent occupational diseases: infectious diseases; diseases (hazards) are caused by noise ↗↗ providing milk or equivalent products ↗↗ personnel preventive vaccination; and labor severity. to employees working in hazardous ↗↗ restocking first aid kits; conditions; ↗↗ supply of potable water and vitamins; Number of casualties in 2016–2018 In each case, the Company issued ↗↗ supplying effective individual hearing ↗↗ supply of detergents and Year Indicator RusHydro RusHydro RAO ES East Total a relevant report followed by stricter protection means; decontaminants. (excluding RAO ES Subgroup control over medical examinations to ↗↗ reimbursing for costs related East Subgroup) enable early diagnosis and minimize to additional medical check-ups; 2016 Number of injuries, 1 12 27 40 the risks of developing chronic ↗↗ organizing health resort treatment and employees diseases. sports activities; incl. fatalities 0 1 3 4 Categories of injured Number and types of injuries Categories of employees with Rate of recordable 0.19 0.96 0.54 0.59 work-related injuries1 Категорииemployees работников in 2018 со случаями травматизмаКоличествоin 2018 в и 2018 типы году полученных (403-9) травмfatalКоличество в 2018 and году severe и(403-9) типы injuries полученных in 2018 травм в 2018 году (403-9) 2017 Number of injuries, 0 12 21 33 employees incl. fatalities 0 1 3 4 Rate of recordable 0.00 0.96 0.43 0.49 work-related injuries1 2018 Number of injuries, 5 12 24 41 employees incl. fatalities 0 2 4 6 Rate of recordable 1.07 0.89 0.52 0.64 work-related injuries 1
Workers (m) 26 Bone fracture 24 Severe injuries to workers (m) 7 Managers (m) 6 Bruising 18 Fatal injuries to workers (m) 4 Skilled employees (m) 4 Thermal burns 3 Fatal injuries to managers (m) 1 Workers (f) 4 External blows 3 Skilled employees (f) 1 Electric shock 2 Managers (f) 0 Jamming pinching 1 Ligament rupture 1
1 Rate of recordable work-related injuries = Number of recordable work-related injuries * 1,000,000 man-hours / average number of workers in the reporting year.
100 101 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Energy consumption and efficiency air leaks, reduction in indoor of 250 mn kWh thanks to the ruling systems; and infiltration; out of water discharge above ↗↗ modernization and scheduled The Russian Federation as RusHydro’s the efficiency of energy and water prevention), irrigation of agricultural ↗↗ rehabilitation of heating and hot turbine flows in August 2018; maintenance with a view to main shareholder ensures energy resources as well as a number of lands, transportation (vehicle and water supply systems, electric ↗↗ RusHydro efficiently redistributed extending the operational life of the companies’ commitment to priority energy saving solutions. railway traffic across rivers) as well as boiler houses, modernization of automatic load-frequency control equipment. increasing energy security and In 2017, the program was updated waterborne traffic. pump stations, elevators (replacing (ALFC) reserves at the Volga-Kama reducing energy intensity. The following the review by the Russian mechanisms for frequency- cascade in a high-water season, Key technical arrangements for Energy Efficiency and Development Ministry of Energy to be aligned with In this connection, HPPs sometimes regulated drives); which translated into additional improving energy efficiency in 2018: national program approved by changes to the applicable laws and have to meet direct opposite ↗↗ replacement of hydropower units output of 200 mn kWh (reducing ↗↗ energy audits; and Resolution No. 321 of the Russian regulations. The updated program is requirements, so it is quite a hard with ones with a higher efficiency water discharge above turbine ↗↗ optimized operating modes for Government of April 15, 2014 sets out based on energy audits held in 2010 task to analyze their performance. rate, modernization of automatic flows by 3.5 cu km); and the equipment and systems by three key areas for improving energy through 2016. In 2018, the Ministry of For example, discharge of water control and excitation systems; ↗↗ following its modernization, redistributing loads and matching efficiency across all types of energy Energy registered RusHydro’s Energy reduces the overall energy efficiency ↗↗ modernization and rehabilitation Zhigulevskaya HPP now operates the plant mix to its operating mode. resources: Performance Certificate for another but provides a vital river runoff. of hydraulic structures, including at full capacity in a high-water ↗↗ energy saving and improving five-year period. Moreover, the generators operating in service, emergency and repair season. Its capacity gained energy efficiency; the synchronous compensator mode gates, phased rehabilitation of 177.5 MW translating into an Energy efficiency ↗↗ development and modernization of That same year, JSC RAO ES East’s also reduces the overall efficiency but water intakes and industrial water additional 80 mn kWh in a high- of electrical grids electric power industry; and companies engaged in regulated ensures the stability of the energy disposal areas; and water season. ↗↗ promotion of renewables. activities1 updated and approved system as a whole. (103) ↗↗ replacement of power transformers Key ESIEE initiatives in 2018: their programs of energy saving with energy saving ones, ↗↗ replacement of wires with heavier- RusHydro Group’s energy saving and increased energy efficiency for Since HPPs require no specific fuel to replacement of air circuit breakers Energy efficiency of heat gauge ones at overloaded initiatives are governed by Federal 2019–2024 in reliance on the updated produce electricity, the performance with gas-insulated ones (as power transmission lines and Law No. 261-FZ On Energy Saving Regulations for Developing, analysis counts out this main cost compressors are phased out). Key ESIEE initiatives in 2018: replacement of overhead power and Improving Energy Efficiency and Negotiating, Approving, Implementing item inherent in other types of ↗↗ rehabilitation of power generation lines with self-supporting insulated Amendments to Certain Legislative and Monitoring Programs for Energy power plants, with the exception of facilities (turbo generators, boiler wires; and Acts of the Russian Federation Saving and Improving Energy Efficiency renewables. Therefore, the focus is on Better usage of water resources units, secondary equipment) ↗↗ replacement of underloaded and dated November 23, 2009 and for Subsidiaries Engaged in Regulated own consumption by HPPs. for better cost effectiveness, overloaded transformers. the respective programs of energy Activities approved by RusHydro’s Better usage of water resources is including steam path saving and increased energy Order No. 462 of July 2, 2018. Key areas for improving RusHydro’s another way to improve the HPP improvement, heating surface To reduce grid losses and optimize efficiency. energy efficiency: energy efficiency which helped replacement, sealing off air gas energy consumption, the Company ↗↗ modernization of interior and reduce water discharge above turbine ducts, etc.; kept on installing commercial-grade HPPs have their own specifics, Energy efficiency of exterior, routine and emergency flows and increase carbon-free ↗↗ rehabilitation of boiler houses, electricity and heat meters while which requires a special approach to hydropower lighting systems (partially based on generation by at least 530 mn kWh in including boiler replacement; also modernizing and introducing assessing and improving their energy automatic controls); 2018 through the following initiatives: ↗↗ replacing existing inefficient the automated electric power efficiency. That is why RusHydro In addition to power generation, ↗↗ modernization of HVAC systems ↗↗ RusHydro, JSC SO UPS and PJSC capacities through construction accounting system. launched the Program of Energy HPPs serve multiple functions which for powerhouses and auxiliary FGC UES teamed up to optimize and rehabilitation of diesel power Saving and Increased Energy Efficiency are critically important both for buildings (including weather the repair schedules for power plants; through to 2020 (ESIEEP) specifically the industry and the communities at controls); generation facilities and grids at ↗↗ modernization of lighting systems intended for HPPs and providing for large. These include hydrotechnical ↗↗ rehabilitation of heated buildings Sayano-Shushenskaya HPP, which based on high-performance the list of key initiatives for increasing tasks (river runoff control, flood and facilities, elimination of warm translated into an additional output illuminants and light control
1 DGK, JSC DRSK, PJSC Kamchatskenergo, PJSC Magadanenergo, PJSC Mobile Energy, PJSC Sakhalinenergo, JSC Sakhaenergo, JSC Teploenergoservis, JSC Chukotenergo, JSC UESK, PJSC Yakutskenergo.
102 103 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Energy efficiency of heating ↗↗ rehabilitation of heat pipelines generation. By contrast, HPPs rarely RAO ES East Subgroup’s consumption per unit of equivalent fuel [302-3] grids using heat proof materials. consume more than 1.5%. Indicator 2016 2017 2018 Consumption per unit of equivalent fuel for 385.319 385.174 385.858 Key ESIEE initiatives in 2018: TPPs heavily rely on electricity for own electricity generation, g/kWh ↗↗ comprehensive equipment consumption accounting for a hefty Consumption per unit of equivalent fuel for heat 161.216 159.867 160.084 modernization at heat substations; and 10–16% of RusHydro Group’s electricity generation, kg/Gcal
Efficiency of energy utilization Energy savings by RAO ES East Subgroup’s [302-4] Energy resource saved 2016 2017 2018 Own consumption by energy resource in 2018 [302-1] Natural gas, ‘000 cu m 446 270 4,328 Non-renewables In-kind RUB mn Diesel fuel, tonnes of natural fuel 7 45 46 Electricity consumption, mn kWh 6,579 1,624.48 Other fuel, tonnes of equivalent fuel 18,045 27,467 29,322 Heat consumption, Gcal 716,422 142.16 Heat, Gcal 19,482 27,868 28,443 Boiler and furnace fuels, tonnes 17,687,304 63,771.16 Electricity, ‘000 kWh 70,610 87,151 91,099 Motor gasoline, l 5,619,939 224.20
Diesel fuel, l 23,566,189 1,069.68 Plans to improve energy Kabardino-Balkaria branch, Cascade No. RU229041EN for compliance with Natural gas, cu m 6,365,269 6,555.12 efficiency in 2019 of Verkhnevolzhskiye HPPs, Cascade ISO 50001:2011 issued by Bureau Veritas of Kubanskiye HPPs, Karachay- Certification Rus on August 24, 2016 JSC RAO ES East’s subsidiaries mainly use In 2018, the ESIEE helped RusHydro RAO ES East Subgroup’s companies1 In 2019, RusHydro and its subsidiaries Cherkessia branch, Nizhegorodskaya was extended untill August 23, 2019. coal, natural gas and fuel oil along with and its subsidiaries (HPPs) save spent RUB 2,153 mn in 2018 under their (HPPs) plan to spend RUB 16,235 HPP, Novosibirskaya HPP, Saratovskaya some other non-renewables, including 41,443,000 kWh on own consumption respective programs for energy saving mn on energy saving and energy HPP and two power generating diesel fuel and firewood. and additionally generate and improving energy efficiency, with efficiency initiatives, which is set to subsidiaries (Geoterm and HPP-3 of Building a lean consumer 56,915,000 kWh, having spent annual economic benefits amounting bring RUB 1,985 mn kWh of annual PJSC KamGEK). behavior model As for renewables, geothermal steam RUB 2,874 mn on energy saving and to RUB 444 mn, or 59,303 tonnes of benefits. from the Mutnovskoye hydrothermal energy efficiency initiatives. equivalent fuel. As a result, all branches and RusHydro Group promotes energy deposit in the Kamchatka Territory is RAO ES East Subgroup’s companies1 subsidiaries being audited now have saving awareness arranging for used, with consumption standing at plan to spend RUB 2,262.75 mn under energy performance certificates, training events at schools. 308,065 GJ. their updated ESIEEs for 2019–2024, programs for energy saving and Fuel consumption in 2016–2018 which is set to bring RUB 519.06 mn of improving energy efficiency and audit In line with the national policy The fuel mix of JSC RAO ES East’s TPPs annual benefits. reports with recommendations. for energy saving and improving remained virtually unchanged. Gas energy efficiency, RusHydro’s consumption also remains flat over In 2018, PJSC Yakutskenergo’s PJSC Ryazanenergosbyt assists the years, which contributes to better Energy saving initiatives integrated management system was the Ryazan Region in implementing environmental conditions across its in cooperation with recertified for compliance with four the Development of Utilities footprint, including lower greenhouse gas stakeholders in 2018 international standards, including Infrastructure, Energy Saving and emissions as well as ash and slag waste. ISO 50001. No material inconsistencies Improving Energy Efficiency for In 2018, RusHydro held energy audits were identified by the audit which 2015–2020 state program approved In 2018, RAO ES East’s TPPs produced at 12 branches: Volzhskaya HPP, confirmed the continuous success by Resolution No. 314 of the 1 28 2 1 1 2 2 1 8 2
more electricity as compared to 2017 12 1 8 Votkinskaya HPP, Dagestan branch, of its energy management system. Government of the Ryazan Region of 0 8 marginally increasing their consumption, Zhigulevskaya HPP, Kamskaya HPP, PJSC Yakutskenergo’s certificate October 29, 2014. 1 1 18 with DGK accounting for the bulk
of electricity generation. In 2018, its Coal, kt electricity output rose by 4.4% y-o-y, Other fuel, kt, incl. fuel oil, diesel fuel, kerosene and firewood or 1,099 mn kWh (2017: 24,758 mn kWh). Natural gas, mn cu m
1 DGK, JSC DRSK, PJSC Kamchatskenergo, PJSC Magadanenergo, PJSC Mobile Energy, PJSC Sakhalinenergo, JSC Sakhaenergo, JSC Teploenergoservis, JSC Chukotenergo, JSC UESK, 1 DGK, JSC DRSK, PJSC Kamchatskenergo, PJSC Magadanenergo, PJSC Mobile Energy, PJSC Sakhalinenergo, JSC Sakhaenergo, JSC Teploenergoservis, JSC Chukotenergo, JSC UESK, PJSC Yakutskenergo. PJSC Yakutskenergo.
104 105 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018 INNOVATIONS KPI for the Innovative Development Program of RusHydro Group KPI Target Result 2018 2019 2020 2018 Delivered or not R&D expenses, % of revenue 0.25 0.25 0.25 0.28 Delivered Innovative Development Program of RusHydro Group Growth in the quantity of IP assets on the balance 5.5 6.5 7 6.7 Delivered for 2016–2020 with an outlook until 20251 sheet, % Efficiency of hydropower capacity management, 20.52 20.36 20.13 21.19 96.9% employees per 100 MW delivered Innovative products purchased, 1.21 1.33 1.46 1.21 Delivered The Innovative Development Program of RusHydro Group is a policy paper that sets out % of total volume the focus and framework of the Group’s innovations and specifies the amounts and sources 1 HPP repair expenses, ‘000 RUB/MW 19.9 19.8 19.6 12.86 Delivered of funds to be spent on its innovative projects. (at 2000 prices)
Prior to approval by the Board of In the medium term, it aims to construction, modernization Integrated innovative development management Directors, RusHydro’s draft Innovative improve RusHydro Group’s economic and repair processes for power Development Program was agreed with and operational efficiency by using generation facilities; for RusHydro and RAO ES East Subgroup the Ministry of Education and Science of innovative engineering, technical and • development of real-time the Russian Federation and the Ministry management solutions focused on: monitoring technologies for The innovative development programs ↗↗ heat efficiency, % (for JSC RAO ES Development Program of RusHydro of Energy of Russia, and then reviewed ↗↗ extending lifespans and improving the core equipment; of RusHydro Group and RAO ES East East only). Group. and approved by the Interdepartmental performance of equipment; • automation and robotization Subgroup have been integrated as Commission for Technological ↗↗ enhancing reliability and economic of maintenance and repair; follows: The Innovative Development Program of Development of the Presidium of the efficiency of equipment; and development of new ↗↗ R&D expenses, % of revenue; JSC RAO ES East and the corresponding Presidential Council for Economic ↗↗ improving the quality of equipment innovative products based on ↗↗ growth in the quantity of IP assets on annual progress reports are reviewed Modernization and Innovative diagnoses coupled with proactive RusHydro’s know-how and the balance sheet in the reporting and approved by RusHydro’s Board Development of Russia (Minutes No. 8- identification and mitigation of expertise (e.g. energy efficiency period, %; and of Directors as part of the Innovative DO1 of September 23, 2016). operational risks; and storage solutions, EV ↗↗ import substitution and reducing the infrastructure, and advanced RusHydro’s approved Innovative dependence on imported equipment; materials). Development Program was reviewed ↗↗ reducing the environmental footprint; and ↗↗ Ensure deeper engagement in green Amounts and sources of funds spent on the Innovative and evaluated by the Interdepartmental ↗↗ improving energy efficiency and energy, including via: Working Group on the Implementation cutting losses. • development of hydropower Development Program of Innovative Development Priorities potential in certain regions of under the Presidium of the Presidential In the long term, the Innovative Russia; In 2018, spending on the Innovative of RAO ES East Subgroup amounted to Council for Economic Modernization Development Program of RusHydro • development of RES-based Development Program of RusHydro RUB 1,717.5 mn. and Innovative Development of Russia, Group aims to: alternative energy infrastructure Group totaled RUB 655.4 mn (without the final quality assessment of ↗↗ Assure the Company’s position as one (geothermal power generation); and the Innovative Development Program The equivalent KPI for R&D expenses THE INNOVATIVE DEVELOPMENT RusHydro’s Innovative Development of the most technologically advanced • analysis and development of mini- of JSC RAO ES East), while the figure for across RusHydro Group stood at 0.28, PROGRAM OF RUSHYDRO GROUP Program was 95.2% (Minutes No. 1 of energy companies, both domestic and hydro solutions. the Innovative Development Program or 112% of the target, in 2018. IS FUNDED SOLELY WITH ITS OWN April 14, 2017). international, including via: CAPITAL. • development of efficient
1 Approved by RusHydro’s Board of Directors on November 22, 2016 (Minutes No. 244 of November 23, 2016). 1 An “inverse” indicator (the lower the better).
106 107 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
KEY INNOVATIVE PROJECTS IN 2018 Program for Intellectual Property Rights Management within RusHydro Group
↗↗ Development of a hardware and ↗↗ Development of recommendations ↗↗ Modernization of reinforced concrete The Russian Government has toughened In 2017–2018, it issued a number of of Directors approving the Program for software system for monitoring and on assessing the human impact on penstock encasements, including innovation requirements for companies directives setting IP management Intellectual Property Rights Management predicting the reliability of HPP/PSPP tailraces with regard to the HPP application of protective coatings. where it is a shareholder, including those requirements for such organizations, within RusHydro Group along with a hydraulic structures in geologically equipment, hydraulic structures and The objective was to insulate on intellectual property management. which resulted in the Company’s Board corresponding action plan. challenging environments. energy efficiency. The objective penstocks with waterproofing The objective was to test and was to develop and justify an action coatings based on advanced implement a hardware and software plan to raise and stabilize the water materials, extend time between system for safety and reliability levels in separate outlets for repairs and cut repair expenses. monitoring of hydraulic structures better performance of HPP turbine at Zagorskaya PSPP and Zagorskaya equipment. PSPP-2. R&D projects
RusHydro Group is committed to R&D spending, R&D spending by area in 2018, ↗↗ Research into new processes ↗↗ Expansion of the digital testing ↗↗ As regards RAO ES East Subgroup, ramping up its R&D investments. RUB mn (incl. VAT) RUB mn (incl. VAT) to repair and restore hydraulic complex at RusHydro’s branch its key innovative project was In 2018, they grew by 59.7% structures, extend their lifespans Nizhegorodskaya HPP. The objective to develop technical solutions to RUB 642.6 mn (incl. VAT). 1 02 2 Структура финансирования направлений НИОКР в 2018 году, млн and enhance their reliability, and was to evaluate the iSAS automated to reduce the erosive wear and 1 руб. с НДС drafting implementation guidelines. protection and management system enhance the reliability of moving 2018 R&Ds were aimed at addressing the The objective was to develop robust and assess the feasibility of its blades at the downstream stages most significant (critical) process problems techniques for repair and restoration implementation at energy facilities of steam turbines by using of RusHydro Group related with the of hydraulic structures. with a view to a commercial rollout multifunctional nanocomposite prevention of the risks of process upsets at Nizhegorodskaya HPP. coatings. The initiative was carried leading to the undersupply of electricity 1 out during 2018. to consumers and significant economic 2 losses. 1 0
2
Focus of innovations in 2018 12 Plant and e uipment 439 Given the industry’s rapid technological KPI with those of its major peers (the The results are now used to draft pro- monitoring and operation Social and economic 78 development, it is no longer sufficient “Comparison”) to review its develop- posals on amending the Innovative development of the Russian Far East to adjust corresponding priorities once ment priorities in this field. Development Program, compile a list of 1 1 18 Environmental protection and sustainability 69 design, construction, in five years (as requires the planning technologies crucial to the Group’s fur- RusHydro Subgroup Modernization and repair solutions 34 horizon for our Innovative Development The key objective was to identify attrac- ther development, and plan measures RAO ES East Subgroup Energy efficiency and water management 21 Program). tive areas and technologies, assess their to bring it on a par with more techno- actual potential, and set ambitious but logically advanced peers. In 2018, RusHydro compared the Group’s feasible technological development technological capabilities and innovation goals for RusHydro Group. Key R&D projects implemented by RusHydro Group to ensure sustainable development
Description Progress in 2018 Pilot testing of the digital testing complex at Nizhegorodskaya HPP
Objectives: Pilot testing of the digital complex followed integrated tests ↗↗ to increase the guaranteed measurement accuracy; ensure high in 2018 as part of the Development and Implementation of electromagnetic immunity and low susceptibility to vibration an Automated Protection and Management System for Next- and temperature fluctuations; Generation Electrical Substations national project, which had ↗↗ to improve the electromagnetic compatibility of modern been initiated by the Russian Ministry of Energy. Results will protective relaying equipment with automated process control be used to draft recommendations on a further rollout across systems by using optical fibers; RusHydro Group. ↗↗ to prevent saturation, ferroresonance and undesirable transient events; and ↗↗ to perform self-diagnosis and online monitoring. Solution: ↗↗ to install optical and electronic measuring devices.
108 109 //OUR PERFORMANCE
Description Progress in 2018 machinery and hydraulic structures of implementation guides; and HPP energy efficiency; and introduction of an expert system Development and implementation of a process to partially restore heat transfer surface elements of cogeneration heat exchange equipment (tubes) instead of replacing the entire tube bundle ↗↗ research into new technologies to support decision-making in to repair and rehabilitate response to incidents, accidents and Objective: Epoxy coating (BLOKOR-MKK115) developed in 2018 along with hydraulic structures and their emergencies at RusHydro Group’s ↗↗ to develop and implement a process to partially restore heat a modular (block) pilot machine designed to apply it evenly elements extending their lifespan production facilities. transfer surface elements of cogeneration heat exchange along the inner surfaces of heat exchange tubes. equipment (tubes) instead of replacing the entire tube bundle Pilot testing (application of the protective coating and in situ and reliability, development and thereby improve its performance, which includes exploring tests) underway at Khabarovskaya CHPP-3. the properties of a set of thermal conductive materials and developing a process and a commercial prototype for application of a protective coating to damaged elements Business process digitalization at (tubes) of a heat exchanger’s tube bundle. Solution: RusHydro Group ↗↗ to apply specialty epoxy coating (BLOKOR-MKK115). RusHydro Group launched its Digitalization Program in 2018 Design of avalanche-resistant pylons and foundations for 220 kV power lines and plans to develop a Digital Transformation Blueprint in Objective: Detailed design drawings of pylons and foundations made 2019. Currently, the Program includes 22 digital projects ↗↗ to cut operating costs for overhead power lines by reducing along with a prototype of an avalanche-resistant angle pylon for expenses associated with emergency recovery operations to fix overhead power lines. covering virtually all business lines of the Group such as pylons damaged by avalanches. Following utility models obtained: hydropower and heat generation, grid assets, and sales. Solution: ↗↗ multisided steel pole for overhead power line pylons; and ↗↗ to design special avalanche-resistant pylons and foundations ↗↗ reinforced cast-in-place concrete foundation. Key focus areas: ↗↗ using analytical systems to process compliant with building codes and regulations, including ↗↗ supporting operational management Big Data to support decision- seismic performance requirements. of RusHydro’s production and grid making; and Design of a composite power line conductor core based on thermoplastic resins assets and developing internal ↗↗ relying on cross-industry capabilities for condition-based cooperation to build shared services Objectives: Manufacturing equipment engineering and production repairs; in support of governance models. ↗↗ to achieve a 50% higher current-carrying capacity and reliability documentation drafted. Patents for composite cores and ↗↗ building infrastructure to collect, vs ACSR conductors without adding weight (resulting in savings corresponding production processes explored. on account of the increased quantities of transmitted power). Plans made to develop an experimental pultrusion machine, process, store and escalate know- RusHydro Group has a distance ↗↗ to make overhead power lines and the entire grid more reliable manufacture and test core prototypes, draft specifications how up the ladder; learning system up and running, which by reducing the ice and wind load on pylons (resulting in for the core and conductors, and perform field tests on the ↗↗ developing internal capabilities for is made accessible to the employees extended conductor lifespans); and conductors to verify their compliance with standards and remote control over facilities and of RusHydro’s HQ , branches and ↗↗ 15% to 40% lower costs of building new crossings as fewer requirements. pylons will be required). systems; and subsidiaries. Solution: ↗↗ leveraging advanced technologies ↗↗ to design a composite power line conductor core based on to ensure external communications, In compliance with the respective thermoplastic matrices along with manufacturing equipment. including transfer of technical data. import substitution directives of the Russian Government, RusHydro Key milestones: Group developed and approved R&D effect on the Company’s the following R&D projects: ↗↗ development of a hardware and ↗↗ building advanced integrated the Action Plan for 2018–2021 which risks ↗↗ research and development in the software system for monitoring multi-service information and provides for the Group’s increased field of remote monitoring of HPP and forecasting the reliability of telecommunications infrastructure; reliance on domestically developed Damage caused by natural and industrial facilities condition and operating HPP/PSPP hydraulic structures ↗↗ transforming production chains and software. disasters outside RusHydro Group’s modes. Development of a technique in geologically challenging processes, governance models and facilities is one of the key risks for to assess the condition of hydraulic environments; planning procedures; the Company. structures and hydropower units ↗↗ development of an automated at HPPs based on the monitoring warning system to detect This risk results from the underprotection of the amplitude and frequency ruptures and measure turbine of RusHydro Group’s production assets of vibrations along with the earth flows at RusHydro’s diversion and against natural disasters. foundation; impoundment HPPs; ↗↗ development and testing of ↗↗ development of recommendations The risk management initiatives provided a technology to monitor structural on how to assess human impact RUSHYDRO’S DIGITALIZATION for by the 2018 calendar plan include stress in case of a tensiometer failure; in the tailrace on the condition of PROGRAM INCLUDES 22 PROJECTS
110 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Procurement regulation is based on RusHydro publishes information PROCUREMENT a systemic approach which ensures that on planned procurement activities uniform corporate rules are laid down and and places up-to-date official followed, also determining the authority announcements describing the scope Essential conditions in competitive Procurement management and responsibility of the officers in charge of procurement (item name), material procurement and other information of procurement. As a result, the customer terms of the competitive procurement on RusHydro procurement can be found on the official website of the To support its activities, RusHydro Group purchases large quantities of works, services, enjoys: and other details on its official Russian Federation: raw materials (including fuel) and products from third parties. RusHydro Group has in ↗↗ benefits of a regulatory framework; website in Russia at www.zakupki. www.zakupki.gov place a number of internal by-laws to prevent inappropriate and inefficient use of funds. ↗↗ effective platform for procurement gov.ru as well as on the electronic management and follow-up control; trading platform at https://rushydro. ↗↗ qualified procurement professionals; roseltorg.ru. Procurement by RusHydro is governed ↗↗ the CPC appoints standing These procedures ensure: ↗↗ well-established procurement by the applicable Russian laws, procurement commissions, which ↗↗ careful planning of demand; infrastructure (information support, Following the competitive including Federal Law No. 223-FZ On are directly authorized to arrange ↗↗ market research; e-commerce tools, certification, procedure, the Company publishes Procurement of Goods, Works and for and carry out procurement ↗↗ procurement transparency; professional consultants, etc.). the procurement results specifying And also on the electronic trading Services by Certain Types of Legal procedures. Depending on ↗↗ focus on equality and fairness, the winning bidder and the respective platform: Entities dated July 18, 2011 and the the scope of powers, there are with no discrimination or price. [103-2] https://rushydro.roseltorg.ru. Regulations on Procurement (approved procurement commissions of unreasonable restrictions on in 2018 by resolution No. 265 of level 1 and level 2 as well as ad hoc competition among participants RusHydro’s Board of Directors No. 265 commissions. where possible, or, if impossible, dated February 6, 2018, restated as enhanced internal control; Implementation of the annual comprehensive the Uniform Regulations on RusHydro ↗↗ intended and efficient use of Group’s Procurement Policy effective The objectives and principles funds allocated for purchasing procurement program as of November 1, 2018 pursuant to of the Uniform Regulations goods, works and services (taking resolution No. 277 of RusHydro’s Board on RusHydro Group’s into account their life cycle In 2018, total value of contracts 13% year-on-year, mainly due to a 39% at JSC RAO ES East Subgroup. Open of Directors No. 277 dated October 4, Procurement Policy cost, where applicable), and awarded under procurement decrease at RusHydro Subgroup. bidding accounts for over 50% of all 2018), whereby: implementation of cost-cutting procedures at RusHydro Group At the same time, the number of procurement procedures, of which ↗↗ the Company’s Board of Directors The Regulations on Procurement set out initiatives; amounted to RUB 270,704 procurement procedures rose by 99% run on an electronic trading oversees procurement management, the following objectives and principles: ↗↗ no restrictions on participation in mn (incl. VAT), down by 10% to 17,445 due to a 14% increase platform. [102-9] approves the annual comprehensive ↗↗ procurement regulation aims to the procurement in the form of procurement program and its ensure timely and efficient supply non-measurable requirements for Procurement, Procurement by method, % progress report. of goods, works and services to participants; RUBСтруктура mn (incl. закупок, VAT) млн руб. с НДС ↗↗ the Central Procurement the customer as well as prudent use ↗↗ efficient and fair selection of 2017 2018 10 2 2 0 0 Commission (CPC) is a permanent of the customer’s funds. preferred suppliers following Type RusHydro RAO ES East RusHydro RAO ES East collective body which shapes and ↗↗ procurement regulation relies on a comprehensive SWOT analysis 28 of procurement Subgroup Subgroup Subgroup Subgroup carries out the uniform procurement rational use of special procedures to (with price and quality being the 0 8 Electronic policy as well as exercises control make purchases on an arm’s length key factors); and 1 87.95 99.40 98.62 99.77 8 12 1 02 procurement and coordination of procurement basis as closely as practicable and ↗↗ follow-up on contracts and use activities. The CPC Chairman provides for mandatory procedures of goods, works and services 2 20 Procurement through open 67.79 42.37 52.69 48.31 is responsible for procurement to be followed by the officers in purchased. 1 1 2 bidding management within RusHydro. charge of procurement. 1 1 08 Single-source 32.09 57.10 45.95 50.03 procurement Procurement through closed 0 0 0.29 0.82 bidding
1 18 RAO ES East Subgroup's operating activities RusHydro Subgroup's operating activities RAO ES East Subgroup's investment activities RusHydro Subgroup's investment activities
112 113 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Procurement is mostly (in money terms) One of the Group’s most important Asia-Pacific market. As a result, the Procurement from small and medium-sized for works and services related to repair strategic priorities in procurement domestic market faced shortage of and investment programs (upgrade, is to ensure, in a timely and efficient coal supply nudging up prices that businesses (SMEs) capital construction projects) of the manner, competitive awarding of steadily rose at a rate of up to 20% companies within RusHydro Group. contracts for fuel supplies (mainly coal a year. During the period of low coal To facilitate competition and official website in the Procurement and diesel fuel) to meet the needs of its prices, RusHydro Group’s subsidiaries development of SMEs, RusHydro section and is updated as necessary. The procurement items include goods generating facilities (GRES, CHPP, etc.). entered into a number of long-term Group seeks to partner with small and usually purchased by energy companies In 2018, the value of contracts awarded contracts that expired in 2018. The medium-sized businesses as part of The list of goods, works and services Partnership program is publicly (core equipment (boilers and turbines), for fuel supplies amounted to RUB price terms in these contracts were its procurement activities. purchased from SMEs can be found on available and published transformers, switchgear cells, package 83,042.59 mn (incl. VAT), or 30.7% of based on the tariffs then applicable. the website of the Unified Information on RusHydro’s website: http://zakupki.rushydro.ru transformer substations, isolation total value of contracts awarded under RusHydro Group intends to adjust the RusHydro launched a partnership System for Procurement and on valves, control valves, line accessories, procurement procedures. coal purchase price so that it equals program with small and medium- RusHydro’s website. cable fittings, pipelines, steam pipelines the fair price reflecting the fuel cost sized businesses (the “Partnership and spare parts, cabling and wiring, The years 2016 through 2018 were component and use it as a base price Program”) approved by RusHydro’s RusHydro’s target for contracts electrical appliances, metal goods, characterized by high export prices in bidding for long-term coal supply Order No. 568 dated July 16, 2014). awarded to SMEs in 2018 was insulators, heat insulators, etc.). for coal products, including in the contracts. [103] The Partnership Program is developed determined by Russian Government’s in accordance with the Russian Ministry Resolution No. 1352 On Special of Economic Development’s guidelines Aspects of Participation of Small and The list of goods, works and (letter No. 23941-EE/D28i dated Medium Enterprises in Procurement services purchased from SMEs can November 1, 2013). of Goods, Works and Services for be found on the website: Impact of procurement activities on the regions http://zakupki.gov.ru Certain Types of Legal Entities of operations, communities and the environment The register of small and medium-sized dated December 11, 2014. As businesses included in the Partnership at December 31, 2018, the Group Being one of Russia’s largest purchasers feasibility studies) for new hydropower ↗↗ industrial and occupational safety; Program is published on RusHydro’s significantly exceeded the target. of goods, products, services and raw and thermal power projects, their ↗↗ protection of indigenous peoples materials, RusHydro Group is fully construction and modernization, and socially vulnerable groups; Procurement from SMEs in 2018, % aware of its responsibility to the regions any core equipment and technical ↗↗ control over negative footprint on where it operates, communities and specifications and the terms of contracts climate change and environment; Indicator Target Actual environment and relies on the Uniform awarded under procurement procedures and Procurement through businesses including SMEs, % of annually RusHydro 18 70.77 Regulations on RusHydro Group’s must be aligned with the customer’s ↗↗ biodiversity conservation and awarded contracts RusHydro Group 18 77.86 Procurement Policy (approved by approved internal sustainability by-laws restoration. resolution No. 277 of RusHydro’s Board to ensure: Procurement only through SMEs, % of annually awarded RusHydro 15 42.15 contracts of Directors No. 277 dated October 4, ↗↗ compliance with environmental Procurement procedures based on RusHydro Group 15 28.03 2018). According to the regulation, requirements; tenders or requests for bids may include any design works (including pre- ↗↗ protection of cultural heritage sites; relevant sustainability criteria. RusHydro Group’s planned target for of its procurement to be delivered only contracts to businesses including SMEs through SMEs. in 2019 is at least 18%, with at least 15%
114 115 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018 Import substitution projects HR AND SOCIAL POLICY ↗↗ As part of the Comprehensive and obtaining approval to include ↗↗ As part of efforts to gradually Modernization Program for RusHydro’s the investment projects in the Register substitute purchases of foreign generating facilities, the Company approved by the Government goods, works and services locally Our people plans to increase supplies from Commission on Import Substitution3. manufactured that have equivalent domestic machinery producers given The Standard Regulations for performance and properties, RusHydro’s HR policy is aimed at developing the potential of its employees and using it to that, among other things, certain types RusHydro’s Subsidiaries on Registering the Company is supposed to reduce pursue the strategic goals of RusHydro Group. of equipment and components will be Investment Projects Included in the List the share of imported equipment in produced in Russia. of RusHydro Group’s Investment the course of its operations. 1 ↗↗ To increase supplies from local Projects were approved by RusHydro’s ↗↗ The Roadmap until 2025 was The employees of RusHydro Group are Employee overview RusHydro Group – headcount , manufacturers in 2018, RusHydro Management Board. amended along with RusHydro the Company’s key asset. The Group’s Списочнаяpeople численность персонала Группы РусГидро, человек* reduced the share of imported ↗↗ In 2018, the share of imported Group’s updated Long-Term power facilities in Russia and abroad As at December 31, 2018, RusHydro 0 2 0 81 equipment for its operations so that equipment stood at 23%, which is in Development Program for 2018–2022 are staffed with professionals with Group employed 69,665 people foreign goods, works and services are line with the Roadmap target capped (Minutes No. 271 of the Board of extensive operational experience and (including RAO ES East Subgroup, 18 0 1 0 1 8 gradually phased out and replaced Доляat 23%. импортного оборудования, % Directors No. 271 dated June 1, 2018). superior technical expertise. The HR facilities in Russia and abroad), down by by local goods, works and services policy of RusHydro seeks to unlock 816 employees, or 1.2%, compared to 1 802 1 0 of equivalent performance and Share of imported equipment, % the potential of its people and use it the previous reporting period. 881 properties. to deliver on the strategic priorities ↗↗ As part of import substitution, of the Group. RusHydro is committed Most of RusHydro employees work full- in compliance with Federal Law to promoting workplace stability time (98.6% for RusHydro Subgroup No. 223-FZ On Procurement of Goods, by adopting a socially responsible and 99.6% for RAO ES East Subgroup) Works and Services by Certain Types attitude towards its employees, which and under permanent employment of Legal Entities dated July 18, 2011 means that the HR strategy is closely contracts (87.5% for RusHydro as well as Russian Government’s linked to the Group’s social policy. Subgroup and 97.2% for RAO ES East Directive No. 1659p-P1383 dated March In particular, the Group protects Subgroup). 1 1 18 15, 20161, the Company approved the social and economic rights of its the Regulations on Registering employees, ensures their financial RAO ES East Subgroup
RusHydro Subgroup 20 8 2 2 12 Investment Projects Included in the List 2 2 stability and social guarantees. of RusHydro Group’s Investment Projects2, which determine a set of 1 1 1 18 1 standards, rules and requirements Target Headcount by country and region as at December 31, 2018 [102-7], [102-8] for selecting investment projects Actual Country, region Headcount, people Russia Central Federal District 3,858 PROCUREMENT IMPROVEMENT IN 2019 Southern Federal District 621 North-Western Federal District 919 Ural Federal District 311 Far Eastern Federal District 52,801 Siberian Federal District 3,439 ↗↗ Optimization of procurement ↗↗ Further automation of the Group’s ↗↗ Development of the reference data Volga Federal District 3,557 processes procurement processes, including system the development of an automated North Caucasian Federal District 3,727 analytical reporting system Foreign countries Republic of Armenia 401 Republic of Tajikistan 31
1 On Approval of Procedure for Registering Investment Projects Included in the List of Investment Projects 2 Resolution of RusHydro’s Board of Directors dated May 31, 2016 (Minutes No. 237) 3 Established by Russian Government’s Resolution No. 785 On the Government Commission on Import Substitution dated August 4, 2015
1 The RusHydro Group headcount figures for 2016 and 2017 may be different from the previous annual reports due to changes in the reporting boundaries applied in 2018 report.
116 117 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Workforce by gender, Workforce structure as at Workforce structure by age, Total number of employees starting or leaving employment at RusHydro Group in 2018, by age, gender and region, type of employment СтруктураDecember персонала 31, 2018, people на 31.12.2018 (102-8)Структураpeople (405-1) [405-1] персонала Группы РусГидро с разбивкой по возрасту,region, people человек [401-1] and kind of employment [102-8], [405-1] contract [102-8] (405-1) Region <25 years 25–34 years 35–44 years 45–54 years >55 years Total M F M F M F M F M F Gender distribution varies depending Starting employment on the category of employees. In the management cohort, there Central Federal District 45 19 98 72 91 79 44 44 68 35 595 are 3 times as many men as women; Southern Federal District 14 1 11 1 13 5 9 1 3 2 60 in the white-collar category – North-Western Federal 19 10 9 15 7 6 10 4 7 13 100 1.7 times as many women as men; and District in the blue-collar category – 4 times Far Eastern Federal 829 312 1,724 870 1,378 753 815 425 511 268 7,885 as many men as women, which District reflects the specifics of RusHydro Siberian Federal District 38 29 89 74 86 82 48 45 58 37 586 Group’s operations. Blue-collar (m) 30,819 25 years 2,054 White-collar (f) 13,299 25–34 years 16,230 Ural Federal District 3 0 5 2 3 2 2 0 3 0 20 Managers (m) 8,261 35–44 years 19,897 26% of RusHydro Group’s employees White-collar (m) 7,999 45–54 years 17,244 Volga Federal District 79 5 183 28 135 18 74 11 34 7 574 Blue-collar (f) 6,880 55 years 14,240 are aged 35 or younger. One of North Caucasian Managers (f) 2,407 160 3 269 23 179 33 161 24 114 11 977 RusHydro Group’s key tasks on Federal District the personnel management front is to Republic of Armenia 0 0 6 2 6 2 2 1 10 2 31 attract young talent. Republic of Tajikistan 0 0 2 0 1 1 1 0 0 0 5
In 2018, RusHydro Group created Total 1,187 379 2,396 1,087 1,899 981 1,166 555 808 375 10,833 Seasonal employment [102-8] Recruitment 1,253 new jobs as the scope of work Leaving employment increased and additional power capacities Central Federal District 32 15 92 90 81 74 51 30 127 61 653 RusHydro Group hires seasonal labor. RusHydro Group recruits staff, including were put into operation. Southern Federal 15 0 11 2 14 3 6 0 14 5 70 In 2018, one seasonal worker was hired management, on a competitive basis. District to control water flows from Lake Sevan, This approach enables the Company Entry-level wages at RusHydro Group North-Western Federal 9 1 12 15 5 6 5 4 14 25 96 27 workers were hired for the heating to recruit motivated people who meet are either equal to the statutory District season, 62 workers were hired to the qualification requirements and minimum monthly wage or up to manage children’s recreation camp have potential to grow professionally. 9.4 times higher than that depending Far Eastern Federal 456 180 1,477 713 1,274 824 1,004 567 1 605 840 8,940 District Energetik during the summer vacation, Candidates of any gender, age and on the region of presence, which means 16 workers were hired to restore ice nationality are allowed to compete for that RusHydro is a competitive and Siberian Federal District 21 11 65 58 66 86 67 51 85 65 575 fields and ski trails. vacancies, with professional skills being reliable employer. [202-1] Ural Federal District 4 0 2 1 4 1 0 2 7 6 27 the main selection criterion. Volga Federal District 63 1 166 19 140 22 59 9 84 26 589
1 North Caucasian 76 4 171 22 109 17 115 16 109 17 656 Percentage of employees who will reach retirement age in the next 5 and 10 years [EU15] Federal District Indicator 5 years 10 years Total in the next 10 years Republic of Armenia 2 0 10 3 8 2 6 2 14 3 50 (on an accrual basis) Republic of Tajikistan 0 0 0 0 0 0 0 0 0 0 0 people2 % people3 % people4 % Total 678 212 2,006 923 1,701 1,035 1,313 681 2,059 2,059 11,656 RusHydro Group 6,856 9.8 7,718 11 14,574 21
Management 1,131 10.6 1,372 13 2,503 24 White-collar 1,586 7.4 2,040 10 3,626 employees 17 Personnel assessment managerial competency appraisal personal qualities and achievements methods, including the Assessment assessed. Managers and white-collar Blue-collar 4,139 11.0 4,306 11 8,445 22 employees The Corporate Hydropower Center. employees, regardless of gender, are University, a branch of RusHydro, assessed once every three years. [404-3] assesses employee potential to join The Company’s employees are also the Company’s management talent tested for adequacy to the job and pool using various professional and have their professional, business and
1 Age of retirement on general or special terms. 2 Employees who will reach retirement age during 5 years from the reporting date (in 2019–2023). 3 Employees who will reach retirement age in 5 to 10 years from the reporting date (in 2024–2028). 4 Employees who will reach retirement age during 10 years from the reporting date (on an accrual basis, in 2019–2028).
118 119 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Further professional training Percentage of RusHydro Group employees who undergo periodic Average training expenses for RusHydro Group’s personnel performance and career development appraisal, by gender and category different employee categories development costs, To achieve its strategic goals, (% of total headcount across the specified category), 2018 [404-3] in 2018, RUB/people РасходыRUB mn на развитие кадрового потенциала Группы РусГидро, млн руб. RusHydro Group participates in 2 0 0 the development and integration of occupational standards, RusHydro Subgroup RAO ES East 1 1 develops employee professional 1 2 and managerial competencies, 12 implements career guidance programs for talented students. 2 For this purpose, RusHydro Group 1 implements advanced personnel 1 1 8 development programs, builds a talent pool and trains employees. 8 1 21 8 28 2 8 0 12 1 8 0 The continuous training system ana ers te ollar lue ollar 1 1 18 1 0 serves to develop employee 1 10 e ployees e ployees competencies to meet their current RAO ES East Subgroup job requirements and to be promoted ana ers te ollar ana ers te ollar RAO ES East Subgroup RusHydro subsidiaries1 RusHydro Subgroup as part of the talent pool arrangement. e ployees e ployees RusHydro The Company offers employees Male professional retraining opportunities, Female Lifelong learning and training programs that support the continued employability of employees and assist including in accordance with them in managing career endings [404-2] occupational standards. Среднее количество часов обучения на одного сотрудника (404-1) Average hours of training per employee [404-1] Form of training Frequency RusHydro Group’ s personnel training Further professional training At least once every five years and development costs rose to Occupational training As required by regulators, in case of retraining for a new career RUB 339 mn in 2018 as the Company held the 8th biennial All-Russia HPP Occupational retraining As required for operational reasons to enable employees to do a new type of work or Operations Staff Competition and to receive additional qualifications as well as for talent pool training the Open Corporate WorldSkills Corporate trainings On an as-needed basis when required to solve specific tasks Competition in the reporting year Internal training in production and technical Annually and also increased spending on skills employee training under the education Short-term training programs (seminars, Annually, with the content depending on business needs license issued to RusHydro’s conferences, forums) Corporate Hydropower University
2 21 1 Distance learning Annually, with the content depending on business needs in December 2017. Specifically, the Company increased training ana ers te ollar lue ollor hours, conducted out-of-office e ployees e ployees The Corporate Hydropower operational staff in accordance with programs for other RusHydro Group sessions, developed new training and Male University the education license issued in 2017. personnel, with 3,244 employees methodological materials and updated Female 153 employees were retrained in 5 participating in 2018. 12,356 distance the existing ones in accordance In 2018, the Corporate Hydropower programs, 190 employees received training courses were completed. with occupational standards and ↗↗ Technical and statutory trainings occupational training programs. University developed 10 occupational further professional training in 14 Training sessions covered employees of requirements of the Ministry of Education required for performing job duties; RusHydro became the first company in retraining programs and 44 further programs. Furthermore, the Corporate RusHydro and its subsidiaries. and Science of the Russian Federation for ↗↗ Management and leadership the Russian power sector to implement professional training programs for University conducted 51 corporate advanced and occupational training. trainings; in 2018 a project for professional and ↗↗ Project management training; public accreditation of programs run by Key areas of employee training: ↗↗ Corporate governance training; its corporate training centers based on ↗↗ Statutory training under ↗↗ Graduate degrees; occupational standards. In particular, the requirements of the Federal ↗↗ Second professional degree. the Company’s Far Eastern centers Environmental, Industrial and Nuclear in Magadan, Khabarovsk and Artyom Supervision Service of Russia, In 2018, RusHydro Group provided (Primorye Territory) were awarded the Federal Service for Labor and 36,537 training courses to its employees accreditation certificates for the next Employment, and other controlling under corporate training programs, 7 years. authorities; further professional education and
1 Excluding RAO ES East Subgroup.
120 121 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Training at the Corporate Hydropower University Apart from offering training modules The community operates, on a voluntary The assessments will be conducted for talent pool candidates, RusHydro basis, to implement joint projects, share starting from 2019, in line with statutory Number of courses Group arranged a number of other experience and practices, search for regulations, as an occupational Employee categories Onsite Online events for young employees in 2018, new, more efficient approached and examination, which includes a theory RusHydro, including: 2,466 10,875 36,537 including participation in industry- solutions to deliver on RusHydro Group’s test and a practical section to check managers 1,200 2,921 courses wide competitions in innovation, strategic priorities. The community skills and competencies. the engineering training initiative set the key project streams as follows: white-collar employees 1,029 5,396 completed by RusHydro Group’s employees in 2018 Technological Leadership School Technology Leadership, Professional The tests will be run in Moscow as blue-collar workers 237 2,558 run as part of the Youth Day at Development, Health and Safety, well as in the Volga Training Center of Subsidiaries 1,121 1,481 the St. Petersburg International Comfortable Environment in the Regions the Corporate Hydropower University, Total 3,587 12,356 Economic Forum and development of of Operation. For each stream, the Artyom Training Centers in the Far young people’s vision of technological community participants designed a work East, and the Dolzhenko Personnel growth of Russia’s energy sector in plan for 2019 and determined mentors Training Center of DGK’s branch In 2018, RusHydro held its Corporate the Volga Branch of the Moscow Power 161 employees were trained in these the context of global trends until 2030. from among the managers and experts Khabarovsk Generation. The examination WorldSkills Russia Juniors Competiton Engineering Institute (as part of a trial modules. The vision was elaborated in the format of RusHydro’s headquarters. board will include RusHydro in Electrical Installations at the Sayano- demonstration exam) participated in of a competition among young production experts, who contributed Shushensky training center of the championship. In 2018, 10 employees from the first energy professionals. The research The first project implemented by to the development of occupational excellence of its Corporate Hydropower group of talent pool candidates for key by RusHydro’s young specialists won the community in 2018 was a virtual standards and assessment materials. University. The competition was positions at the chief engineer’s office the competition and was showcased to walking marathon across RusHydro entered by 14 juniors up to 16 years Talent pool defended their diploma projects and the Ministry of Energy during the Youth Group’s sites called “Walking from In 2019, RusHydro Group, at its old from orphanages in Rybinsk, completed training under the talent pool Day of the Russian Energy Week. the Far East to North Caucasus” aimed Sakhalinenergo Training Center, will Nevinnomyssk, Perm, Novosibirsk, In order to ensure management program. The diploma projects were at promoting a healthy life style and hold the 2nd corporate competition Khabarovsk and Sayanogorsk under succession, improve management written under the guidance of mentors In 2018, RusHydro’s young specialists building communications among for operations staff at cross-connection the patronage of RusHydro. appointment process and to incentivize from the production unit and assessed participated in the 8th International employees. 6,000 employees from 28 thermal power plants. Teams from DGK, employees to enhance their professional by an expert committee for applicability Forum of Young Power Professionals regions participated in the walking Kamchatskenergo, Magadanenergo, The winning team participated in skills and knowledge for career at RusHydro Group, the maturity and and Industrialists called the Fast marathon. The project won the first Sakhalinenergo and Chukotenergo will the 5th National Championship of development purposes, RusHydro Group viability of the projects. and the Furious 2018. It was for prize in the Life Style nomination at take part in the competition. Cross-Industry Working Professions has management talent pool building the first time that the vast majority of the 9th International Competition in High-Tech Industries –WorldSkills and development programs in place. The Company’s young talent pool RusHydro’s branches and subsidiaries, for Internal Communication Projects Other plans for 2019 include: Hi-Tech 2018. Team RusHydro came called “Internal Source of Energy” is including those from the Far East, were INTERCOMM-2018. ↗↗ the 1st Corporate Engineering Case fourth in the Electrical Installations The programs are divided into two levels. a group of young specialists up to 30 represented at the event. At the forum, Championship of Innovation and category among juniors aged 14 to 16. The talent pool for any given position is years old, who have been assessed the Young Employees’ Community Work Improvement Proposals called a specially trained group of employees and selected as potential professionals started work under the guidance Personnel management Ratsenergy; In October, RusHydro’s branch from the headquarters and branches, and/or leaders and receive regular of RusHydro’s senior management system development plans ↗↗ the 2nd Corporate Championship Volzhskaya HPP, the Volga Training who combine strong leadership targeted training to improve their and experts. The key goals of this for 2019 WorldSkills Russia Juniors in Electrical Center of the Corporate Hydropower competencies and professional qualifications. professional community are as follows: Installations; University and the Volga Branch of skills commensurate with corporate In 2018, RusHydro Group established ↗↗ the Industry (Corporate) the Moscow Power Engineering requirements for a particular managerial The “Internal Source of Energy” project ↗↗ to communicate RusHydro Group’s a Qualifications Assessment Center Championship for protective relaying Institute (National Research University) position. is aimed at identifying, developing and values to young people; as a separate legal entity to assess and automation of hydropower hosted a corporate championship of retaining young talent. In 2018, the third ↗↗ to position RusHydro Group as employees for compliance with industry plants and pumped storage power professional skills in operational and In 2018, the Company arranged and intake of young professionals completed an employer brand across its occupational standards. In September plants, arranged to WorldSkills technical control of hydraulic units conducted the following talent pool a modular program that covered project geographies; 2018, the Energy Sector Occupational standards; and and auxiliary equipment, according to training modules: management, operational excellence, ↗↗ to create opportunities for proactive Qualifications Council authorized ↗↗ a conference of RusHydro WorldSkills standards. 21 hydraulic unit ↗↗ Occupational training; finance for non-finance managers, young employees; the Qualifications Assessment Center Group’s young talent community operators from RusHydro’s branches ↗↗ Personal performance improvement; and went on to work on their diploma ↗↗ to develop young employees’ to conduct independent assessments at the International Innovation and subsidiaries as well as other ↗↗ Project management; projects to be presented at a later competencies and skills and create of professional qualifications under Forum of Industrialists and Power electrical power companies, aged up to ↗↗ Production asset management; stage. a new pool of young talent will opportunities for promotion at the occupational standards for Professionals called the Fast and 28, and three fourth-year students from ↗↗ Digital transformation. be selected and trained in 2019. RusHydro Group. the electrical and heating power sector. the Furious 2019.
122 123 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Social policy Private pension plans the Company and the state) have a limited opportunity to form consisting of: the funded part of the work pension In order to implement RusHydro’s socially responsible position, the Board of Directors In 2018, the private pension coverage ↗↗ the “5+5” option (an employee and (for employees born before 1966); approved the Company’s Social Policy in 2013. The document established the key for employees at RusHydro’s branches the Company jointly finance his or ↗↗ the “Veterans” option (the Company principles, goals and objectives for RusHydro Group’s social development across included several pension plans designed her pension savings); accumulates pension savings on the regions of operation. to finance the pension savings of ↗↗ the “Co-financing” option the pension accounts of its former different target employee groups. (an employee, the Company and employees as a supplementary the state jointly finance his or her pension for retired employees). Objectives and results of the social policy The private pension plans include: pension savings). ↗↗ the “Individual” option (employees Similar programs are in place at several Objectives of the social policy: rights, labor relations, environmental ↗↗ other payments and benefits finance their pension savings); The corporate plan (financed by subsidiaries, including Hydroremont – ↗↗ furthering the Company’s socially protection, anti-corruption initiatives and in accordance with collective ↗↗ the “Close People” option the Company) consisting of: VCC, Transport Company RusHydro, responsible agenda; stakeholder relations. The Company relies bargaining agreements and in-house (employees finance pension savings ↗↗ the “Supporting” option Kolymaenergo, DGK, Far Eastern ↗↗ promoting shared social on the Guidance on Social Responsibility rules and regulations. for the benefit of third parties). (the Company accumulates pension distribution company (DRSK), Far responsibility and social partnership (ISO 26000) and the universal principles contributions on registered pension Eastern energy company (DEK), practices; enshrined in the UNGC Guide to Corporate To support young families, the Group The parity plan (financed on the basis accounts of employees who, as Kamchatskenergo, etc. ↗↗ making RusHydro Group more Sustainability in the field of human rights, provides them with one-off payments of equal participation by an employee a result of the reform of the state attractive as an employer to recruit and labor relations, environmental protection in connection with the registration of and the Company or an employee, pension system, do not receive or retain the best talent. and anti-corruption initiatives, as well as marriage, the birth of a child, childcare 1 the Social Charter of the Russian Business allowance for up to three years, Security for RusHydro Group’s liabilities under pension plans [201-3] Tasks of the social policy: and the Tariff Agreement for the Electrical compensation of expenses for nursery ↗↗ creating an institutional environment Power Industry of the Russian Federation and kindergarten daycare costs. Indicator Value for attracting and retaining young [102-12]. Net pension liabilities as at December 31, 2018, RUB mn 7,418 talent; RusHydro also contributes to local Estimated coverage ratio of special assets vs. liabilities under the scheme (fair value of plan assets / current value of plan 12.52 ↗↗ maximizing employee commitment RusHydro Group grants benefits to full- employment, fiscal sustainability, liabilities), % to RusHydro’s goals and principles; time employees: construction and financing of ↗↗ improving occupational relations ↗↗ voluntary medical insurance; social infrastructure facilities, urban taking into account the interests ↗↗ insurance against accidents and improvement, supporting education, Improving housing own apartment or house, relocated No. 702 dated September 8, 2016, 139 of the employer, employees, diseases; healthcare, culture and sports, caring for conditions for employees specialists, key and highly qualified employees received compensation of shareholders, and the government. ↗↗ disability/temporary disability veterans and disabled people, making specialists, as well as employees with interest payments on mortgage loans compensation; technical arrangements to reduce RusHydro continues implementing many children, and single parents. and lease expenses. Furthermore, in In its social policy, RusHydro Group ↗↗ maternity/paternity leave; environmental footprint and providing a program to improve housing 2018 employee housing programs follows international standards and ↗↗ one-off financial aid in case of death assistance to those affected by natural conditions for employees. The priority In 2018, pursuant to Regulations were introduced at Yakutskenergo, best practices in the field of human of a close relative; and other disasters. right to participate in the program is on Improving Employee Housing Sakhaenergo and Kolymaenergo. given to young professionals under Conditions at Branches of RusHydro the age of 30, who do not have their approved by Company’s Order Social policy Employee rights, trade unions Work with young Healthcare and healthy Housing people, training lifestyle promotion program At RusHydro Group, employees trade unions in place, with a total of Director of RusHydro, Nikolay programs are free to fully exercise their right 35,882 members in 2018. [407-1] Shulginov, and the senior management to freedom of association. Most of of RusHydro had a meeting with RusHydro Group’s companies have On December 11, 2018, Chairman of the leaders of the Far Eastern sections the Management Board – General of the All-Russian Electric Trade Union.
Support for families Pension Social and professional and mothers coverage guidance for orphans
1 Liabilities under IFRS as appraised by Actuarial and Financial Services LLC
124 125 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
At the meeting, memorandum and labor relations in the industry and on childcare leave, etc.). Notably, Education Park, with the number of nature trails Culture No. 56 pr/2 was signed with a view sets a minimum level of guarantees for RusHydro provides employee benefits created in 15 regions of the Company’s to developing social partnerships at employees. This standard significantly and guarantees that are higher than Support for educational institutions operations reaching 23. For several years now, cooperation all levels, improving a social dialogue facilitates the dialogue in social those set forth in the Industry Tariff translates itself into technical upgrade with the Russian Geographical between authorized representatives partnerships at the levels of industry Agreement in terms of both scope and initiatives and implementation Society has been one of RusHydro’s of employers and employees at companies and the Group, enabling amounts paid. of educational projects. In 2018, Healthcare major projects in the realm of RAO ES East Subgroup, as well RusHydro to compare and assess RusHydro provided financial support to culture. Last year, the Company as maintaining the existing social the level of guarantees provided to Pursuant to the Labor Code of 18 kindergartens, 28 secondary schools, Every year, in the run-up to the Energy provided financial assistance for benefits. employees. the Russian Federation, specifically 10 music schools and community Worker’s Day, RusHydro holds an the Society to put in place a grant article 74 concerning changes in centers, 13 centers of additional Energy Born charity event, aiming to fund designed to encourage research All of RusHydro Group’s generation All companies that are “ERA of Russia” organizational or technical conditions education and leisure for children and provide maternity hospitals, perinatal on natural disasters and rare animal branches and 40 subsidiaries have members comply with the key provisions of labor, article 75 concerning changes youth, and five universities. care centers and maternity wards from species, while also supporting collective bargaining agreements in of the Industry Tariff Agreement of control and restructuring, employees across the Company’s footprint with the organization’s publishing activities place. In 2018, 96% of the Group’s pertaining to the amount and frequency must be notified in simple written RusHydro staged the 10th edition of state-of-the-art medical equipment. In and environmental and geographical employees were covered by collective of indexation of the minimum monthly form within at least two months from the Energy for Development contest 2018, as part of this initiative, the Group expeditions. bargaining agreements. rate of pay, additional benefits and the date of such material changes in for undergraduates and postgraduates purchased cardiotocographs / fetal guarantees such as one-off payments an employment contract. In collective of technical universities, aiming to monitors, neonatal intensive care units, Financing was also allocated to The collective bargaining agreements made prior to a paid leave, financial bargaining agreements, Section 4 put in place a long-term framework air recirculation and irradiation systems, ensure the preservation of cultural signed at RusHydro Group regulate assistance provided in the face of certain “Employment” also makes reference for consistent professional training electrocoagulators and pulse oximeters and historical heritage by upgrading the social and labor relations taking into events (marriage, childbirth, death of to the Industry Tariff Agreement, which in the energy sector and facilitate for 14 healthcare institutions. a wide range of cultural institutions, account the interests of employees and close relatives), one-off payments to reflects duties of employers and trade industry-specific education. Over including museums, community the employer. [102-41] retiring employees, compensation to unions in the event of material changes the years, some 1,000 undergraduates The total number of medical centers, and libraries. the financial families in cases of work-related fatalities in employment contracts. [402-1] and postgraduates submitted their organizations benefiting from financial assistance provided by the Company RusHydro and its 12 subsidiaries are and deaths caused by common diseases applications to take part in the contest, support in 2018 reached 21. made it possible to stage a large members of the All-Russian Industry or home accidents, as well as other with several dozen winners opting to number of creative festivals, contests Association of Employers of the Power benefits provided for by the Industry pursue a career in the energy sector and exhibitions and to promote book Sector “ERA of Russia”, while another Tariff Agreement if the company is after the competition. Sports publishing. 3 subsidiaries have joined the Industry financially able to make the payments Tariff Agreement for the Electrical Power (50% discount of the regular charge More information on the Industry A total of 26 sports schools and Industry of the Russian Federation. for electricity and heat, compensation Tariff Agreement is available at: Environment football, basketball, hockey, tennis, Support of social institutions and http://www.orael.ru the Industry Tariff Agreement provides of childcare expenses, monthly chess, water sports and martial arts organizations a single standard for regulating social compensation payments to employees RusHydro’s environmental initiatives clubs from the Company’s regions include oBEREGAi, an environmental of operation became eligible for RusHydro pays close attention to program designed to clean up the banks charitable assistance, with sports the problems of children without of local water bodies, and a project equipment and accessories supplied parental care and kids with special Charity projects and volunteering offering students a wide choice of with the support of RusHydro. needs. In 2018, 18 orphanages environmental sessions, festivals, Moreover, young athletes from and asylums and 9 rehabilitation Charity programs the Company’s regions of operation, ↗↗ support of social institutions and contests, excursions focusing on local the patronized sports schools now centers for children and teenagers foster a favorable social environment and organizations; history and culture, field schools and have an opportunity to participate became eligible for financial support. RusHydro pursues charitable activities in help unlock Russia’s spiritual, scientific, ↗↗ initiatives promoting the social classes in the school’s forest and nature in European and international the Company’s charitable assistance accordance with the Company’s Charity technical and intellectual potential. and economic development of reserve facilities during their vacations. competitions to vie for gold and silver helped upgrade and refurbish and Sponsorship Policy approved by its the Russian regions; the Company provides support to medals. the institutions’ facilities, prepare Board of Directors (Minutes No. 280 of RusHydro’s charitable priorities include: ↗↗ support of charitable foundations specially protected natural areas (nature orphan undergraduates for adult December 7, 2018). ↗↗ education; and non-profit organizations; reserves, protected areas and national Financial support was also provided life, furnish playgrounds for children ↗↗ environment; ↗↗ improving the living standards of parks) at both the regional and national to the Russian Whitewater Slalom with special needs, purchase special The main objective of RusHydro’s ↗↗ healthcare; low-income households and people levels. As part of the Ecological Paths Federation, Russian Union of Martial educational equipment, set up charity programs is to set the stage ↗↗ sports; in need. project, an additional tourist route Arts, Russian Judo Federation, rehabilitation courses, and organize for sustainable development in ↗↗ culture; was laid out in the Prielbrusye National Karachayevo-Cherkessian Regional educational excursions and sports Sports Federation of Kyokushin, and competitions. Yenisei-STM Rugby Club.
126 127 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Support of charitable foundations Program, with support provided to to join Energy Summer School, Institute established a united center for Volunteering initiatives of rivers, reservoirs and lakes in the Group’s and non-profit organizations orphanages and asylums, boarding a corporate R&D camp run by education and training of engineers in regions of operation. schools, rehabilitation centers for minors, RusHydro on an annual basis. In 2018, hydropower and renewables. RusHydro Group promotes corporate Funds were allocated to support educational and cultural institutions, the summer school was hosted volunteering, encouraging individual and RusHydro employees also participate in 35 charitable foundations and non- children’s performance groups, sports by Novosibirskaya HPP. the event The training center was based on the team-based involvement of its employees blood donation campaigns organized profit organizationsat the regional clubs and societies, and veteran was attended by 32 schoolchildren following departments: «Hydropower in socially important projects. by the Company jointly with the Blood and national levels. This financing helped organizations. from 14 Russian regions (including and Renewables», «Hydromechanics Service, with up to 75% of volunteers implement socially significant charitable those enlisted in RusHydro’s energy and Hydraulic Machines», «Innovative RusHydro’s corporate volunteers take an foregoing their compensation for projects in the Company’s regions of classes) who prepared and presented Technologies of Technogenic Safety», active part in oBEREGAi, an environmental charitable purposes. operation, including the Far East, focusing Programs to promote six team projects focusing on which train bachelors, masters and program designed to clean up the banks on education, environment, healthcare, skills and knowledge in synergies between Novosibirskaya postgraduates in the core specialties of sports, culture, support for low-income the professional community HPP and the nearby megapolis. RusHydro. families and people in need, and initiatives or across the region promoting the social and economic In 2018, the Company became development of the Russian regions. As part of RusHydro’s advanced a partner of discipline-specific and personnel development program project-based sessions in the Russian In 2018, charitable foundations benefiting – From New School to Workplace, Children’s Education Centers (Sirius, AWARDS from the Company’s financial assistance an extensive student and Oсean, Smena, Orlyonok) as part included the Vera Hospice Charity Fund, undergraduate engagement exercise of RusHydro’s career guidance Center for Humanitarian Programs, Russian has been launched across the Group’s program, with 462 high school RusHydro has received numerous corporate awards confirming the Company’s commitment to Children’s Foundation, Live Now Charity footprint. This effort seeks to raise students attending the events. raising awareness about energy sector jobs and providing training opportunities to students and Foundation, and Illustrated Books for awareness about the importance of undergraduates across the regions of its operation: Little Blind Children, a regional charitable engineering and blue-collar jobs as In 2018, RusHydro became a theme- foundation. the financial allocations a prerequisite for the development of based partner of ProeKTOriYa, were used to lend a helping hand to the energy sector in the Company’s a national career guidance forum, low-income households and distressed regions of operation. the central which was attended by students of The Company won a first grade award in Young Energy, a program aiming to provide families. element of RusHydro’s school- energy classes from Rybinsk and the Technology Transfer nomination at Enabling social and professional guidance for children from based talent pooling exercise comes their mentor. As part of the forum, Our Future, Russia’s fifth nationwide contest orphanages, won: Each year, RusHydro’s Board of Directors in the shape of career-oriented experts from the Corporate for best employer practices in human capital approves the Company’s Charity and educational programs (energy University staged a hydropower development. ↗↗ the first place and the Grand Prix in the Sponsorship Program. In 2018, the total classes) launched in nine regions case solving competition with online nomination for Collaboration Synergies of the amount of allocations under the charitable across the Company’s footprint. In contributions from the employees of Enabling Our Future contest held as part of the programs stood at RUB 1,240.5 mn, with 2018, 670 school students of the ninth Saratovskaya HPP and the laboratory At Graduate Awards 2018, RusHydro came in Moscow International Education Fair (MIEF-2018); funds used to support charity and socially to eleventh grades completed of Moscow Power Engineering the third place in the nomination for the Best ↗↗ ranked second in the nomination for the Best significant projects and programs in training under such programs. Institute. Schoolchildren Engagement Program with its Program (Project) Promoting Volunteering in RusHydro Group’s regions of operation. 2018 also saw the launch of optional project focusing on the implementation of career Russia at the awards ceremony of the Leaders of classes in Theory of Inventive The key 2018 event in terms of guidance initiatives at the Information Center for Corporate Charity in Russia 2018 initiative; In the Far Eastern Federal District, Problem Solving and extra-curriculum collaboration with professional On-site Training in Cheryomushki. ↗↗ came in the second place at Champions of the social projects of critical engineering activities for more than educational institutions was Goodness, Russia’s first nationwide corporate importance for the macroregion and 400 students from the Company’s RusHydro-sponsored opening of volunteering contest; and its residents are supported by the Far technical creativity centers (technical the Institute of Hydropower and RusHydro won the 2018 Leaders of Russian ↗↗ made it to Top 20 in the Social Mentoring Eastern Energy Company, Far Eastern workshops). Renewable Energy Sources (part Business: Dynamics and Responsibility contest nomination in the first edition of Russia’s Best Generating Company, Far Eastern of Moscow Power Engineering sponsored by the Russian Union of Industrialists Mentoring Practices competition. Distribution Company, Yakutskenergo, Each year, the Company holds Energy Institute) designed as a single and Entrepreneurs, receiving an award for Magadanenergo, Sakhaenergo, for Education, an industry-specific center for education and training of its contribution to the social development of Kamchatskenergo, Energotranssnab, school contest which has attracted engineers specializing in hydropower the Company’s regions of operation. The key Teploenergoservis, Yakutsk Energy Repair over 5,000 students since its kick-off. and renewables. the training evaluation criteria included contributions to solving Company, UESK, and Kolymaenergo. In 2018, 680 schoolchildren submitted center leverages the capacities of economic and social problems, efficiency of Boguchanskaya HPP and International applications to take part in the online the departments of Hydropower proposed projects and initiatives, and replicability Energy Corporation also make significant competition, with 20 winners and Renewables, Hydromechanics of gained experiences outside the company. contributions to the social development in admitted to the final stage of and Hydraulic Machines, and the regions of the Company’s operations. the nationwide Energy Sector Hope Innovative Technogenic Safety In 2018, RusHydro’s subsidiaries allocated school contest. Solutions, which are responsible some RUB 120 mn for charitable purposes for training bachelors, masters and in addition to the funds earmarked under The brightest participants of career postgraduates in the key areas the Company’s Charity and Sponsorship guidance projects become eligible of the Company’s business. The
128 129 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
The Company holds charity fairs, with In retail companies, RusHydro’s corporate Novosibirskaya HPP (RusHydro’s proceeds donated to the charitable volunteers teach pensioners how to use branch), delivered a lecture on ENVIRONMENTAL foundations’ treatment, rehabilitation, their personal online accounts and give renewables in our life for children training and development programs. digital literacy classes. from the Novosibirsk Orphanage); PROTECTION Volunteers are also involved in fundraising ↗↗ creative workshops (decoupage, and drives for people in need. In 2018, In 2018, RusHydro Group mobilized scrapbooking, drawing contests, Environmental friendliness and energy and innovative development in generating renewable energy. as part of the Suitcase of Goodness its volunteers to streamline etc.); awareness is a mandatory part of are set to reduce negative RusHydro Group’s operations span campaign, the Company’s volunteers the implementation of Young Energy, ↗↗ clean-up days; policy for any socially responsible environmental footprint and increase most of Russia, making it a major collected over 2,000 toys for kids a program aiming to provide social and ↗↗ energy efficiency and financial business. Ongoing modernization the Company’s shareholder value. user of national water resources undergoing treatment in children’s professional guidance for children from literacy lessons, rundown on initiatives together with energy and the largest electricity and heat haematology centers and oncology orphanages. the volunteers helped children the Constitution of the Russian conservation and higher energy RusHydro Group is the largest supplier in the Far East. hospitals. Over one hundred gifts were choose a career path, prepare for exams Federation, etc.; efficiency, advancement of renewable Russian energy holding and a leader collected before the New Year to cater and studies at specialized technical schools, ↗↗ festivals held on occasion of for the basic needs of the elderly people and seek employment with RusHydro or the New Year, Defender of placed in care homes or under custody of other companies. the program covering the Fatherland Day, International the Vera Miloserdiya foundation. nine regions of the Company’s operations Women’s Day, Maslenitsa, school Environmental policy has been in place since 2013. RusHydro’s graduation, Knowledge Day, RusHydro’s employees arrange tours volunteers are the main driver behind Energy Worker’s Day, etc.; Environmental impact addresses today’s challenges and Environmental impact around the Group’s facilities. In 2018, the initiative. In 2018, 120 volunteers took ↗↗ visits to cultural events, theatres, management [103-1] trends in environmental protection management more than 4,000 tours were organized for part in the Program. exhibitions, etc. (for example, while taking into account the specific students in an attempt to stir interest in on February 2, 2019, volunteers RusHydro Group adheres to operating environment of RusHydro’s engineering and energy sector professions Volunteers work with children on from Volzhskaya HPP (RusHydro’s environment protection and sustainable hydropower and heat assets. RusHydro Group among the youth. an ongoing basis, having encouraged more branch) took children from use of natural resources while than 55 students to take specialized training the Volzhsky Orphanage on a observing the approved Environmental The updated Environmental Policy sets Annually, RusHydro’s volunteers come at technical schools. Five of those students trip to the Panorama Museum of Policy, which is based on Russia’s out KPI seeking to increase the installed RusHydro’s Executive Office to schools from across the Company’s are now employed with the Company. the Stalingrad Battle (Volgograd) to national policy for environmentally capacity of low-carbon generation, footprint to give over 15,000 Volunteers regularly arrange socialization commemorate the anniversary of sustainable development and safety, reduce direct and per unit greenhouse schoolchildren lessons about energy saving and career guidance events for children the Battle of Stalingrad); the Constitution of the Russian gas emissions, prevent species technologies and energy security. living in orphanages. These events come in ↗↗ sports events and contests Federation, federal laws and elimination as a result of operating all sorts of formats – from financial literacy (football and volleyball regulations, and international treaties activities, additionally train staff in RusHydro Group’s corporate volunteers classes and lessons in independent living competitions, school sports days, of the Russian Federation governing environmental protection, etc. stage festive events (as part of to a series of occupational insight sessions, rafting excursions, health days, etc.). the same. Member of the Management the Brightest Christmas Tree initiative) professional tests, and tutoring courses. The plan by 2025 is to increase Board, First Deputy General and collect stationery (as part of the Get The Company’s volunteers organized RusHydro Group also takes into the installed capacity of low-carbon Director – Chief Engineer Ready for School campaign) for children Since 2015, the Company has been using a training session for children from account global standards for generation by 632.3 MW and reduce from distressed families and kids placed a training program for participants of Lastochka Orphanage (Republic of environmental management and greenhouse gas emissions by more under the custody of socially responsible the WorldSkills Russia Juniors championship Khakassia) in an attempt to facilitate their international best practices applicable than 6% as compared to 2015. charitable foundations, orphanages and as one of the main career guidance and transition to adult life after they leave to energy projects. the intensity of СО2 emissions is set boarding schools. professional development tools for orphans school. Moreover, additional training in to decrease 7.7% in the electricity Department of Development and children without parental care. maths, Russian and physics is available While planning and carrying out its generation segment and 6.4% in and Standardization of On occasion of the Energy Worker’s Day RusHydro is the only company with children to orphans and children without parental operations, the Group abides by the heat production segment. Production Processes and other holidays, corporate volunteers from orphanages in its teams. care as part of their preparation for the precautionary approach adopted come to visit retirees at their homes and the high school graduation exams and by the UN Conference on Environment The restated Environmental Policy 1 organize retiree meetings enabling energy In 2018, volunteers organized a large entrance exams at technical schools. and Development in 1992. [102-11] addresses today’s challenges and sector workers of different generations number of socialization and career trends in environmental protection. to share their experiences. On such guidance events for children, including: A team of volunteers led by Natalya The integration of RusHydro and the document was prepared on days, volunteers from RusHydro’s North ↗↗ preparation for the WorldSkills Gordeyeva, an HR specialist at Volzhskaya RAO ES East had an impact on the basis of federal government Environmental protection Caucasus branches clean up areas around Junior championships; HPP (RusHydro’s branch), helped Denis the Group’s operations, changing authorities’ proposals, specifically specialists of the Group’s monuments to Russia’s defenders and ↗↗ visits to the Company’s facilities; Tsygankov, brought up by Volzhsky the perimeter of its operations and those by the Ministry of Energy, branches and subsidiaries organize excursions to the Caucasus ↗↗ lectures and workshops on Orphanage, to successfully pass entrance causing the Group to revise its Ministry of Economic Development and Mountains to honor the heroic deed of technology and energy (for exams at the Volzhsky branch of Moscow Environmental Policy, which now the Ministry of Natural soldiers who died in defense of the North example, Denis Ivashkin, Head Power Engineering Institute. Caucasus region during World War II. of Energy Market Support
1 “Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.” (Rio Declaration on Environment and Development, 1992).
130 131 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Resources and the Environment of Enablers of RusHydro’s TPP boilers to feed on natural gas, which Branch/subsidiary Initiatives the Russian Federation as well as Environmental Policy helps reduce pollutant emissions into JSC DGK ↗↗Minor and major repairs, tests and adjustments at dust collecting equipment and aspiration the UN Sustainable Development the air and enhance the efficiency of bunkers, gas purification units (scrubbing towers, Venturi tubes) for Blagoveshchenskaya CHPP, Raychikhinskaya CHPP, Primorskaya GRES, Neryungrinskaya CHPP, Artyomovskaya TPP, Goals. RusHydro approved the Implementation gas purification and dust collecting Vladivostokskaya CHPP-2, Partizanskaya GRES, Amurskaya CHPP, Komsomolskaya CHPP-2, Program for the Environmental Policy. equipment. Mayskaya GRES, Khabarovskaya CHPP-1, Khabarovskaya CHPP-3, and Urgalskaya boiler plant The Environmental Policy won As part of the Rehabilitation and ↗↗Repair of ash dump and sluice discharge piping at Blagoveshchenskaya CHPP, Chulamskaya recognition during public hearings Modernization Program, RusHydro The Company also employs other CHPP ↗↗Construction of dam at the 3rd tier of ash dump No. 2 (upstream dam) at Primorskaya GRES, attended by representatives of procures to upgrade and replace initiatives to reduce its negative construction of ash dump at Amurskaya CHPP, ash dump expansion at Khabarovskaya CHPP-3 theWorld Wildlife Fund (WWF), hydropower units and repair HPP environmental footprint, including: ↗↗Repair of clarified water treatment facilities and pump station at Blagoveshchenskaya CHPP, Russian Union of Industrialists and turbines, including to prevent ↗↗ construction of industrial waste construction of a waste water treatment station at Khabarovskaya CHPP-2 using innovative Entrepreneurs, Moscow State environmental contamination in landfills; technologies of biochemical purification and disinfection ↗↗Repair of industrial, storm and household drains at Vladivostokskaya CHPP-2, repair of University, RUSAL, EuroSibEnergo, the course of its operations. Bank ↗↗ rehabilitation of storm drains and equipment and facilities at sewage treatment plant of Mayskaya GRES Rosseti, etc. protection efforts are ongoing to waste water treatment facilities; ↗↗Rehabilitation of Khabarovskaya CHPP-1 and Khabarovskaya CHPP-3 to upgrade boilers and maintain water conservation zones in ↗↗ collection of floating rubbish and hot-water peaking boiler plant to feed on natural gas It is worth noting that good repair. RusHydro Group seeks to transfer to waste disposal facilities; PJSC Sakhalinenergo ↗↗Repair, tests and adjustments at boilers (including dust collecting equipment), gas turbine the Environmental Policy is binding on replace oil-filled electrical equipment ↗↗ landscaping and planting of units and diesel power plant of Yuzhno-Sakhalinskaya CHPP-1 all companies within RusHydro Group with vacuum or SF6 gas, which contains greenery; ↗↗Instrumentation to monitor pollutant emissions into the air ↗↗Replacement of oil-filled electrical equipment with vacuum or SF6 gas equipment, which as well as entities that collaborate with no oil, or with that with lower oil content. ↗↗ repair of ash and slag disposal contains no oil, or with equipment with lower oil content at Yuzhno-Sakhalinskaya CHPP-1 the Group on contractual terms. RusHydro Group procures to upgrade facilities. ↗↗Current repairs of gas purification equipment at boilers of Yuzhno-Sakhalinskaya CHPP-1 ↗↗Replacement of straight runs of ash and slag pipe at Yuzhno-Sakhalinskaya CHPP-1 JSC Chukotenergo ↗↗Tests on dust collecting equipment and measurements of gaseous effluents from boilers of Key environmental protection initiatives in 2018 as part of the Rehabilitation and Modernization Program Anadyr CHPP and Chaunskaya CHPP ↗↗Procurement of gas analyzers and components for Anadyr CHPP Initiatives JSC UESK ↗↗Flue gas scrubbing from smoke and dust using special equipment (cyclones) Branch/subsidiary ↗↗Rehabilitation of diesel power plant No. 23 and replacement of diesel generator in Ust- Votkinskaya HPP ↗↗Downstream water management at earth dam No. 3 Kamchatsk (RusHydro’s branch) ↗↗Replacement and rehabilitation of overflow dam bars and construction of a transfer platform PJSC Yakutskenergo ↗↗Replacement and repair of boiler burners at Yakutskaya GRES Saratovskaya HPP ↗↗Current repairs of concrete and earth slopes of the left-bank dam and channel dam ↗↗Repair of mechanical-draft tower at Yakutskaya GRES (RusHydro’s branch) ↗↗Replacement of oil-filled circuit breakers with vacuum ones at Yakutskaya GRES ↗↗Current repairs to prevent air inflow at uniflow cyclone and multi-cyclone (boilers No. 4 and 5) ↗↗Current repairs of overflow dam sealing off concrete surfaces JSC Sakhaenergo Kamskaya HPP of Deputatsky CHPP ↗↗Repair of drainage systems (RusHydro’s branch) ↗↗Commissioning equipment for disposal of hazard classes 1–4 waste (Tiksi, Olekminsk, Batagay) Volzhskaya HPP ↗↗Sealing off oil-filled runners of turbines ↗↗Replacement of oil-filled circuit breakers with vacuum ones (RusHydro’s branch) ↗↗Landscaping of upstream and downstream penstocks ↗↗Rehabilitation of ash and slag pipe for recycling water supply at Deputatsky CHPP ↗↗Water spraying (dust suppression) of roads, coal faces and open-pit crushing and screening area Cheboksarskaya HPP ↗↗Rehabilitation of drainage water treatment facilities adjacent to the HPP building and storm JSC LCM ↗↗Repair of oil separators at vehicle handling facilities in the mining area (RusHydro’s branch) and thaw water treatment facilities adjacent to the logistics base Kolymaenergo ↗↗Installation of water meters (as part of hydroelectric unit upgrade) (Kolymskaya HPP) Boguchanskaya HPP ↗↗Search for latent flaws at ERShCh E-200 BKh biological sewage treatment plant of KOS-240 treatment facilities complex at Boguchanskaya HPP Technical regulations Assessment. Guidelines and ↗↗Fishery protection (ongoing monitoring) for environmental safety Hydroelectric Power Plants: Industrial ↗↗Inspection to identify causes for poor performance of the waste water treatment process Environmental Control. Standards and against discharge limits for oil-contaminated water (20 l/s) 2018 SAW NO INCIDENTS RusHydro adheres to a number of Requirements. JSC DRSK ↗↗Replacement of oil-filled electrical equipment with vacuum equipment OR ACCIDENTS CAUSING technical standards providing for PJSC Magadanenergo ↗↗Repair of fly-ash collectors at Arkagalinskaya GRES boilers ENVIRONMENTAL DAMAGE WITHIN environmental safety. National Standard ↗↗Maintenance of oil separators at Magadanskaya CHPP RUSHYDRO GROUP GOST R 58 224-2018 Hydroelectric PJSC Mobile Energy ↗↗Introduction of gas monitors To assess the impact on environment Power Plants, Loss Allowance for PJSC Kamchatskenergo ↗↗Repair and maintenance of waste water treatment facilities at Kamchatskaya CHPP-1 and and ensure industrial control, Turbine Oil While in Operation, Kamchatskaya CHPP-2, Central Power Grids, Yuzhno-Sakhalinskaya CHPP-1 RusHydro introduced corporate Method of Calculation for Turbine Oil standards such as Hydroelectric Losses While in Operation applies Power Plants: Environment to both the Company’s day-to-day Protection, Environmental Impact management and state supervision.
132 133 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Environmental impact industrial facilities. Prior to starting a new In 2018, there was no need to hold assessment project or modifying the existing facilities public hearings on environmental InvestmentsОбщие расходы in environmentalи инвестиции Группы protection РусГидро на охрану (at the project initiation and design impact assessment for projects being окружающей среды в 2016-2018 годах, млн руб. RusHydro ensures environmental stages), the Company procures to assess designed or constructed. Total environmental protection RusHydro Group’s Total RusHydro Group’s Total safety at all stages of the life cycle of its their impact on environment. expenses and investments of Environmental Expenses and Environmental Expenses RusHydro Group in 2016-2018, Investments by Type of Costs, and Investments by Distribution Assessment and controls over environmental impact at all stages of the project life cycle RUB mn RUB mn [103] of Costs, RUB mn [103]
Stage Controls over environmental impact Planning (pre-project stage) ↗↗R&D with a focus on environment ↗↗Preliminary environmental impact assessment for new construction and rehabilitation planning Design ↗↗Environmental impact assessment: assessment of the facility impact on environment in order to decide whether construction or rehabilitation is feasible ↗↗Designing initiatives to ensure the required level of environmental safety Construction ↗↗Implementation and follow-up on the initiatives provided for by the project and aimed at ensuring environmental safety ↗↗Compliance with environmental laws during construction and installation Operation ↗↗Industrial environmental control: initiatives preventing any deviation from the given level 1 2 8 1 0 2 1 of environmental safety ↗↗Voluntary initiatives to preserve biodiversity and improve environmental awareness 1 1 18 Total annual current (operating) costs 1,170 6 Wastewater collection and treatment 591 0 among employees and communities Environmental protection costs 363 7 Waste management 468 2 Costs for capital repair of 159 2 Atmospheric air protection 389 7 environmental protection fixed assets and climatic change prevention Protection and rehabilitation of soils, surface 121 1 Ensuring compliance with ↗↗ Federal Service for Supervision over provides for a unified system of and subsurface water Natural Resources Management; technical expertise ensuring that R&D Research activities and developments to 12 6 environmental laws mitigate human interventions ↗↗ Federal Agency for Water solutions, projects and programs Preservation of biodiversity and protection 8 7 It is mandatory for the Company to Resources; are examined for compliance with 1,694 of natural areas Environmental protection against noise, 3 3 develop draft standards applicable ↗↗ Federal Fishery Agency; the Technical Policy and applicable RUB mn vibration, and other physical impacts during the construction and operation of ↗↗ Federal Service for Supervision over technical regulations. Environmental radiation safety 0 09 its facilities which establish permissible Consumer Rights Protection and total expenses and investments Other environmental protection areas 101 8 pollutant emission and discharge Human Welfare. To ensure environmental safety while to protect the environment limits, waste generation and disposal developing new technical solutions, in 2018 limits as well as design documentation The Company relies on the documents the Company established the STC’s related to environmental protection, so approved to carry on its business task force on water reservoirs including initiatives to reduce negative in compliance with environmental and environmental protection. It environmental footprint and preserve protection standards. includes representatives of R&D biodiversity. institutions, the Chair for General Ecology of the Department of Biology These documents are to be approved Scientific at the Moscow State University, by the respective government and Technical Council the Information Fund for Water Cooperation in environmental the successful implementation of its Resources and the Environment agencies in charge of environmental Resources of the Federal Agency for protection environmental projects. of the Russian Federation (the protection, including: The Company has a permanent Water Resources, and the Papanin “UNDP Project”). the Project was ↗↗ Ministry of Natural Resources expert collective body, the Scientific Institute of Biology of Inland Waters RusHydro Group actively cooperates Prior to March 2018, RusHydro had been implemented in Russia between and Environment of the Russian and Technical Council (STC), which (Russian Academy of Sciences). with international organizations on a partner of Mainstreaming Biodiversity 2012 and 2018. the Project’s objectives Federation; matters of environment protection and Conservation into Russia’s Energy were as follows: conservation of biological diversity. Sector Policies and Operations project ↗↗ demonstration and introduction the Company supports industry-specific run by the United Nations Development of international best practices in and international initiatives to reduce Program, the Global Environmental the field of biodiversity conservation the man-made load on the environment Facility and the Ministry of Natural in Russia’s energy sector; and strives to adopt best practices for
134 135 //OUR PERFORMANCE
↗↗ improving biodiversity status in of a New Climate Agreement at the 21st and the Association of Hydropower of industrialized regions of Russia; session of the Conference of the Parties Russia, within the working group on Water use and discharge ↗↗ assistance in the set-up of to the United Nations Framework developing a methodological approach a monitoring system for biodiversity Convention on Climate Change to understanding global climate change With most of its operations based around Impact on water bodies status and testing of environmental (UNFCCC). processes in terms of greenhouse gas water bodies, RusHydro Group is a major technologies in oil producing, coal emissions from the surface of HPP user of national water resources. The Group’s waste and drainage water mining, and hydropower production; The 24th session of the Conference freshwater reservoirs and evaluating their is discharged in strict compliance with and of the Parties to the UNFCCC was absorbing capacity. RusHydro strictly adheres to the applicable Russian laws. The rights ↗↗ promoting the adoption of policies held on December, 2018 in Katowice the applicable Russian laws and timely to use water bodies for such purposes and guidelines on biodiversity (Poland), whereby Timur Khaziakhmetov, In March 2018, RusHydro and obtains all necessary permits and licenses are confirmed by relevant permits and conservation in the energy sector. Director of RusHydro’s Department of the Hydropower of Russia Association for water use and protection of water licenses duly issued by the authorised Development and Standardization of held a round table in Moscow bodies from the authorised government government agencies. The same permits Within the UNDP Project, RusHydro was Production Processes, presented his “Hydropower in the context of agencies. The Company’s water and licenses set out the applicable focusing on: report RusHydro Group’s Low-Carbon the transition of the energy sector of withdrawal activities have no significant discharge limits. [303-2] In 2018, waste water ↗↗ biodiversity conservation; Development at the Russian Investments the Russian Federation to sustainable impact on water sources. [103-1] discharges totaled 601,506,000 m3. [303-3] ↗↗ sustainable development of for a Transition to the Low GHG Emission and low-carbon development”. the event hydropower; and Development round table and spoke on discussed a wide range of issues related In 2018, RusHydro Group’s water ↗↗ development of guidelines on RusHydro’s sustainable development to the sustainable development of consumption increased by 5.86% y-o-y to biodiversity conservation in policy at the Day of Sustainable Energy. hydropower, existing methodologies for 786,864,000 m3, with 97% of water taken the hydropower sector. Both events were sponsored by assessing the compliance of hydropower for operational purposes. the Russian Ministry of Energy to discuss projects with sustainable development In 2018, RusHydro continued its sustainable development and Russia’s criteria, ensuring reliable operation of Waste water discharge by membership in international industry transition to low-carbon development, hydroelectric power plants amid climate treatment method, ‘000 m3 per associations such as the Centre for Energy improving the greenhouse gas emissions change, minimizing the negative impact Общийannum объем[303-3] сбросов сточных вод в разбивке по методу очистки, тыс. куб. Advancement through Technological inventory, including the preparation of on biodiversity during construction and Innovation (CEATI), the International a national greenhouse gas emissions subsequent operation of hydroelectric м в год (303-4) In 2013, the Company began 8 00 80 8 8 01 0 Hydropower Association (IHA) and survey. power plants, the impact of hydroelectric disclosing HPP reservoir level data the International Commission on Large power plants and their reservoirs on on a designated web page at: 1 8 Dams (ICOLD). Membership in these The participants included Ruslan the balance of greenhouse gases. http://www.rushydro.ru/hydrology/ 0 informer/ 1 0 organizations enables the Company Edelgeriyev, special representative of to interact with the world community the Russian President on climate issues, B. Bogush, member of the Board, on the safe, innovative and sustainable as well as representatives of the Ministry First Deputy General Director - Chief development of hydropower. [102-13] of Energy, Ministry of Economic Engineer of RusHydro, representatives of 22 1 22 22 0 Development of the Russian Federation, federal authorities, energy companies, 21 80 220 0 1 21 To promote the principles of sustainable Russian Meteorological Service the Association of Hydropower of development in Russia, the Company (Roshydromet), RUSAL, EuroSibEnergo, Russia, scientific and environmental contributes to the implementation SUEK, etc. organizations took part in the round of the Hydropower Sustainability table. 1 1 18 Assessment Protocol (HSAP) as Since 2015, RusHydro has been a member No treatment a statutory instrument. of the Climate Partnership of Russia, Based on the results of the round table, Insufficiently treated which seeks to unite the efforts of a decision was made on the desirability Clean under statutory re uirements businesses in the interests of transition to of adapting the existing international Treated as re uired at treatment facilities (biological, physica, chemical, mechanical treatment) Cooperation to combat environmentally friendly technologies. and Russian methods of calculating climate change and studying the effect of reservoirs on In 2018, the Company continued to report the greenhouse gas balance in order to In late 2015, RusHydro supported on greenhouse gas emissions to the CDP properly take into account the natural an initiative to unite the efforts in Russia (Carbon Disclosure Project), having been conditions Russian hydroelectric to reduce the impact on the environment its participant since 2015. reservoirs operate in, and the need to RUSHYDRO ENSURES and prevent climate change, signing develop methodological approaches to ENVIRONMENTAL SAFETY OF the Statement of the Russian Business on In 2018, RusHydro also continued its ensuring and assessing projects criteria PRODUCTION ACTIVITIES AT ALL the Negotiation Process and Adoption work, together with EuroSibEnergo for sustainable development. LIFE CYCLE STAGES OF INDUSTRIAL FACILITIES
136 137 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
RAO ES East Subgroup Water body1 Volume or average Biodiversity value Biodiversity conservation Subsidiary discharge, mn m3 Avacha Bay 3,800 Supreme
Khalaktyrka River – Supreme Impact on biodiversity cause reduction of species, habitat the Russian Red List and the 1996 IUCN PJSC Kamchatskenergo conversion, or introduction of invasive Red List of Threatened Animals, and Lake Halaktyrskoye 11 Supreme While none of RusHydro’s power species, pests or pathogens. [304-2] mentioned in Appendix 2 to the Bonn Lake Sypuchka – Supreme generation facilities is located within Convention and migratory bird specially protected natural areas, protecting appendices to bilateral JSC UESK Bystraya River 43.2 High RAO ES East’s grid infrastructure does Protected species’ habitats agreements between Russia, Japan, Magadanka River 127.5 Supreme extend to such places, sharing them affected by activities of the Republic of Korea and the DPRK. with rare plant and animal species. RusHydro Group [304-4] PJSC Magadanenergo Kamenushka River 37.9 High [304-1] Myaunja River 37.9 Supreme The habitat of the mandarin duck (Aix As the Group seeks to minimize its galericulata) in the Amur Region is PJSC Sakhalinenergo Gulf of Patience (Sea of Okhotsk) 211,250 Supreme impact on biodiversity and protected impounded by the Nizhne-Bureyskaya Lena River 515,610 Supreme natural areas, none of its activities HPP. As a rare species, the bird is on PJSC Yakutskenergo Vilyuy River 21,290 Supreme
Kazachka River 22 Medium Water bodies affected by wastewater discharges of RAO ES East Subgroup: affiliation, volume JSC Chukotenergo Lake Okhotnichye 0.25 Medium and biodiversity [306-5]
1 Chaun Bay – High RAO ES East Subgroup Water body Volume or average Biodiversity value 3 Subsidiary discharge, mn m Vilyuy River 72,400 Supreme Kivdinskoye reservoir 9.6 High Yana River 29,297 Supreme Kontrovod River – Supreme Aldan River 154,683 Supreme Promezhutochnaya Bay – Supreme JSC Teploenergoservis Obyasneniye River – High Indigirka River 14,002 Supreme Lozovy Klyuch Stream – High Allakh-Yun River 5,550 Supreme
Partizanskaya River – High Nera River 3,658 Supreme Olongoro River reservoir 43.2 High JSC LCM Kontrovod River – Supreme Semyonovskiy Stream – Medium Amnunakta River – High The impoundment area of the dam Another rare species affected by and migratory bird protecting Amurskaya Anabranch – Supreme also covers a primary habitat of the construction of Nizhne-Bureyskaya appendices to bilateral agreements Amur River – Supreme Aleuritopteris kuhnii, a rare fern listed HPP and activities of JSC DRSK is the between Russia, Japan, the Republic JSC DGK Lake Khorpy – Supreme in Russia as a threatened plant species. Far Eastern stork (Ciconia boyciana). of Korea and the DPRK. In 2018, JSC The Far Eastern stork is on the DRSK proposed an initiative to install Galbon Anabranch (Old Amur) – Supreme The process of impounding Nizhne- Russian Red List and the 1996 IUCN supports for stork nests. Zapadnaya Bay – Supreme Bureyskaya HPP reservoir also affected Red List of Threatened Animals, and Nante Stream – Supreme the habitats of local ungulates. mentioned in Appendix 1 to the CITES Pravaya Beryozovaya River – Medium Chernaya River – Medium Polezhaevka Stream – Medium Gnilaya Pad Stream – Medium Malaya Sita River – High Rudka Stream – Medium Bezymyanny Stream – Medium
1 No water body is a protected natural reserve.
138 139 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
Biodiversity conservation RusHydro Group’s biodiversity the Company’s primary goal and sets the Federal Fishery Agency released program for the Persian leopard conservation activities a zero plant and animal extinction 300,000 juvenile peled, a commercially reintroduction in Ossetia provides for RusHydro Group focuses its biodiversity target for 2025. valuable fish species, into the Elikchan comprehensive measures in research, conservation efforts on five major areas. Protected natural areas Lakes of the Kolyma. RusHydro’s environment protection and awareness (sponsorship and support) At present, RusHydro is developing Kabardino-Balkaria branch and the West building to make the region and RusHydro supports international a three-year action plan for Caspian Department of the Federal communities ready for Persian leopards initiatives in environment protection biodiversity conservation. It will Fishery Agency released 74,000 juvenile to be released under the international and biodiversity conservation. As incorporate approaches of the Project brown trout, a fish species on the Red program run by the Ministry of part of Mainstreaming Biodiversity Protection of threatened ungulates and provide for their roll-out at List, into the Baksan and its tributaries. Natural Resources and Environment Conservation into Russia’s Energy (project "Bureysky Compromise”) other facilities of RusHydro. In 2018, Bureyskaya HPP supported a fish stoking of the Russian Federation. Sector Policies and Operations, a UNDP- a working group was formed at initiative on the Amur’s largest tributary GEF project run by the Ministry of RusHydro for this purpose to include Zeya in the Amur Region. As part of In 2015, zoologists were totally Natural Resources and Environment of Plant conservation biodiversity conservation experts RusHydro’s Clean Energy Program, surprised to see a Persian leopard the Russian Federation (“the Project”), (project "Bureysky Compromise") from the Company and academic 3,600 less-than-year-old Amur sturgeon, for the first time in 60 (!) years. It RusHydro took a number of biodiversity community. Fish stocking initiatives a very rare and especially valuable fish was captured on a CCTV camera conservation measures in 2012–2017. species, were released into the river near Gizeldonskaya HPP although In particular, borders of protected With most of the Company’s activities near the village of Krasnoyarovo. the species was thought to have natural areas were changed to move Bird conservation centered on rivers, much attention the initiative was aimed at maintaining been extinct in Russia since the 1950s. them away from the impoundment is paid to the restoration of fish the fish population upstream and an unprecedented reintroduction area of Nizhne-Bureyskaya HPP and lift populations through voluntary annual midstream of the Amur. program was launched in the Caucasus restrictions on the dam construction. stocking initiatives at water reservoirs region in 2007. As part of it, a breeding (EU13) Restoration of fish populations (fish stocking) and rivers since 2003. Additionally, Boguchanskaya HPP center was established in the Sochi monitored and assessed the impact of National Park to house purebred Potential environmental impact of In April 2018, RusHydro’s branch its water reservoir on the environment Persian leopards brought from all over suitable dam sites in the Amur Region Cascade of Kubanskiye HPPs released and water life in 2018. the world. Their offsprings are prepared was assessed to proactively evaluate two forest guard lodges were built in was confirmed by Stewart Williams, 165,000 juvenile silver carp into to be released into the wild and risks of local hydropower projects the Bureysky Nature Park. a plan was an independent UNDP expert, during the Yegorlyk Reservoir. the event was repopulate the Caucasus. the animal and plan biodiversity conservation developed to minimize the impact the final audit of the Project. staged on the left bank of the reservoir RAN IEE and RusHydro’s Persian captured on camera near the HPP in measures. As part of the project on animals during the construction of and supported by the Azov and Black leopard reintroduction program in Ossetia shows that the unprecedented “Bureysky Compromise”, a nature Nizhne-Zeyskaya HPP. Starting from 2016, biodiversity Sea Department of the Federal Fishery Ossetia reintroduction program is a success. park was established to protect local conservation costs have been reported Agency. ungulates and move threatened The Biodiversity Conservation Projects as a separate item and subject to The North Ossetia branch of RusHydro The joint program of RusHydro and plants from the impoundment area. section was added to the corporate disclosure by the Company. In July, Votkinskaya HPP released over supports the Persian leopard RAN IEE was designed to create These activities were financed with website through joint efforts of 600 juvenile sterlet, an especially reintroduction program initiated by necessary conditions for the rare the funds of the UNDP Project and, the Project’s stakeholders. RusHydro Group’s Environmental valuable fish species on the Russian the Russian Academy of Sciences’ predators to repopulate the region. in fact, are compensatory measures Policy (approved by the Board of Red List, into the Votkinsk Reservoir. Severtsov Institute of Ecology and Entitled Reintroduction of Leopards provided for by the Nizhne-Bureyskaya In 2018, effectiveness of RusHydro’s Directors on August 9, 2018) provides In August 2018, Ust-Srednekanskaya Evolution (RAN IEE) in the Caucasus in Ossetia, the program studied HPP construction project. In 2018, biodiversity conservation initiatives for biodiversity conservation as HPP and the Okhotsk Department of region. the joint RAN IEE and RusHydro the possibility of releasing leopards
140 141 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018
into the wild, comprised area parents of the reviving population. As a result, the Alania National Park Greenhouse gas and air pollutant emissions preparation measures and provided for Their offsprings are trained to live in was selected for the first release. awareness initiatives aimed at picturing the wild without human assistance. the national park was fitted with RusHydro uses renewables in Ministry of Natural Resources and facility based on the fuel consumption the leopard as a national heritage They learn to avoid humans, photo and video cameras, and its operation. HPPs produce no Environment of the Russian Federation of each facility. and forming a responsible attitude settlements and domestic animals and the leopards were carrying GPS greenhouse gas emissions. on June 30, 2015, Guidelines for to the environment among local hunt prey independently. tracking collars to make it possible for Calculation of Gross Carbon Dioxide In 2018, emissions of greenhouse gases communities. researchers to monitor the animals in Still, emissions of greenhouse gases by Emissions by TPPs and Boilers went up 1.41% driven by higher power Elbrus and Volna, who completed their habitats. the facilities of RAO ES East Subgroup (RD 153-34.0-02.318-2001), and data output at the facilities of RAO ES East In July 2018, two non-relative species a similar training course, spent two were calculated in accordance from the Carbon Fund. Greenhouse Subgroup and an increase in reference of the Persian leopard – Elbrus years in the Sochi Breeding Center The joint program of RusHydro and with Order No. 300 issued by the gas emissions were calculated per fuel consumption. (male) and Volna (female) – were after birth preparing for their life in Severtsov Institute of Ecology and released in the Alania National Park the wild. In the meantime, a team of Evolution for the reintroduction of Direct greenhouse gas emissions by RAO ES East (scope 1), ‘000 tonnes [305-1] with support from RusHydro. They zoologists, hydropower engineers Persian leopards in North Ossetia Item 2016 2017 2018 2018/2017, % were raised in the Sochi Breeding and volunteers analyzed natural received the Vernadsky National СО emissions, '000 tonnes 34,096.5 34,457.1 34,942.3 1.4 Center, which is now home to ecosystems in North Ossetia to Environmental Award as the Best 2
several purebred leopards brought select the best site for leopards to be Social and Environmental Initiative N2O emissions, '000 tonnes CO2-eq. 119.1 117.1 120.2 2.7 from different countries to become released. in 2018. CH4 emissions, '000 tonnes CO2-eq. 14.4 13.9 14.6 5.0 Total emissions 34,229.9 34,588.2 35,077.1 1.4 natural gas combustion 9,936.0 10,101.5 10,147.9 0.5 Rehabilitation of disturbed areas fuel oil combustion 693.5 712.0 723.1 1.6 solid fuel combustion 23,600.4 23,774.6 24,206.1 1.8 Habitats preserved and rehabilitated by RAO ES East Subgroup [304-3] Name JSC PJSC PJSC JSC JSC Total DGK Magadanenergo Sakhalinenergo Chukotenergo LCM Intensity of greenhouse gas a primary objective for RusHydro Group. Intensity of greenhouse gas emissions by RAO ES East Its Environmental Policy sets a number emissions by RAO ES East January 1, 2018 Интенсивность выбросов1 парниковых газов АО «РАО ЭС Востока», т of 2025 low-carbon targets, including Subgroup, tonnes [305-4] Total disturbed area, 2,300.52 272.00 255.02 174.14 4,027.19 7,028.87 The CO2-equivalent emission intensity reduction of greenhouse gas emissions ha is calculated as a ratio of total emissions and emission intensity and expansion of –2.1 Total post- 59.00 51.00 3.22 0.50 24.39 138.11 ∆, % (tonnes CO2-eq.) to electric power low-carbon installed capacity. RusHydro construction area, ha (mn kWh) and heat (‘000 Gcal) produced. Group plans to achieve a 6% decrease Topsoil stockpiled, 275.61 0 0 0 578.78 854.39 in its greenhouse gas emissions by 2025 3 ‘000 m One of the key challenges accounted for as compared to 2015. The year 2015 Total in 2018 by RusHydro in its updated Environmental was recommended by the Ministry of –1.9 ∆, % Total disturbed area, 15.00 0 0.1 0.51 83.60 99.21 Policy (approved by the Board of Economic Development of the Russian ha Directors on August 9, 2018) is the global Federation to be used as the base year in
climate change and need to adapt to the greenhouse gas reduction roadmap 8 8 Total post- 0 0 0.1 0 0 0.10 construction area, ha global warming effects threatening for the Russian public sector companies. human life and health, flora and fauna, The intensity of СО emissions is set to Total rehabilitated 0 0 0.1 0 0 0.10 2 1 18 area, ha and causing changes in long-standing decrease 7.7% in the electricity generation Intensity of CO emissions from power hydrological and meteorological patterns. segment and 6.4% in the heat production 2 generation, tonnes CO -e December 31, 2018 2 Low-carbon development is therefore segment. Intensity of CO2 emissions from Total disturbed area, heat production, tonnes CO -e . 2,315.52 272.00 255.02 174.66 4,110.79 7,127.99 2 ha Total post- 59.00 51.00 3.22 0.50 24.39 138.11 construction area, ha Topsoil stockpiled, 275.61 0 0 0 578.78 854.39 ‘000 m3
1 Net of Cascade of Viluysky HPPs and solar power plants producing no greenhouse gas emissions
142 143 //OUR PERFORMANCE PJSC RusHydro | Annual Report 2018 Выбросы загрязняющих веществ в атмосферу в разбивке по основным категориям, т (305-7) Выбросы загрязняющих веществ в атмосферу в разбивке по основным The Expansion of Installed Low-Carbon Air pollutant emissions by major категориям,Air pollutant т emissions,(305-7) Waste Capacity target is planned to be achieved categories, tonnes [305-7] tonnes [305-7] with the Comprehensive Modernization Most wastes from RusHydro Group’s soil stripped during coal mining, contractors duly licensed to collect, Program (Long-Term Development 2 generating assets are wastes belonging bottom coal ashes, and waste from transport and treat such waste. (306-4). 8 1 2 2 1 Program for 2012–2020 with an outlook 0 1 to hazardous classes IV and V. They construction and repairs. Accumulated until 2025) providing for retrofit of include low-hazard wastes, such as waste is collected by specialized 81 1 RusHydro’s generating facilities. RusHydro 8 18 8 is also heavily engaged in renewable 1 1 8 Total waste by hazard class in 2018, tonnes [306-2] energy projects. Item 2016 2017 2018 2018/2017, % In particular, the Company builds smaller 1 1 0 000 0 RusHydro Subgroup HPPs in Northern Caucasus. In November 2018, RusHydro commissioned a 900 kW Hazardous waste class I and II 21 31 18 –42 wind power plant in the Arctic settlement Hazardous waste class III, IV and V 29,179 29,191 23,178 –21 1 1 18 1 1 18 of Tiksi in the Republic of Sakha (Yakutia). Total 29,200 29,222 23,196 –21
Gaseous and li uid emissions NOх RAO ES East Subgroup In 2018, measures were taken at Solid emissions SOх the Company’s subsidiaries in the Far East СО Hazardous waste class I and II 33 39 45 15 to reduce air pollutant emissions: Hazardous waste class III, IV and V 24,743,429 26,570,307 29,596,949 11 ↗↗ minor and major repairs at dust Total 24,743,462 26,570,346 29,596,995 11 collecting equipment, aspiration RusHydro Group bunkers and scrubbing towers to Air pollutant emissions maintain the flue gas quality at Hazardous waste class I and II 54 70 63 –10 the required level. Such measures Air pollution is monitored at all production Hazardous waste class III, IV and V 24,722,608 26,599,498 29,620,127 11 were taken at Blagoveshchenskaya facilities of RusHydro Group. In 2018, SOx 2.1% Total 24,772,662 26,599,569 29,620,190 11 CHPP, Raychikhinskaya CHPP, emissions increased by 11% on the back Primorskaya GRES, Neryungrinskaya of a higher power output at gas-fired drop in CO2 specific emissions GRES, Artyomovskaya CHPP, thermal power plants. associated with electricity gener- A 11% year-on-year increase in wastes ↗↗ more bottom ash produced as ↗↗ more overburden resulting from Vladivostokskaya CHPP-2, ation is mostly attributable to an increase a result of higher coal consumption larger-scale stripping operations at Partizanskaya GRES, Amurskaya in wastes belonging to hazardous at DGK, PJSC Sakhalinenergo, JSC LCM. CHPP, Komsomolskaya CHPP-2, class V due to: PJSC Kamchatskenergo, and Mayskaya GRES, Khabarovskaya PJSC Magadanenergo; CHPP-1, Khabarovskaya CHPP-3, Urgalskaya boiler plant, and Arkagalinskaya GRES; ↗↗ rehabilitation of Khabarovskaya CHPP-1 and Khabarovskaya CHPP-3 to upgrade boilers and hot-water peaking boiler plant to feed on natural gas (305-5)
144 145 //CORPORATE GOVERNANCE
EVEN MORE
RUSHYDRO GROUP HAS HIGH CREDITWORTHINESS. FOR THE FIRST TIME IN THE GROUP’S HISTORY, ALL THREE LEADING INTERNATIONAL RATING AGENCIES–S&P,MOODY’S,ANDFITCH–UPGRADED THE CREDIT RATINGS OF RUSHYDRO TO THE SOVEREIGN LEVEL IN THE INVESTMENT CATEGORY. RUSHYDRO’S FINANCIAL SUSTAINABILITY CONTRIBUTES TO THE PERFORMANCE OF THE INVESTMENT PROGRAM FOCUSED ON THE EXPANSION OF THE ENERGY INFRASTRUCTURE IN THE REGIONS OF PRESENCE. //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
CORPORATE Corporate governance structure [102–18] eneral eet n o S are olders GOVERNANCE Appro ately 0 000 s are olders e er s n t e r r ts at annual and e traord nary eneral eet n s o s are olders RusHydro Group’s corporate governance aims to protect the rights and interests of the shareholders, build and maintain trusted relationships between the Company and its investors, and grow the Company’s value Report on t e aud t o ple entat on Report on t e a ura y Appro al le t on le t on and dividend yields. t e Co pany s o resolut ons o t e Co pany s state ents state ents
It complies with applicable laws this power is corporate rather than Its adoption confirms the Company’s e oard o d re tors ternal aud tor and reflects today’s trends and administrative by nature. Certain commitment to complying 1 e ers nternal Aud t Pr e ater ouseCoopers best practices, while fulfilling procedures for the state to exercise its with the best corporate C a r an o t e oard o Co ss on Aud t the requirements associated with rights as a shareholder are stipulated governance practices, including re tors ury rutne the listing of shares on the Moscow by law, setting out the process for the recommendations of the Bank of Exchange and of depositary receipts the government to make decisions Russia’s Corporate Governance Code. on the London Stock Exchange and as regards the Company using its Appo nt ent Ad n strat e on the U.S. OTCQX over-the-counter corporate rights. ser es Corporate market. Re o endat ons Se retary The Group’s corporate governance Appo nt ent RusHydro Group has the state as its principles and procedures are laid out Appo nt ent controlling shareholder, which has, due in the Company’s Charter and internal nternal to its majority stake in the authorized regulations. The corporate practices are Aud t Ser e capital, significant power with respect formalized in the Corporate Governance A ounta l ty to corporate governance. However, Code. Co ttees under ple entat on Appo nt ent t e oard o re tors o resolut ons super s on Key principles [102–16] ↗ Strate y Co ttee ↗ o nat on and ey pr n ples o orporate o ernan e C a r an Co pensat on o t e ana e ent nternal Control and Co ttee oard eneral re tor R s ana e ent re tor C e Aud tor ↗ n est ent Co ttee olay S ul no ↗ Co ttee on ner y u ta le and Pro ess onal s ransparen y e t e Ad n strat e e elop ent and un t onal a r treat ent o respons l ty and and a ess l ty syste o ana e ent report n all s are olders a ounta l ty o t e o n or at on nternal ontrol o t e ar ast super s on oard o re tors to t e a out and r s ↗ Aud t Co ttee Co pany s s are olders t e Co pany ana e ent ↗ Co ttee on Appo nt ent Rel a l ty ner y ana e ent oard1 Efficiency and nno at on e Co pany s pos t on er se y all s are olders Pre ent on o any Cont nuous on ot er portant atters t e Co pany ts ana e ent s are older a t ons a ed pro e ent o bodies, officers and other at aus n ar to ot er orporate sta e olders o t e r r ts n ood s are olders or o ernan e Su s d ar es a t pre ent on o a use o r ts t e Co pany pra t es e Co pany s pos t on on ey atters
1 Decides on matters reserved to supreme governing bodies of the subsidiaries where the Company exercises the rights of the sole shareholder (participant).
148 149 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Subsidiary management Compliance with the Corporate Governance Code
RusHydro (including indirectly through meetings of shareholders/participants, position on other important matters As a result of corporate governance Compliance with the Corporate Governance Code, % subsidiaries) has stakes in authorized on boards of directors and supervisory regarding subsidiaries (KPI approval improvement efforts and capital of companies engaged in bodies of the subsidiaries. (adjustment), participation of the subsidiary implementation of the standards set 8 2 electricity and heat generation and in non-energy organizations, nomination forth in the Code, RusHydro came 2 2 distribution, energy facilities design, Deciding on matters reserved to supreme of candidates to the subsidiary’s to observe 92% of the principles construction, repair, maintenance, governing bodies of the subsidiaries management and supervisory bodies, etc.) in 2018, compared to 63% in 2016. rehabilitation and modernization, where the Company exercises is established by the Management Board. and other activities. the rights of the sole shareholder (participant) falls within the remit of In 2018, aiming to improve the quality The Company contributes to subsidiaries’ the Management Board. Establishing and transparency of the corporate strategy delivery, stable economic the Company’s position on key matters governance with respect to subsidiaries, growth and investment appeal, and regarding subsidiaries (reorganization, the Company’s internal regulations 1 1 18 protection of rights and interests of liquidation, increase of the authorized were amended to provide members of For a detailed report on the Company’s compliance Observed the shareholders of both the Company capital, approval of major transactions, RusHydro’s Board of Directors with the Partially observed with the Corporate Governance Not observed and its subsidiaries. participation of the subsidiary in other right to access documents and make Code, see Appendix № 1. energy organizations, disposal of inquiries as regards subsidiaries and to go The Company manages its subsidiaries energy assets) falls within the remit of into matters relating to material aspects of by being represented at general the Board of Directors. The Company’s their business. Compliance with the principles of the Corporate Governance Code1 Observance of standards Observed Partially observed Not observed Total and principles of the Code 2018 Improving the corporate governance system Year 2016 2017 2018 2016 2017 2018 2016 2017 2018 Shareholder rights and equitable 10 11 12 2 2 1 1 0 0 13 In 2018, the Company continued • recommendations regarding material Company’s annual report and treatment of shareholders to implement the standards set forth corporate actions by independent on the Company’s website were The Company’s Board of Directors 20 23 32 12 10 1 4 3 3 36 in the Code and aimed at corporate directors before their approval by improved; The Company’s Corporate Secretary 2 2 2 0 0 0 0 0 0 2 governance improvement by consistently the Board of Directors; ↗↗ the Information Policy Regulations Remuneration of the Company’s 10 10 10 0 0 0 0 0 0 10 amending the internal regulations and • access by the Company’s were updated to reflect global and directors, executives and other key applying the standards in the day-to-day shareholders and members Russian best practices; managers operations. of the Board of Directors to ↗↗ policy on Rotation of Auditors and Risk management and internal control 5 6 6 1 0 0 0 0 0 6 the documents containing Policy on the Ownership of Shares system The following key actions were taken information on the Company’s in PJSC RusHydro and Shares Disclosures and the Company’s 3 6 7 4 1 0 0 0 0 7 in 2018: subsidiaries; (Interests) in PJSC RusHydro’s information policy ↗↗ the Company’s internal regulations ↗↗ candidates to the Board of Subsidiaries by Members of Material corporate actions 0 0 4 4 5 1 1 0 0 5 were amended to include standards Directors were assessed with the Board of Directors and on: respect to necessary experience Management Board were approved • development of an onboarding and knowledge, good reputation by the Board of Directors. program for first-time elected and absence of conflict of interest, members of the Board of Directors; with the results of the assessment In addition, the Company was fully • prevention and resolution of conflicts included in the materials for committed to compliance with of interest on the Board of Directors; the Annual General Meeting of the Corporate Governance Code • engagement by the Board of Shareholders; over the reporting period: Senior Directors of independent external ↗↗ the Board of Directors’ performance Independent Director was elected; experts (advisors) to work on matters was independently assessed, with performance of the Company’s risk within its remit; the results reviewed by the Board of management and internal control • improvement of the Board of Directors at a meeting held in person; system was assessed; corporate Directors’ performance through ↗↗ the number of meetings of the Board governance practices in the offering educational and professional of Directors held in person was Company were discussed; report on development opportunities for its increased; the implementation of the Company’s members; ↗↗ the quality and level of detail Information Policy Regulations was of information disclosed in the reviewed; etc.
1 Compliance with the principles of the Corporate Governance Code was assessed based on the Bank of Russia’s methodology and reporting recommendations with respect to such compliance (annex to Bank of Russia letter No. IN-06-52/8 dated February 17, 2016). For a full report on the Company’s compliance with the principles and recommendations of the Corporate Governance Code, including explanation of deviations from the compliance assessment criteria, see Appendix X to RusHydro’s annual report.
150 151 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Corporate governance quality assessment SHAREHOLDERS In 2018, corporate governance quality components, each including a set of the Russian Corporate Governance was externally assessed by the Russian criteria to reflect corporate governance Code. In addition, the Company runs a AND INVESTORS Institute of Directors (RID). policies, procedures and structures rather low risk of losses to owners due as required by applicable Russian to corporate governance issues. In September 2018, the RID increased laws, the Moscow Exchange’s Listing Share capital and securities RusHydro’s corporate governance Rules, recommendations of the Russian rating according to the National Corporate Governance Code and global RusHydro’s authorized Pevek-Bilibino high-voltage power registered shares. the Company did 1 Corporate Governance Rating best practices. capital lines in Chukotka and to the upcoming not issue preferred or ordinary shares (NCGR) scale from level 7++ to level refurbishment of the Chaun and Bilibino with differing par values; 8 “Advanced Corporate Governance The RID has concluded that The authorized capital of the Company energy hub following the transformation ↗↗ the Company does not hold any Practice”. the Company complies with the Russian THE COMPANY INTENDS amounts to 426,288,813,551 ordinary of the power units at Bilibino NPP, which of its own shares; 2 legislative requirements with respect TO FURTHER IMPROVE ITS shares, each with a par value of RUB 1 . has reached the end of its service life. ↗↗ Company’s subsidiaries hold The Company’s corporate governance to corporate governance and observes CORPORATE GOVERNANCE 3,852,259,680 shares, or 0.9% of practices were assessed based on four many of the recommendations of RATING the Company’s authorized capital.3 Additional share issuance Information on the Company’s shares On June 1, 2018, the Board of Directors Corporate governance resolved to increase the authorized ↗↗ the governing bodies of the Russian capital by RUB 14,013,888,828 with Federation have no special right improvement prospects an additional placement via open to participate in the management subscription. The decision to issue of the Company (“golden share”); Key areas for improvement as regards date they submit their request the Board of Directors to improve additional shares was registered ↗↗ the executive bodies have See the full version the Company’s corporate governance to the Company (from the date the operating performance by the Bank of Russia on August no information on any interests of the document at: in 2019 include the following: the list is drawn up if the request of the Board of Directors and 27, 2018, with the issuance being in the share capital of over 5%, http://www.rushydro.ru ↗↗ Amend the Company’s Charter is submitted beforehand); its committees; and prepare assigned the registration number apart from those already disclosed and internal regulations to reflect ↗↗ Enable shareholders to vote a report on the results of the self- of 1-01-55038-E-043D. by the Company; the following standards: at Annual General Meetings of assessment exercise to be ↗↗ the total number of voting shares • resolutions on critical matters Shareholders via an electronic reviewed by the Board of Directors The proceeds from the additional issue with breakdown by categories set forth in recommendation 170 voting system; at a meeting held in person; are going to the construction of 110 kV (types): 426,288,813,551 ordinary of the Code to be passed by ↗↗ Arrange for a comprehensive ↗↗ Disclose in the Company’s annual a qualified majority of at least formal self-assessment of the Board report the amount of remuneration three-quarters or a majority vote of Directors and its committees of each member of the Board of involving all elected directors; with a focus on their performance Directors. • shareholders to be granted as a single body and individual The number of shares at the disposal of the Company’s subsidiaries the right to access the list of contributions of directors to the Name Number of shares, pcs Share in authorized capital, % persons entitled to attend proceedings of the Board of General Meetings of Shareholders Directors and its committees; JSC Hydroinvest 3,430,091,314 0.804640 from the date following the draft recommendations to JSC Zaramagskiye HPP 271,302,097 0.063643 PJSC DEK 73,093,031 0.017146 JSC RAO ES East 48,511,987 0.011380 JSC ChirkeyGESstroy 29,205,310 0.006851 PJSC Yakutskenergo 55,941 0.000013
1 As at December 31, 2018 2 State registration number of the issue: 1-01-55038-E, dated February 22, 2005. 3 RusHydro’s shares held by the Company’s subsidiaries were not used in voting at the Annual General Meeting of Shareholders that took place on June 27, 2018.
152 153 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Shareholders
Share of securities in free float1 Shareholder agreements The Company’s shares are held by around 350,000 Russian and foreign investors. The Russian Federation Date Free-float factor owns the controlling stake of 258,161,535,606 shares, or 60.56% of the Company’s authorized capital. RusHydro’s shareholders can enter into Last trading day of 2016 0.23 shareholder agreements, including The Russian Federation (state property) The Company’s shareholders whose 31, 2017, and December 31, 2018, Last trading day of 2017 0.25 those that afford them an extent of owns the Company’s shares via the stake in the authorized capital, when respectively. [102-5] Last trading day of 2018 0.19 control disproportionate to their Federal Agency for State Property taken together with the disclosed contribution to the authorized capital2. Management (258,161,535,606 pcs) and clients of nominal holders, exceeds 2% ITAR-TASS News Agency (248,527 pcs). as at December 31, 2016, December
Notifications on concluded shareholder agreements received by RusHydro Changes in the group of persons with the right to execute, directly or indirectly, at least 2% of the voting Parties to the shareholder agreement Date of the shareholder rights attached to the Company’s voting shares, % agreement
As at December 31, 2016 As at December 31, 2017 As at December 31, 2018 ↗↗The Russian Federation as represented by the Federal Agency for State Property Management March 7, 2017 ↗↗VTB Bank (PJSC) ↗↗The Russian Federation as represented by the Federal Agency for State Property Management June 23, 2016 ↗↗RusHydro’s subsidiaries: Hydroinvest3, EZOP, Energy Index – HydroOGK
Outstanding shares
Moscow Exchange listing Index inclusion: ↗↗ FTSE All-World Index AWORLDS; ↗↗ MOEX Russia Index (previous name – ↗↗ FTSE4Good Emerging; The Company’s shares have been MICEX Index) IMOEX; ↗↗ NASDAQ Russia NQRU; The Russian Federation as 67 The Russian Federation as 61 The Russian Federation as 61 traded on the Moscow Exchange ↗↗ Electric Utilities Index MOEXEU; ↗↗ Nasdaq AlphaDEX Emerging Markets represented by the Federal Agency represented by the Federal Agency represented by the Federal for State Property Management for State Property Management Agency for State Property (formerly MICEX Stock Exchange). ↗↗ Broad Market Index MOEXBMI; NQDXEM; Gazprombank 5 VTB Bank (public 13 Management since February 4, 2008 (ticker: HYDR). ↗↗ State-Owned Companies Index ↗↗ STOXX Russia Total Market TCRUP; (joint-stock company) joint-stock company) VTB Bank (public 13 The securities are listed in Level 1, MOEXSCI; ↗↗ STOXX Optimized Russia EEORGT. JSC Hydroinvest 3 LLC Avitrans 2 joint-stock company) The Company’s other shareholders 25 Jivanta Ventures Limited 3 LLC Avitrans 6 the Exchange’s top quotation list. ↗↗ FTSE Emerging Index AWALLE; whose stake in the authorized The Company’s other shareholders 21 The Company’s other shareholders 20 capital, when taken together whose stake in the authorized whose stake in the authorized with the disclosed clients, capital, when taken together with capital, when taken together with is below 2 the disclosed clients, is below 2 the disclosed clients, is below 2 Moscow Exchange trading information
Item 2016 2017 2018 Changes in the shareholding structure by shareholder category, % Trading mode T+: stocks and DRs T+: stocks and DRs T+: stocks and DRs Name of the registered entity Percentage share in Percentage share in Percentage share in the Currency RUB RUB RUB the authorized capital the authorized capital as authorized capital as at Maximum trade price 0.994 1.100 0.810 as at May 23, 2016 at December 31, 2017 December 31, 2018 Minimum trade price 0.575 0.717 0.476 The Russian Federation as represented 66.8 60.6 60.6 by the Federal Agency for State Property Year-end trade price 0.926 0.729 0.486 Management Trading volume, bn pcs 134 173 136 Legal entities 30.1 38.1 38.1 Individuals 3.1 1.3 1.3
1 In accordance with the Moscow Exchange’s methodology for calculating the free-float factor published at http://www.moex.com/ru/index/MICEXINDEXCF/constituents/. 2 For information on the ability of certain shareholders to obtain or actual cases of them obtaining an extent of control disproportionate to their contribution to the authorized capital, including through shareholder agreements or based on them holding ordinary and preferred shares with differing par values, please see the website at: http://www.rushydro.ru/upload/iblock/65a/ Svedeniya-o-vozmozhnosti-priobreteniya-stepeni-kontrolya.pdf. 3 As at March 7, 2017, Hydroinvest was no longer the Company’s shareholder, while the aggregate stake of EZOP and Energy Index – HydroOGK in the Company’s authorized capital went down to 0.8% due to the sale of shares to VTB Bank (PJSC). As at September 28, 2018, Hydroinvest held 0.8% in RusHydro’s authorized capital following the incorporation of EZOP and Energy Index – HydroOGK into Hydroinvest.
154 155 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Share performance on the Moscow Exchange GDR and ADR program structure as at December 31, 2018 RUB Type Start of Depositary bank Ratio Ticker Quantity as at Trading platforms bn pcs 1.2 10 trading December 31, 2018, pcs Rule 144А June 17, 2008 The Bank of New 1 GDR = 100 HYDR 78,273 London Stock Exchange 8 1.0 GDRs York Mellon ordinary shares (Main Market – IOB)
6 0.8 Level I ADRs August 7, 2009 The Bank of New 1 ADR = 100 RSHYY 116,318,249 OTCQX York Mellon ordinary shares 4 HYDR London Stock Exchange
0.6 2 Share performance over companies on the part of global investors Capitalization 0 0.4 the last three years given the stricter monetary policy in 12 31 2014 12 31 2015 12 31 2016 12 31 2017 12 31 2018 the US and oil price volatility. For most of RusHydro’s market 1 Share price, RUB Trading volume, bn pcs 2016 the year, RusHydro’s shares traded in line capitalization , RUB mn with the market. At the end of the year, In 2016, the MOEX Russia Index added the share price was driven down by Shares vs key indices of the Moscow Exchange 27%, the MOEX Electric Utilities Index – the news of RusHydro’s Board of Directors 110%, and RusHydro shares grew resolving to suspend the construction 200 by 36%. The domestic market was of Zagorskaya PSPP-2. buoyed by the expected recovery 150 of the Russian economy and ruble appreciation in the second half of 2018 100 the year. RusHydro shares grew on 1 50 the back of high dividend payments, In 2018, the MOEX Russia Index was up 0 20 0 1 full liberalization of the HPP capacity 7.8% year-on-year, while the Moscow 12/30/2016 12/29/2017 12/29/2018 0 market in Siberia, as well as overall Stock Exchange Power Index was
-50 strong hydro performance thanks to down 11.4%, with shares in RusHydro 12 31 2014 6 30 2015 12 31 2015 6 30 2016 12 31 2016 6 30 2017 12 31 2017 6 30 2018 12 31 2018 higher water levels. An additional boost losing 33.4%. In 2018, the market value
RusHydro MicexPWR Moscow Exchange to shares was provided by measures of RusHydro shares decreased against to optimize operating and investment a backdrop of the general lack of expenses, decisions on refinancing investor interest in the electric power Shares traded on the global ADR trading on the London Stock Exchange the debt of RAO ES East Subgroup industry. In Q1 2018, RusHydro’s shares market Item 2016 2017 2018 by signing a forward contract for traded in line with the market. From THE COMPANY’S SHARES RUB 55 bn in equity capital with VTB Q2 2018 onwards, the Russian market HAVE BEEN TRADED ON THE As at December 31, 2018, the number Maximum trade price, USD 1.570 1.810 1.370 Bank (PJSC), and full consolidation and RusHydro shares were under MOSCOW EXCHANGE SINCE of shares traded outside of the Russian Minimum trade price, USD 0.750 1.200 0.640 of the RAO ES East shares for 100% pressure from sanctions on RUSAL Group, Federation in the form of ADRs and GDRs ownership. The shares also benefited the biggest power consumer in Siberia 2008 AND ARE LISTED IN stood at 11,639,652,200, or 2.73% of Year-end trade price, USD 1.455 1.200 0.660 from the disposal of major assets by and the Group’s partner on the BEMO LEVEL 1, THE EXCHANGE’S TOP the Company’s authorized capital. the Company for a total amount of over project, geopolitical risks, including talks QUOTATION LIST. Trading volume, bn pcs 188 175 195 RUB 15 bn. on introducing new sanctions by the US (DASKA, August 2018), as well as lower ADR performance on the London Stock Exchange interest in emerging market companies
USD 2017 with no USD-denominated export revenue mn psc 1.9 on the part of global investors while 12 In 2017, the MOEX Russia Index was down the US was tightening its monetary policy. 1.7 10 6%, the MOEX Electric Utilities Index – Starting mid-October, RusHydro’s shares 1.5 110%, and RusHydro shares lost 21%. began dropping in price due to investor 8 The Russian market faced headwinds and analyst expectation of MSCI excluding 1.3 in the form of geopolitical risks, which the Company from its Russia index, which 6 included talks on new US sanctions it did in late November 2018. 1.1 as well as lower interest in Russian 4 0.9
2 0.7
0 0.5 12 31 2014 12 31 2015 12 31 2016 12 31 2017 12 31 2018 1 Source: the official website of the securities market operator (PJSC Moscow Exchange): http://www.moex.com/s26 Market capitalization is calculated as the number of shares of the respective category (type) multiplied by the market price of one share as disclosed by the market operator. ADR price, USD Trading volume, mn psc 156 157 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Dividends Share of IFRS net profit allocated Dividend yield1, % for dividends, % RusHydro’s dividend policy is focused allocates no less than 5% of its profit under Information on payment on supporting the Company’s strategic the IFRS consolidated financial statements of declared (accrued) 46.1 development for the benefit of its of RusHydro Group to pay dividends at dividends on the Company’s RUB bn shareholders by striking an optimal balance the end of the period (http://www.eng. shares in 2017 dividends paid by RusHydro between dividend payouts and profit rushydro.ru/investors/Dividends/). over the past three years capitalization. As at December 31, 2018, the Company The Development Strategy of RusHydro had paid out RUB 11.19 bn in dividends, To ensure transparency in determining Group until 2020 with an outlook for with unpaid dividends amounting the amount of dividends and dividend 2025 sets the dividend payout ratio of at to RUB 38 mn. The latter was due 0 0 payments, the Company has Regulations least 50% of net profit, and the Company is to reasons beyond the Company’s on the Dividend Policy in place, which was always going to target the maximum level control: the Company or the Registrar 1 1 18 1 1 18 approved by the resolution of RusHydro’s of dividend yield for its shareholders. [103] (nominal holder) did not have the exact Board of Directors (minutes No. 195 dated and necessary address details or bank March 28, 2014). When determining Based on RusHydro’s performance details. the recommended amount of dividends in 2017, the Annual General Meeting Total shareholder return and submitting it to the General Meeting of Shareholders on June, 27, 2018 The Company made the dividend of Shareholders for approval, the Board resolved to pay out dividends on payments to the federal budget in full, in Since 2016, total shareholder return MICEX Index). Changes in the MOEX (100% match) if the Company’s actual of Directors considers the Company’s net the ordinary shares in the amount of the amount of RUB 6.8 bn. The Company (TSR), the Company’s central KPI Russia Index are calculated as a relation TSR grew faster than the MOEX Russia profit in accordance with the consolidated RUB 11.23 bn, or 50% of the IFRS net has no dividends to the federal budget metric, has been assessed by between changes in the average Index Index in the reporting period. financial statements of RusHydro Group profit. that are in arrears. comparing the actual TSR values value over the last 22 trading days of in accordance with the International delivered by RusHydro against the reporting year and the average In 2018, the TSR was -32.8%, while Financial Reporting Standards (IFRS) and Over the last three years, changes in the MOEX Russia Index, Index value of the last 22 trading days the MOEX Russia Index grew by 12.2% the Russian Accounting Standards (RAS), the Company has paid out a total the key composite index of the in the year preceding the reporting over the same period. as well as the Company’s need to finance of RUB 46.1 bn in dividends. Moscow Exchange (IMOEX, previously year. The KPI is deemed to be achieved the investment program. The Company
Dividend history for the five years preceding the reporting year Shareholder and investor relations
Reporting period for Total amount of Amount of dividends ON APRIL 19, 2019, RUSHYDRO’S During the reporting period, agencies with the participation of seeking to enforce compliance with the which the dividends declared (accrued) declared per share, RUB BOARD OF DIRECTORS APPROVED the Company focused closely the Company’s management; sustainable development criteria. Those were paid dividends, RUB ‘000 AN AMENDED VERSION OF THE on maximizing engagement with ↗↗ a visit to the Zaramagskaya HPP- agencies included: 2013 5,248,250 0.01358751 DIVIDEND POLICY1 SETTING THE participants of the exchange market 1 construction site for analysts and 2014 6,032,750 0.01561855 BASE VALUE FOR CALCULATING and improving efficiency of information investors. ↗↗ CDP (Carbon Disclosure Project); disclosures. ↗↗ Sustainalytics; 2015 15,011,046 0.038863 THE AMOUNT OF DIVIDENDS The meetings focused on discussing ↗↗ MSCI-ESG; 2016 19,875,503 0.0466245 IN THE AMOUNT OF 50% OF As part of the investor engagement RusHydro Group’s strategic priorities ↗↗ FTSE-Russel; RUSHYDRO GROUP’S NET PROFIT 2017 11,225,676 0.0263335 exercise, the Company held: and plans, including its dividend policy, ↗↗ Vigeo Eiris; FOR THE RELEVANT REPORTING ↗↗ more than 100 one-on-one and implementation of the Value Growth ↗↗ Robeco-SAM; YEAR UNDER IFRS AND THE group meetings with the managers Plan, management efforts aimed at ↗↗ Trucost; MINIMUM DIVIDEND (LOWER of major international and Russian improving operational efficiency, and ↗↗ Energy Intelligence. 2 THRESHOLD) AT THE LEVEL OF investment funds; plans for asset modernization. In 2018, AVERAGE DIVIDEND FOR THE ↗↗ four quarterly conference calls the Company also closely engaged with For more details on RusHydro’s PREVIOUS THREE YEARS for analysts, investors and rating the leading global analytical agencies Dividend Policy see http://www.rushydro.ru
1 Minutes No. 287 of April 22, 2019. 2 The level of average dividend for the previous three years is calculated the following formula: 1 The dividend yield is calculated upon the adoption of the resolution on the size of the annual dividend by dividing the annual dividend per one share by that share’s median market price
Divthreshold = (Div–3 years+ Div–2 years + Div–1 year) / 3 in the reporting period (dividends – PJSC Moscow Exchange, http://moex.com).
158 159 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
All candidates nominated to HR, innovation and investment, as ↗↗ have impeccable business and GOVERNING BODIES the Company’s Board of Directors well as production and R&D; personal reputation, sufficient skills, have higher education and are highly- ↗↗ have a track record of serving on expertise and experience to make professional and qualified, and: boards of directors or in senior decisions falling within the Board of General Meeting of Shareholders ↗↗ are recognized experts in energy, positions at other joint-stock Directors’ remit and perform their finance, law, strategic and corporate companies listed on organized responsibilities efficiently. The General Meeting of Shareholders is the supreme governing body of the Company, which operates governance, audit, risk management, exchanges; in accordance with the laws of the Russian Federation, the Company’s Charter and the Regulations on the Procedure for Convening and Holding General Meetings of Shareholders of RusHydro.
On June 27, 2018, the Annual General the governing and supervisory bodies Full name Year of Status Nominated by Committee membership appointment Meeting of Shareholders was held of the Company, and other invitees. AC NCC SC CEDFE CREEI IC in Moscow (Minutes No. 17 of June The meeting quorum stood at 87%. Artem Avetisyan 2015 Non-executive Russian Federation 28, 2018) and was attended by Maxim Bystrov 2013 Independent Russian Federation + + + 501 shareholders, as well as media No Extraordinary General Meetings of More information on the Annual General Meeting of Shareholders, representatives, nominees to Shareholders were held in 2018. Pavel Grachev 2016 Independent Russian Federation + + including materials made available 1 to shareholders and the Minutes Sergey Ivanov 2015 Independent Russian Federation + + + + of the Annual General Meeting Vyacheslav 2014 Non-executive Russian Federation + + of Shareholders, is available on Kravchenko the Company’s website at: http://www.rushydro.ru Pavel Livinsky 2018 Non-executive Russian Federation Vyacheslav 2013 Independent Russian Federation + + + + Board of Directors Pivovarov Mikhail Rasstrigin 2018 Non-executive Russian Federation The Board of Directors is a governing The transparency of the Board of Company’s financial statements, body that sets the priority areas Directors election process is ensured conduct financial performance Nikolay Rogalev 2016 Non-executive Russian Federation + + + of the Company’s operations, by a dedicated Board of Directors’ analysis and monitor the Group’s Yury Trutnev 2015 Non-executive Russian Federation + approves its development strategy committee assessing candidates for delivery against targets. Sergey Shishin 2011 Non-executive Russian Federation + and determines the core principles compliance with the independence Andrey Shishkin 2014 Non-executive Gazprombank and approaches to the organization criteria. The existing independent directors 2 of the Company’s internal control are assessed for compliance with Nikolay Shulginov 2016 Executive Russian Federation + and risk management functions. the independence criteria on The Board of Directors also supervises Independent Directors and a quarterly basis during their tenure as AC – Audit Committee the Company’s executive bodies their role part of the procedure for confirming NCC – Nomination and Compensation Committee and performs other key functions, compliance with the Moscow SC – Strategy Committee including such as investment and Independent directors bring in well- Exchange listing requirements, and CEDFE – Committee on Energy Development of the Far East business planning, performance balanced opinions and exercise their personal details and information CREEI – Committee on Reliability, Energy Efficiency and Innovation management, innovative unbiased judgment based solely provided by them on a regular basis IC – Investment Committee development, risk management, on their experience and expertise. are used for this purpose. and sustainable development, Independent directors and their input including social policy, charity and to the work of the Board of Directors Director status, % Years served on the Board environmental aspects. The Board enhance the trust and confidence Composition of the Board of of Directors, % of Directors is also involved in some of shareholders and a wide range Directors of the most important operational of investors, improve the quality matters or those requiring regular of management decisions, and The Board of Directors consists of supervision, such as reliable promote compliance with corporate 13 members, 11 of whom were re- THE CURRENT COMPOSITION functioning of the Company’s governance principles. elected. In 2018, there were two Boards OF RUSHYDRO’S BOARD facilities, including in the Far Eastern of Directors: one elected by the Annual OF DIRECTORS IS WELL- Federal District, approval of individual RusHydro meets Moscow Exchange’s General Meeting of Shareholders BALANCED IN TERMS OF transactions, management of requirements in terms of the number on June 26, 2017 and the other elected NECESSARY COMPETENCIES subsidiaries, etc. [102–26] of independent directors serving on on June 27, 2018. AND PROFESSIONAL EXPERIENCE its Board of Directors. There are four The Board of Directors consists of independent directors serving on 13 directors and operates based on the Company’s Board of Directors: Independent 31 Less than 1 year 15 Non-executive 61 1–3 years 23 the Regulations on the Procedure for Maxim Bystrov, Pavel Grachev, Sergey Executive 8 4–5 years 39 Convening and Holding the Board of Ivanov and Vyacheslav Pivovarov. Regulations on the Procedure for 6 years 23 Directors’ meetings of RusHydro. Independent directors review the Convening and Holding the Board of Directors’ meetings of RusHydro are available on the Company’s website at: www.rushydro.ru 1 Served on the Board of Directors from 2013 to 2014, and then starting from 2015. 2 Until August 7, 2018. 160 161 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
The balance of the Board of Directors sufficient time for performing the duties all of which contribute to effective Short biographies of the Board of Directors members1 is achieved through a high level of of a member of the Board of Directors, decision-making. professional knowledge and expertise, and absence of a conflict of interest, YURY TRUTNEV Born in 1956
1 Experience and competencies of the Board of Directors members Chairman of the Board Education, academic degree, academic rank: Full name Energy Finance Management Production Research and Other competencies of Directors Graduated from the Perm National Research Polytechnic University with a degree and audit development in Mining Engineering Non-Executive Director
Artem Avetisyan + + Promotion of entrepreneurship Representative of Experience over the last 5 years: Maxim Bystrov + + + + Global economics the Russian Federation, ↗↗ 2013–present: Deputy Prime Minister of the Russian Federation and Presidential public officer Pavel Grachev + + Law, Doctor of Law Plenipotentiary Envoy to the Far Eastern Federal District Sergey Ivanov + + + Nuclear Physics, Professor, corresponding member of Positions held in collective governing bodies as of December 31,2018: the Russian Academy of Sciences, Doctoral Degree in Economics ↗↗ member of the Supervisory Board of Rosatom State Corporation
Vyacheslav + + Law ↗↗ Chairman of the Supervisory Board of the Far Eastern Federal University Kravchenko ↗↗ Co-Chairman of the Russian Union of Martial Arts Pavel Livinsky + + Economics Vyacheslav + + Global Economics, Applied Pivovarov Economics, MBA Mikhail Rasstrigin + + + Economics
Nikolay Rogalev + + + Doctoral Degree in Technical ARTEM AVETISYAN Sciences, Professor Born in 1976 Yury Trutnev + + + + + Non-Executive Director Education, academic degree, academic rank: Sergey Shishin + + Doctoral Degree in Economics ↗↗ Graduated from the Financial University under the Government of the Russian Andrey Shishkin + + + + Representative of the Russian Federation Federation with a degree in Finance and Lending Nikolay Shulginov + + + + + PhD in Technical Sciences ↗↗ Postgraduate studies at the Financial University under the Government Total 7 11 12 4 5 of the Russian Federation
↗↗ Audit retraining program at Moscow State University Induction program ↗↗ the software and technical facilities Education and further used in the work of the Board of professional training A newly elected member of the Board Directors. Experience over the last 5 years: of Directors takes an induction program, To improve its overall performance, ↗↗ 2011–present: Head of New Business at the Agency for Strategic Initiatives including introduction to the members Independent directors also acquaint the Board of Directors may decide to of the Management Board and themselves with additional rights send its individual members for training ↗↗ 2012–present: Chairman of the Leaders Club familiarizing with: and obligations of independent and further professional development ↗↗ 2014–2016: Vice President of the NEO Centre ↗↗ the Company’s by-laws; directors, their functions and roles programs at the Company’s expense ↗↗ the Company’s key performance in the Company’s corporate practice. within the limits of the Company’s Positions held in collective governing bodies as of December 31,2018: indicators; budget allocated for these purposes. ↗↗ Chairman of the Board of Directors of Vostochny Bank ↗↗ RusHydro Group Development In addition, the Corporate Secretary Strategy and RusHydro Group’s arranges for the newly elected The training and further professional ↗↗ Chairman of the Board of Directors of Modulbank Long-term Development Program; members of the Company’s Board of development programs for Board ↗↗ the specifics of the Company’s Directors to receive answers to their of Directors members are subject operations as a joint-stock company questions and sets up meetings with to approval by the Nomination and with a majority government stake the Company’s officers. Compensation Committee. and other specific aspects;
1 Relevant experience of the candidates to the Board of Directors in various areas of activity, based on the data received from candidates to the Board of Directors, including education, professional track recor, and other publicly available information. 1 As at December 31, 2018
162 163 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
MAXIM BYSTROV Born in 1964 SERGEY IVANOV
Non-Executive Director Education, academic degree, academic rank: Non-Executive Director Born in 1961 Graduated from the National Research Moscow State University of Civil Engineering Independent Director1 Independent Director1 with a degree in Hydraulic Engineering and Power Plant Construction Education, academic degree, academic rank: Graduated from the Russian Foreign Trade Academy with a degree in International Graduated from the National Research Nuclear University with a degree in Theoretical Economics Nuclear Physics PhD degree in Economics, Professor Experience over the last 5 years: Corresponding member of the Russian Academy of Natural Sciences
↗↗ 2013–present: Chairman of the Management Board of NP Market Council Experience over the last 5 years: ↗↗ 2013–present: Chairman of the Management Board of JSC ATS ↗↗ 2016–2018: General Director at RT-Capital
Positions held in collective governing bodies as of December 31,2018: ↗↗ 2015–2016: General Director of Nechernozemagropromstroy Corporation
↗↗ member of the Supervisory Board of the NP Market Council ↗↗ 2012–2015: General Director of LENSENT
↗↗ member of the Board of Directors at JSC ATS ↗↗ 2011–2016: General Director of Energetic Russian Company (ERCO)
↗↗ member of the Board of Directors at JSC SO UES ↗↗ 2007–2014: Chairman of the Presidium of the National Institute of Energy Security
PAVEL GRACHEV Born in 1973 VYACHESLAV Born in 1967 Non-Executive Director Education, academic degree, academic rank: KRAVCHENKO Education, academic degree, academic rank: Independent Director Graduated from the Saint Petersburg State University and the University of Trieste (Italy) with degrees in law, Doctor of Law Non-Executive Director Graduated from the Moscow State University with a degree in Law Representative of Experience over the last 5 years: the Russian Federation Experience over the last 5 years: ↗↗ 2016–present: General Director of MC Polyus LLC ↗↗ 2013–2018: Deputy Minister of Energy of the Russian Federation
↗↗ 2014–present: Chief Executive Officer of PJSC Polyus Positions held in collective governing bodies: ↗↗ 2014–2016: President of JSC Polyus Krasnoyarsk ↗↗ State representative in the Supervisory Board of the NP Market Council ↗↗ 2013–2016: Interim Chief Executive Officer, Chief Executive Officer of Polyus Gold International Limited ↗↗ Chairman of the Board of Directors at JSC SO UES ↗↗ member of the Board of Directors of Rosseti Positions held in collective governing bodies as of December 31,2018:
↗↗ Chairman of the Board of Directors at SL Gold
↗↗ Member of the Board of Directors of PJSC Polyus
↗↗ Member of the Board of Directors at PJSC FGC UES
1 Sergey Ivanov was elected Senior Independent Director by the Nomination and Compensation Committee of the Board of Directors of RusHydro. 1 Maxim Bystrov was recognised by the Board of Directors as an Independent Director because at the date of recognition he met the formal criteria of being related to the Company’s substantial He was recognized by the Board of Directors as an Independent Director because at the date of recognition he met the formal criteria of being related to the state: he held the position of General counterparties, including JSC ATS, JSC SO UES, JSC FSС and NP Market Council. The abovementioned relation is formal and does not affect Maxim Bystrov’s ability to act as a member of Director at RT-Capital LLC, which is controlled by the Russian Federation, during the year prior to the election to the Board of Directors of RusHydro. the Board of Directors in the interests of the Company and all of its shareholders. The abovementioned relation is formal and does not affect Sergey Ivanov’s ability to act as a member of the Board of Directors in the interests of the Company. For more information, see the Company’s website at: http://www.eng.rushydro.ru/upload/iblock/fe6/Extract-from-the-minutes-June-1-2018--271.pdf For more information, see the Company’s website at: http://www.eng.rushydro.ru/upload/iblock/fe6/Extract-from-the-minutes-June-1-2018--271.pdf
164 165 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
PAVEL LIVINSKY Born in 1980 MIKHAIL RASSTRIGIN Born in 1983
Non-Executive Director Education, academic degree, academic rank: Representative of Education, academic degree, academic rank: the Russian Federation, Representative of the Russian ↗↗ Graduated from the Moscow State University with a degree in Economics in 2001 Graduated from Ivanovo State Power Engineering University Federation public officer ↗↗ Graduated from the Moscow State University with a Master’s degree in Management ↗↗ Degree in Heat Power Station Engineering, 2005; in 2003 Non-Executive Director ↗↗ Bachelor of Economics, 2005.
Experience over the last 5 years: Experience over the last 5 years: ↗↗ 2017–present: General Director, Chairman of the Management Board at Rosseti ↗↗ 2017–present: Deputy Minister of Economic Development ↗↗ 2013–2017: Head of the Moscow Department of Fuel and Energy, in 2017: Head of ↗↗ 2017: Assistant Minister of Economic Development the Moscow Department of Housing, Utilities and Amenities ↗↗ 2011–2017: Head of Electric Power, Natural Resources Directorate, Research Positions held in collective governing bodies: Department, VTB Capital
↗↗ Chairman of the Board of Directors at PJSC FGC UES Positions held in collective governing bodies: ↗↗ member of the Board of Directors of Rosseti ↗↗ member of the Board of Directors of Rosseti ↗↗ member of the Board of Directors at JSC SO UES ↗↗ member of the Board of Directors at JSC SO UES ↗↗ member of the Management Board of the Russian Union of Industrialists and Entrepreneurs (RSPP) ↗↗ member of the Management Board of the Federal Antimonopoly Service
↗↗ President of the Sport Federation of Firefighters and Rescuers
VYACHESLAV PIVOVAROV Born in 1972 NIKOLAY ROGALEV Born in 1962
Education, academic degree, academic rank: Education, academic degree, academic rank: Non-Executive Director Non-Executive Director Graduated from the Sergo Ordzhonikidze State Academy of Management with Graduated from the Moscow Power Engineering Institute (heat power stations), Representative of Independent director a degree in International Economics Professor the Russian Federation Graduated from the American University of Paris with a degree in Applied Economics Experience over the last 5 years: Received MBA from Stanford University ↗↗ 2016–present: President of NP Scientific and Technical Council of the Unified Energy Experience over the last 5 years: System 1 ↗↗ 2015–present: Head of Department at the Moscow Power Engineering Institute ↗↗ 2017–present: President of Altera Capital (part-time) 2 ↗↗ 2011–2017: President of Altera Capital ↗↗ 2013–present: Dean of the Moscow Power Engineering Institute
Positions held in collective governing bodies: Positions held in collective governing bodies: ↗↗ member of the Board of Directors at GeoProMining Investment Ltd (Cyprus) ↗↗ member of the Board of Directors of Rosseti
↗↗ member of the Board of Trustees of the Energy Without Borders foundation
1 INN: 7714961556. 2 INN: 7703741291.
166 167 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
SERGEY SHISHIN Born in 1963 NIKOLAY SHULGINOV Born in 1951 Positions held in collective governing bodies: Education, academic degree, academic rank: Education, academic degree, Non-Executive Director Executive Director ↗↗ member of the Board of Directors academic rank: Graduated from the KGB Moscow Higher Frontier Guards Command Academy of Global Sustainable Energy Representative of Representative of Sergo Ordzhonikidze Novocherkassk Partnership the Russian Federation KGB Military School the Russian Federation Polytechnic Institute awarded the ↗↗ member of the Board of Directors of Russian Presidential Academy of National Economy and Public Administration, degree in Order of the Red Banner of Labor; holds Rosseti Public and Municipal Administration a PhD degree in Technology PhD in Economics ↗↗ chairman of the Supervisory Board of Association Hydropower of Russia Experience over the last 5 years: ↗↗ member of the Supervisory Board of Experience over the last 5 years: ↗↗ 2015–present: Chairman of the the NP Market Council ↗↗ 2007–present: Senior Vice President at VTB Bank Management Board – General Director of RusHydro ↗↗ member of the Management Board of the Russian Union of Industrialists ↗↗ 2009–2015: First Deputy Chairman and Entrepreneurs (RSPP) of the Management Board of JSC SO UES ↗↗ member of the Board of Trustees of the National Research University Moscow Power Engineering Institute
↗↗ deputy Chairman of the Supervisory Board of NP Scientific and Technical Council of the Unified Energy System
ANDREY SHISHKIN Born in 1959 Short biographies of members of the Board of Directors prior to June 27, 2018
Non-Executive Director Education, academic degree, academic rank: Positions held in collective governing Graduated from the Gubkin Moscow Institute of Petrochemical and Gas Industry ALEXEI CHEKUNKOV Born in 1980 with a degree in Industrial Heat and Power Engineering bodies: Education, academic degree, Non-Executive Director ↗↗ member of the Board of Directors at academic rank: Skolkovo Ventures Experience over the last 5 years: Representative of Graduated from Moscow State Institute ↗↗ 2016–present: President, Chairman of the Management Board at Bashneft the Russian Federation ↗↗ member of the Board of Directors at of International Relations with a degree Voskhod ↗↗ 2015–present: General Director at RN-Assets in Economics ↗↗ member of the Supervisory Board at ↗↗ 2012–present: Vice President for Energy, Localization and Innovation; ALROSA Experience over the last 5 years: ↗↗ since 2015: member of the Management Board at Rosneft ↗↗ chairman of the Supervisory Board at ↗↗ 2014–present: Chief Executive Officer the Far East Investment and Export Positions held in collective governing bodies: of the Far East and Baikal Region Agency Development Fund ↗↗ member of the Board of Directors at RN-Assets ↗↗ 2013–2014: First Deputy CEO at Kada- ↗↗ deputy Chairman of the Board of Directors at Bashneft Neftegaz ↗↗ chairman of the Board of Directors at Okha CHPP
168 169 In presentia In person //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
NIKOLAY PODGUZOV Born in 1974 Positions held in collective governing Number of Board of Directors Breakdown of items considered bodies: meetings by the Board of Directors, % Education, academic degree, Non-Executive Director ↗↗ member of the Supervisory Board at matters academic rank: 12 11 169 VTB Bank Representative of 10 were considered by the Board St. Petersburg State Institute of the Russian Federation ↗↗ member of the Supervisory Board at of Directors in 2018 Technology Post Bank Moscow State Institute of International ↗↗ member of the Board of Directors at In 2018, in addition resolutions on Relations (University) under the Ministry Rosseti the convocation of the Annual General of Foreign Affairs 1 1 18 Meeting of Shareholders, approval of ↗↗ member of the Board of Directors at transactions, including related-party the Deposit Insurance Agency In presentia Experience over the last 5 years: In person translations, development of a transparent ↗↗ 2017–present: Chief Executive Officer procurement management framework, at the Russian Post enhancement of the control and audit system and subsidiary management ↗↗ 2013–2017: Deputy Minister of Corporate governance 34 3 Business planning and investments matters, the Board of Directors made Economic Development of the 13 6 Performance management and KPI 10 1 a number of other important decisions Russian Federation Strategy and strategic transactions 10 1 See the minutes of the previous Subsidiary management 4 7 related to the Company’s development Board of Directors meetings here: Transactions 4 2 (see the key matters reviewed by www.rushydro.ru Other 23 the Board in 2018 in the table below).
Key agenda items reviewed by the Board of Directors in the reporting year Item Decision Additional information Board of Directors’ report on the members of the Board Growth of the Company’s value for the state, shareholders, communities and its employees of Directors In 2018, the Board of Directors held Approval of the changes to the Group’s Long- Adjustments to the Long-term Development Program provide for additional measures 18 meetings, including seven meetings term Development Program for 2018–2022 to upgrade the thermal power infrastructure in the Far Eastern Federal District, improve the environmental management system, roll out intelligent systems and digital As at December 31, 2018, the directors For more information on the members in person, and considered 169 matters. of the Board of Directors, see section technology, and enhance the staffing system held (directly or indirectly) no 5.2.1 of the Company’s quarterly In 2018, the attendance at meetings Approval of the updated import substitution Developed a set of measures aimed at scheduled step-by-step substitution shares of the Company or shares/ report for Q4 2018 on the Company’s of the Board of Directors stood at 90% website at: www.rushydro.ru roadmap for the period up to 2025 of imported products with those of Russian origin having similar specifications stakes Company’s subsidiaries. In the of all meetings held during the year. and usability reporting year, members of the Board Approval of RusHydro’s Policy on Rotation The Policy on Rotation of Auditors governs the auditor selection procedure of Directors did not buy or sell the Attendance in 2018 by director of Auditors and the rules for altering the composition of the audit team Company’s shares. Full name Meetings Attendance, % Approval of the termination of RusHydro and Approved the sale of 5,131,669,622 shares of PJSC Inter RAO UES (4.915% attended/total its subsidiaries’ participation in the authorized of the authorized capital) to JSC Inter RAO Capital at the price of No loans were issued by the Company capital of PJSC Inter RAO UES RUB 3.3463 per share Artem Avetisyan 13/18 72 or RusHydro Group to any members of Dividends for 2017 The Board recommends paying out dividends in the amount of the Board of Directors. Maxim Bystrov 17/18 94 RUB 0.0263335 per share, or 50% of the IFRS net profit for 2017 Pavel Grachev 18/18 100 Duties of officials representing Stable development of the Company Sergey Ivanov 17/18 94 the Russian Federation are set forth Approval of RusHydro’s Business Plan for 2019 The Group’s investment program for 2019–2023 provides for an estimated in Resolution No. 738 of the Russian Vyacheslav Kravchenko 15/18 83 and RusHydro Group’s Consolidated Business RUB 382.9 bn to be spent on commissioning around 1.4 GW of new power capacity, Plan for 2019–2023, including the consolidated 565 Gcal/h of heat capacity, as well as on building and refurbishing more than Government dated December 3, 2004. Vyacheslav Pivovarov 15/18 83 investment program 130 km of heat and 7,600 km of electric power supply networks Mikhail Rasstrigin (starting June 27, 2018) 7/8 88 The independence of the members Nikolay Rogalev 18/18 100 Approval of RusHydro Group’s New Set new KPIs, including those seeking to increase the installed capacity of low- of the Board of Directors is defined Environmental Policy through 2025 carbon generation, reduce direct and per unit greenhouse gas emissions, and in line with the independence Yury Trutnev 17/18 94 prevent species elimination criteria of the Moscow Exchange and Pavel Livinsky (starting June 27, 2018) 8/8 100 Development of the Far Eastern energy sector the Corporate Governance Code Sergey Shishin 17/18 94 recommended by the Bank of Russia. Review of the Long-term Program Key projects under the Program include the construction of Artyomovskaya Andrey Shishkin 16/18 89 for Replacement of Retired Capacities and TPP-2, Khabarovskaya TPP-4, the second stage of Yakutskaya GRES-2, Power System Development in the Far East a TPP in Pevek, the upgrade of Vladivostokskaya TPP-2 and Komsomolskaya TPP-2, As at the date of appointment Nikolay Shulginov 18/18 100 and commissioning of the fourth hydropower unit of Ust-Srednekanskaya HPP and during 2018, no conflicts of Alexei Chekunkov 10/10 100 Approval of the contributions to The construction of high-voltage power lines in Chukotka due to interest (including participation in (member until June 27, 2018) JSC Chukotenergo’s authorized capital for the decommissioning of the power units at Bilibino NPP, which has reached the end the governing bodies of the Company’s Nikolay Podguzov 5/10 50 the implementation of the initial construction of its service life. Financing is expected to be provided in the amount of RUB 13 bn competitors) of any member of (member until June 27, 2018) stage of two 110 kV high-voltage power lines from the federal budget and RUB 6.3 bn from the Company’s funds the Board of Directors was reported. Pevek – Bilibino
170 171 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Assessment of the Board Self-assessment of Directors, as well as changes complied with the requirements of the of Directors performance THE RESULTS OF THE INDEPENDENT in the business landscape since Company’s by-laws and Federal Law RusHydro conducted an annual the approval of the strategy); of the Russian Federation No. 223-FZ Independent assessment ASSESSMENT assessment of the Board of ↗↗ expand the list of speakers invited On Procurement of Goods, Works, Directors performance to evaluate to the meetings of the Board of Services by Certain Types of Legal In 2018, an independent assessment the contribution of the Russian Directors with members of the Entities dated July 18, 2011. of the Company’s Board of Federation representatives Company’s management and Directors was carried out by The Company largely complies with the principles and recommendations to the Company’s operations external experts; The amount of coverage is LLC PricewaterhouseCoopers of both the Russian and British corporate governance codes. There are and to the implementation ↗↗ hold comprehensive Board of RUB 10,604,715,160 (USD 178,100,000 Advisory, a world– renowned external some key strengths of RusHydro’s Board of Directors: of the development strategy. Directors discussions addressing at the rate of the Bank of Russia independent consultant1. The Board The assessment was based on the matters of risk appetite and key as at July 31, 2017). In addition, of Directors’ performance was assessed collectively, the members of the Board of Directors possess a strong the methodology for individual risk management as they pertain to the independent directors’ liability from April to June 2018 via a survey set of competencies, expertise, skills and leadership qualities that assessment of the Board of Directors the Company’s operations; is insured for RUB 136,950,280 among the directors, individual contribute to their efficient performance. members in joint-stock companies ↗↗ maintain and expand the practice (USD 2,300,000 at the rate of interviews with the directors and several partially owned by the government, of the Board of Directors members the Bank of Russia as at July 31, 2017). key managers of the Company, as the Board of Directors and the Audit Committee include a director as approved by the Federal Agency and independent directors in The insurance premium amounted to well as through reviewing the by-laws with experience and expertise in preparation, analysis, assessment for State Property Management particular attending the most RUB 13,552,825.97 (USD 227,611.80 at that govern the activities of the Board and audit of accounting (financial) statements. (Rosimushchestvo), and was carried important investor and analyst the rate of the Bank of Russia as at of Directors and its Committees, out in the Company’s personal engagement events. July 31, 2017). the meeting minutes of the Board of the Board of Directors includes the main stakeholders of account on Rosimushchestvo’s inter- Directors and Committees, and other the Company. The Board of Directors also maintains a balance agency portal using questionnaires for The insurance policy covers: relevant materials. The scope of the between ensuring succession and systematically bringing in new members of the Board of Directors. As Liability insurance ↗↗ property interests of the insured assessment included: members. a result, duly supervision by the federal related to other persons’ claims ↗↗ Overall assessment of the Board executive body over the state Since 2007, RusHydro has provided for damages arising from of Directors’ performance; the meetings of the Board of Directors feature active discussions representatives’ work on the Board liability insurance for the members the insured person’s claimed ↗↗ Assessment of each Committee’s on the agenda items and resolutions where new ideas and diverse of Directors was confirmed. of the Board of Directors and (alleged, supposed) wrongdoing performance; opinions are welcome. the Management Board, as well as for (error, omission, improper ↗↗ Performance assessment for the persons in the capacity of sole performance, etc.); the Chairman of the Board of Directors attendance of the Board of Directors meetings is high. Areas for development executive bodies at the Company’s ↗↗ property interests of the Company and Senior Independent Director; subsidiaries and branches and for and/or any subsidiary related to ↗↗ Individual assessment of the Board the most important matters pertaining to the operations In order to continue improving its those managing the Company’s units any claims made by other persons of Directors members. of the Company and its subsidiaries are normally discussed efficiency, the Board of Directors is and subsidiaries. In a tender to select that were initially brought against at the meetings of the Board of Directors that are held in person. going to take the following key actions a provider of directors and officers the insured; The previous independent assessment based on the assessment results: (D&O) civil liability insurance for 2018, ↗↗ property interests of the Company was done in 2016 by the Independent the directors ask the management hardball questions and provide ↗↗ hold a strategic session with JSC SOGAZ was chosen based on its and/or any subsidiary related to Directors Association, whose constructive criticism on proposed resolutions, which enables well- external experts to discuss ability to provide the most reliable any claims in respect of securities recommendations led to many informed decision-making. the strategy, its implementation and comprehensive coverage when brought against the Company and/ improvements in the work of the Board and possible updates (in light of it comes to this type of insurance. or any subsidiary. of Directors, including: independent directors play an important and active role in the work systematic renewal of the Board The insurer selection process ↗↗ Approval of a number of strategic of the Board of Directors and its Committees. decisions, including in relation to the JSC RAO ES East debt refinancing; the Committees of the Board of Directors review the agenda items ↗↗ The Board of Directors regularly in more depth and contribute to the overall efficiency of the Board monitors the development and of Directors. implementation of RusHydro subsidiaries’ business plans based on RusHydro Group’s Consolidated Business Plan; ↗↗ The position of Senior Independent Director was Introduced; ↗↗ Board of Directors’ meetings scheduling was improved.
1 The word independent means the consultant has no ties to the Company.
172 173 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Committees of the Board of Directors Nomination and Compensation Committee Members of the Board of Directors1 Key performance results and recommendations issued to the Board of RusHydro’s Board of Directors has six committees: Directors Audit Committee1; Independent members of the Board Nomination and Compensation Committee2; of Directors ↗↗ Reviewed report on achievement of duction of Professional Standards 3 Strategy Committee ; Vyacheslav Pivovarov 12/12 the Management Board’s KPI for 2017. into RusHydro’s Operations in Q4 4 Investment Committee (Chairman of the Committee) ↗↗ Reviewed KPI targets for the Man- 2017 and Q1‑Q3 2018. Committee on Energy Development of the Far East5; Sergey Ivanov 11/12 agement Board for 2018 and 2019, ↗↗ Oversaw external independent 6 and KPI targets under the Company’s assessment of the Board of Directors’ Committee on Reliability, Energy Efficiency and Innovation ; Maxim Bystrov 11/12 Long-Term Incentive Plan. performance. ↗↗ Reviewed annual KPI of the Manage- ↗↗ Reviewed draft internal regulations Audit Committee Committee competencies ment Board for 2019 on the assessment of performance ↗↗ Analyzed qualifications of nominees of the Board of Directors and its Members of the Board of Directors1 Key performance results and recommendations issued The Committee is designed to provide to the Board of Directors and vetted committee. to the Board of Directors recommendations on composition and them for potential conflicts of interest. Independent members of the Board set of skills of the Company’s governing ↗↗ Assessed nominees to the Board of of Directors ↗↗ Reviewed the Company’s auditor ↗↗ Provided corporate governance bodies, and recommend tools to Directors and independent directors Sergey Ivanov 19/19 candidacy and recommended it for assessment results with a focus on enhance efficiency and transparency of for compliance with the independ- (Chairman of the Committee) approval. internal audit review. the remuneration system. Its primary ence criteria. 8 Vyacheslav Pivovarov 14/19 ↗↗ Recommended approval of a ↗↗ Recommended approval of objective is to review relevant items ↗↗ Reviewed reports on progress Maxim Bystrov 18/19 standard to control implementation the annual report. on a preliminary basis and draft against the Action Plan for the Intro- of the Group’s Long-Term ↗↗ Recommended approval of recommendations on matters reserved Development Program. the annual financial (accounting) to the remit of the Board of Directors. Committee competencies ↗↗ Recommended approval statements. of RusHydro’s Insurance Program ↗↗ Assessed the internal audit system. The Committee is designed to assist for 2019. ↗↗ Assessed the efficiency of external the Board of Directors in exercising ↗↗ Approved a methodology for audit for 2017. control over the Company’s financial Assessment of RusHydro’s Corporate ↗↗ Recommended approval of and business operations, with its key Governance Framework. the Report on Compliance with responsibilities including oversight the Company’s Information Policy. of the financial statements, internal controls, risk management, corporate governance, and misconduct reporting systems, and ensuring independence and impartiality of the internal and external audit functions.
1 Regulations on the Audit Committee are approved by resolution of RusHydro’s Board of Directors (Minutes No. 239 of June 23, 2016, as amended on June 21, 2017 (No. 254) and December 24, 2018 (No. 281)) 2 Regulations on the Nomination and Compensation Committee are approved by resolution of RusHydro’s Board of Directors (Minutes No. 239 of June 23, 2016, as amended on June 21, 2017 (No. 254)) 3 Regulations on the Strategy Committee are approved by resolution of RusHydro’s Board of Directors (Minutes No. 242 of October 10, 2016) 4 Regulations on the Investment Committee are approved by resolution of RusHydro’s Board of Directors (Minutes No. 240 of August 11, 2016) 5 Regulations on the Committee on Energy Development of the Far East are approved by resolution of RusHydro’s Board of Directors (Minutes No. 225 of October 30, 2015) 6 Regulations on the Committee on Reliability, Energy Efficiency and Innovation are approved by resolution of RusHydro’s Board of Directors (Minutes No. 188 of October 15, 2013) 7 Opposite the name of the members of the Committee, information on his personal attendance of the Committee’s meetings is presented in the format - number of meetings attended / total the number of meetings of the Committee in 2018. 1 Opposite the name of the members of the Committee, information on his personal attendance of the Committee’s meetings is presented in the format – number of meetings attended / total 8 Vyacheslav Pivovarov has extensive experience and knowledge in preparation, analysis, assessment and audit of financial (accounting) statements. the number of meetings of the Committee in 2018.
174 175 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Strategy Committee Investment Committee
Members of the Board of Directors1 Committee competencies reports), provides recommendations on Members of the Board of Directors1 Committee competencies and contribute to the enhancement of the dividend policy, makes decisions the Company’s investment policy. The Committee is designed on the Company’s investments in and The Committee is designed to preview Independent members of the Board Independent members of the Board of Directors to ensure efficient performance of divestments from other organizations, of Directors new investment projects and programs, Maxim Bystrov 13/13 Pavel Grachev 17/17 the Board of Directors in strategic considers authorized capital increases areas. The Committee determines and other share offering and purchase (Chairman of the Committee) Sergey Ivanov 10/17 Vyacheslav Pivovarov 10/13 (since August 7, 2018) the Group’s strategic development matters, and reviews the Group’s priorities, approves the Company’s financial and valuation models. Sergey Ivanov 10/13 Key performance results and recommendations issued Vyacheslav Pivovarov 14/17 development strategy and long-term Members of the Board of Directors to the Board of Directors Members of the Board of Directors development program (including Nikolay Rogalev 13/13 Nikolay Rogalev 17/17 review of the strategy implementation Alexei Chekunkov 8/13 ↗↗ Approved RusHydro’s draft ↗↗ Pre-approved updated versions of (until September 21, 2018) Sergey Shishin 17/17 investment program for 2019–2028 the Company’s Business Plan and Members of the executive bodies Committee members and draft amendments to RusHydro’s investment program for 2018. Andrey Kazachenkov 13/13 Aleksandr Bogashov 15/17 investment program for 2018–2027. ↗↗ Pre-approved the updated version Sergey Kirov 13/13 Key performance results and recommendations issued ↗↗ Pre-approved the Group’s of the Company’s Consolidated Dmitriy Denisov 9/17 Viktor Khmarin 13/13 (since August 7, 2018) to the Board of Directors Consolidated Business Plan (including Business Plan (including consolidated Committee members Igor Zadvornov 16/17 consolidated investment program) for investment program) for 2018. Mikhail Bychko 4/13 (Chairman of the Committee) ↗↗ Recommended approval of ↗↗ Provided recommendations on 2018–2022. ↗↗ Pre-approved updated KPI targets for Andrey Gabov 7/13 Boris Livshits 17/17 a resolution to divest from information about the efficiency of ↗↗ Pre-approved KPI targets for the Company’s Management Board Sergey Zhuravlev 13/13 Vasiliy Nikonov 15/17 PJSC Inter RAO. forward contracting and progress the Management Board for 2018, and for 2018. Denis Milyutin 13/13 ↗↗ Recommended approval of against Rushydro’s Value Growth KPI targets under the second cycle of ↗↗ Recommended approval of Yevgeniy Olkhovich 9/17 Pavel Snikkars 7/13 (since August 7, 2018) the property disposal deal Plan through 2021. the Company’s Long-Term Incentive RusHydro’s business plan and between JSC RAO ES East and ↗↗ Recommended approval of Plan for 2018–2020. Consolidated Business Plan for 2019, Pavel Snikkars 15/17 PJSC Sakhalinenergo. an investment project to ↗↗ Pre-approved distribution of including RusHydro’s investment Yevgeniy Stolyarov 5/17 (until August 7, 2018) ↗↗ Set preliminary additional terms construct two 110 kV single-circuit the Company’s profit (loss) for 2017 program and consolidated and conditions for participation Pevek‑Bilibino power lines. and recommended that the Annual investment program. Andrey Gabov 7/17 (until August 7, 2018) in the construction of Tayshet ↗↗ Provided recommendations General Meeting of Shareholders Aluminium Smelter (the project was on a report comparing approve the same. Members of the executive bodies put on hold due to the US sanctions). the technological advancement ↗↗ Approved the amount of dividends George Rizhinashvili 17/17 ↗↗ Recommended approval of and innovation KPI of RusHydro paid for the Company’s ordinary Andrey Kazachenkov 9/17 the Group’s Long-Term Development Group against the leading peers. shares for 2017 at RUB 0.0263335 (since August 7, 2018) Program for 2018–2022. ↗↗ Recommended approval of per share. Nikolay Shulginov 7/17 (until August 7, 2018) ↗↗ Provided recommendations on a resolution to divest from report regarding the finalization of Boguchanskaya HPP Construction initiatives to refinance the debt of Organizer, Boguchanskaya HPP JSC RAO ES East. Construction Customer, Small HHPs of Altai, Verkhne-Naryn HPPs, and VolgaHydro.
1 Opposite the name of the members of the Committee, information on his personal attendance of the Committee’s meetings is presented in the format - number of 1 Opposite the name of the members of the Committee, information on his personal attendance of the Committee’s meetings is presented in the format - number meetings attended / total the number of meetings of the Committee in 2018. of meetings attended / total the number of meetings of the Committee in 2018.
176 177 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Committee on Energy Development of the Far East Committee on Reliability, Energy Efficiency and Innovation
Members of the Board of Directors1 Committee competencies the Committee is responsible for Members of the Board of Directors1 Committee competencies and safe operation of hydraulic facilities, determining the Company’s priority energy efficiency, innovation and Independent member of the Board The Committee is designed to ensure areas in the Far East, including by Members of the Board of Directors The Committee is designed to environmental policies, and other areas of Directors efficient performance of the Board of considering matters related to Nikolay Rogalev 7/ 7 ensure efficient performance of reserved to the remit of the Committee. Pavel Grachev 7/ 7 Directors in developing the power the consolidation of power assets in (Chairman of the Committee) the Board of Directors in the realms of Members of the Board of Directors industry of the Far Eastern Federal the Far East, growth of energy exports Vyacheslav Kravchenko 4/7 the Company’s Technical Policy, reliable Yury Trutnev 0/7 District of Russia within the scope of to the Asia-Pacific, and power supply to Alexei Chekunkov 3/7 (Chairman of the Committee) responsibility of the Company and the consumers in the Far East. (until August 9, 2018) Vyacheslav Kravchenko 3/7 its subsidiaries. Among other things, Committee members Alexei Chekunkov 7/ 7 Oleg Barkin (since April 4, 2018) 6/7 Key performance results and recommendations issued Members of the executive bodies Yuriy Vishnevskiy 6/7 to the Board of Directors Sergey Vasilyev 4/7 Dmitriy Gvozdev 4/7 (since April 4, 2018) (since August 9, 2018) Key performance results and recommendations issued ↗↗ Approved the proposal of ↗↗ Approved draft terms of reference Andrey Kazachenkov 7/ 7 to the Board of Directors Sergey Zhuravlev 4/7 the Company’s Management Board for comparing the technological (since August 9, 2018) Sergey Tolstoguzov 0/7 to start levelling the station node advancement and innovation KPI of (until April 4, 2018) Mikhail Fedorov 7/ 7 ↗↗ Recommended approval of ↗↗ Pre-approved the loan agreement building at Zagorskaya PSPP-2. RusHydro Group against the leading Committee members Elena Belchenko 3/7 contributions to the authorized between RusHydro and the Far East ↗↗ Prepared a resolution to build peers and submitting proposals to Igor Zadvornov 7/ 7 (until August 9, 2018) capital of JSC Chukotenergo for and Baikal Region Development an inventory of intellectual update the Company’s innovation Denis Konstantinov 6/7 Roman Gromov 1/7 the construction of two 110 kV single- Fund in the amount of RUB 5 bn to (until April 4, 2018) property rights of RusHydro KPI and Innovative Development Aleksey Molskiy 5/7 circuit Pevek-Bilibino power lines in finance the construction of off-site Members of the executive bodies Group, with the deadline set for Program for 2016–2020 with an Denis Pileniyeks 7/ 7 an amount not exceeding RUB 18 bn, facilities of Sakhalinskaya GRES-2 for Boris Bogush 7/ 7 November 30, 2018. outlook until 2025. Aleksandr Pyatigor 2/7 with up to RUB 5 bn coming from a period of eight years and an interst ↗↗ Drafted a resolution for the Board (since August 9, 2018) George Rizhinashvili 7/ 7 RusHydro and RUB 10 bn coming rate of 5% per annum. of Directors to approve RusHydro Vladimir Tupikin 7/ 7 Kirill Frolov 7/ 7 (until December 6, 2018) from the Government in the form ↗↗ Approved an increase in the price of Dmitriy Gvozdev 5/7 Group’s Intellectual Property Rights Sergey Tyrtsev 2/7 of contributions to the authorized the General Contractor Agreement (since April 4, 2018) Management Program. (since August 9, 2018) capital of RusHydro. (Construction of Sakhalinskaya Sergey Tolstoguzov 0/7 Mikhail Kolesnikov 3/7 GRES‑2. Key Production Capacities. (until April 4, 2018) (until August 9, 2018) On-Site Facilities. Stage 1) by Nikolay Karpukhin 1/7 (until August 7, 2018) Sergey Lebedev 1/7 RUB 3.5 bn to RUB 33.5 bn. (since December 6, 2018) Leonid Petukhov 1/7 (since December 6, 2018) Corporate Secretary
NATALYA KOVALEVA Positions held in collective governing Natalya Kovaleva has no stake in bodies as of December 31,2018: RusHydro’s authorized capital. She Born in 1972 ↗↗ member of the Board of Directors does not hold, either directly or at Blagoveshchenskaya CHPP indirectly, any ordinary shares of Education, academic degree: RusHydro and, consequently, did not ↗↗ member of the Board of Directors In 1996, graduated from Irkutsk State buy or sell the Company’s shares during at Boguchanskiy Aluminum Smelter University with a degree in Law the reporting year, holds no shares in RusHydro’s subsidiaries. ↗↗ member of the Board of Directors Experience over the last 5 years: at PJSC DEK No loans were issued by PJSC RusHydro ↗↗ 2016–present: Corporate Secretary, ↗↗ member of the Board of Directors or RusHydro Group companies to RusHydro at Malaya Dmitrovka Natalya Kovaleva, Corporate Secretary of RusHydro. ↗↗ 2016–present: Deputy Head of ↗↗ member of the Board of Directors Corporate Governance and Property at SNRG The Corporate Secretary has no conflict Management, RusHydro ↗↗ member of the Board of Directors of interest (including participation in ↗↗ 2010–2015: Head of Corporate at JSC Chuvashskaya Electricity Sales the governing bodies of the Company’s Governance, PJSC MOESK Company competitors).
1 Opposite the name of the members of the Committee, information on his personal attendance of the Committee’s meetings is presented in the format - number of 1 Opposite the name of the members of the Committee, information on his personal attendance of the Committee’s meetings meetings attended / total the number of meetings of the Committee in 2018. is presented in the format - number of meetings attended / total the number of meetings of the Committee in 2018.
178 179 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Group, including the implementation of where the Company exercises the rights behalf of the Company within the scope EXECUTIVE BODIES the Long-Term Program for Replacement of the sole shareholder (participant), set out in laws and the Charter, arranging of Retired Capacities and Energy System as well as approving (adjusting) KPI of for accounting and reporting, arranging Development in the Far East. the Company’s employees, and reviewing operations of the Management Board, The Management Board relevant implementation reports. as well as addressing other matters of The Management Board’s powers the Company’s day-to-day operations Executive bodies are in charge of the day- Meeting of Shareholders and the Board of On December 24, 2018, the Board of include developing the Company’s Powers of the Chairman of that do not fall within the remit of to-day operations of the Company. Directors. Directors elected Victor Khmarin, Deputy business priorities and respective the Management Board – General the General Meeting of Shareholders, General Director for Resources and implementation plans and submitting Director include managing the Company’s Board of Directors or Management Board. Powers of the Management Board The number of the Management Board Prospective Development, as a new them to the Board of Directors for day-to-day operations, approving and the Chairman of the Management members is determined by the Board of member of the Management Board. review, reporting on KPI achievement internal regulations that are mandatory Board – General Director are defined Directors. In 2018, the Management Board and business plan implementation, for all the Company’s employees, by Articles 18 and 19 of the Company’s consisted of six members, including the Victor Khmarin took office on January approving budget parameters as regards exercising employer functions, approving Charter, respectively. Executive bodies’ Chairman of the Management Board – 16, 2019. His election was in line with income and expenditures, deciding regulations on the Company’s branches competence include matters that are General Director. the Company’s focus on resources on matters reserved to supreme and representative offices and appointing not reserved to the Company’s General and future development of RusHydro governing bodies of the subsidiaries heads thereof, making transactions on
SERGEY BORIS NIKOLAY ANDREY GEORGE VICTOR KIROV BOGUSH SHULGINOV KAZACHENKOV RIZHINASHVILI KHMARIN Member of the Management Member of the Management Board, Chairman of the Management Member of the Management Member of the Management Member of the Management Board, First Deputy General First Deputy General Director – Chief Board – General Director Board, First Deputy General Board, First Deputy General Board, Deputy General Director Engineer Director Director Director
180 181 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Information on the Management Board members1
NIKOLAY SHULGINOV Born in 1951 ANDREY KAZACHENKOV Supervised units: Education, academic degree, academic rank: Unit of financial and corporate law management Chairman of Member of the Management Sergo Ordzhonikidze Novocherkassk Polytechnic Institute awarded the Order of the Red Banner Born in 1980 the Management Board – Board, First Deputy General of Labor; holds a PhD in Engineering Education, academic degree, academic rank: General Director Director Experience over the last 5 years: Graduated from Saint Petersburg State University of Engineering and Economics with a degree in Economics and Management at Mechanical Engineering Enterprises; ↗↗ 2015–present: Chairman of the Management Board – General Director of RusHydro ↗↗ 2009–2015: First Deputy Chairman of the Management Board of JSC SO UES Has an MBA from the University of Wisconsin-Madison, USA Experience over the last 5 years: Positions held in collective governing bodies as of December 31,2018: ↗↗ 2015–present: Advisor for the Chairman of the Management Board – General Director; ↗↗ member of the Board of Directors of Global Sustainable Energy Partnership member of the Management Board and First Deputy General Director of RusHydro ↗↗ member of the Board of Directors at Rosseti ↗↗ 2012–2015: First Deputy Chairman of the Management Board, Deputy Chairman ↗↗ Chairman of the Supervisory Board of Association Hydropower of Russia of the Management Board of PJSC FGC UES ↗↗ member of the Supervisory Board of the Market Council Non-Profit Partnership ↗↗ member of the Executive Board of the Russian Union of Industrialists and Entrepreneurs Positions held in collective governing bodies as of December 31,2018: (RSPP) ↗↗ Chairman of the Board of Directors at JSC RAO ES East ↗↗ member of the Board of Trustees of the National Research University Moscow Power ↗↗ member of the Board of Directors of JSC Hydroproject Institute Engineering Institute ↗↗ member of the Board of Directors at JSC Far East Energy Management Company ↗↗ Deputy Chairman of the Supervisory Board of NP Scientific and Technical Council of Year of election to the Management Board: 2016 the Unified Energy System Participation in the Board of Directors’ committees: Year of election to the Management Board: 2015 Committee on Energy Development of the Far East of the Board of Directors of RusHydro, Participation in the Board of Directors’ committees: Investment Committee of the Board of Directors of RusHydro, Strategy Committee of the Board Strategy Committee of the Board of Directors of RusHydro (until August 7, 2018) of Directors of RusHydro and Committee on Reliability, Energy Efficiency and Innovation of the Board of Directors of PJSC ROSSETI
BORIS BOGUSH Supervised units: SERGEY KIROV Supervised units: Production unit Unit of sales, economic planning and investments Member of the Management Born in 1952 Member of the Management Born in 1976 Board, First Deputy General Board, First Deputy General Education, academic degree, academic rank: Education, academic degree, academic rank: Director – Chief Engineer Director Graduated from Saratov State Technical University with a degree in Mechanical Engineering; Graduated from Perm State Agro-Technological University with a degree in Economics and Graduated from Russian Presidential Academy of National Economy and Public Administration Agricultural Production Management; with a degree in Management of Business / Organization Development Graduated from the Regional Interdisciplinary Retraining Center of Perm National Research Polytechnic University with a degree in Economics and Management Experience over the last 5 years: Experience over the last 5 years: ↗↗ 2009–present: Managing Director, Head of Business Unit ”Production”; member of the Management Board; member of the Management Board – Chief Engineer; member ↗↗ 2010–present: Director of Economic Affairs; Deputy General Director on Economics, of the Management Board, First Deputy General Director – Chief Engineer Investment and Procurement, member of the Management Board and First Deputy General Director Positions held in collective governing bodies as of December 31,2018: ↗↗ 2010–2014: General Director of LLC RusHydro IT Service ↗↗ member of the Supervisory Board of Association Hydropower of Russia Positions held in collective governing bodies as of December 31,2018: ↗↗ member of the Board of Trustees of Soprichastnost charitable fund ↗↗ ↗↗ member of the Board of Directors of JSC Hydroproject Institute member of the Board of Directors of JSC Hydroproject Institute Year of election to the Management Board: 2010 Year of election to the Management Board: 2015 Participation in the Board of Directors’ committees: Participation in the Board of Directors’ committees: Committee on Reliability, Energy Efficiency and Innovation of the Board of Directors Investment Committee of the Board of Directors of RusHydro of RusHydro
1 As at December 31, 2018
182 183 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Changes in the Management Board composition after the reporting date
Supervised units: GEORGE RIZHINASHVILI Supervised units: VICTOR KHMARIN Resources and future development unit Strategy and innovation unit Born in 1978 Member of the Management Born in 1981 Member of the Management Board, First Deputy General Board, Deputy General Education, academic degree, academic rank: Education, academic degree, academic rank: Director Director Graduated from Saint Petersburg State University with a degree in Law Graduated from Moscow State University with a degree in Economics; holds a PhD in Economics Professional experience over the last five years: Professional experience over the last five years: ↗↗ 2014: Deputy Director for Business Development, LLC Vita-X ↗↗ 2014–2015: Advisor to the First Deputy President – Chairman of the Management ↗↗ 2009–present: member of the Management Board and Deputy Chairman of the Management Board – Vice President, Department for work with clients of market sectors, Board; member of the Management Board and First Deputy General Director of RusHydro PJSC VTB Bank ↗↗ 2016–present: Chairman of the Management Board of the Moscow State University Faculty ↗↗ 2015–present: Deputy General Director on Economics, Investment and of Economics Development Fund Procurement, Deputy General Director for Resources and Prospective Positions held in collective governing bodies: Development, member of the Management Board, Deputy General Director ↗↗ member of the Board of Trustees of Moscow State University Faculty of Economics at RusHydro ↗↗ member of the Board of Trustees of Soprichastnost charitable fund Year of election to the Management Board: 2019 ↗↗ member of the Board of Directors of JSC Hydroproject Institute Participation in the Board of Directors’ committees: Year of election to the Management Board: 2009 Investment Committee of the Board of Directors of RusHydro Participation in the Board of Directors’ committees: Committee on Reliability, Energy Efficiency and Innovation of the Board of Directors of RusHydro, Strategy Committee of the Board of Directors of RusHydro and Strategy Committee the Board of Directors of Rosseti
VLADIMIR MARKIN1 Supervised units: Additional information on the members of the Management Board Administrative unit In the reporting period, RusHydro’s In the reporting period, members of Member of the Management Born in 1956 Board, First Deputy General executive bodies had no conflict the Management Board received no Education, academic degree, academic rank: Director of interest (including participation loans from the Company or RusHydro Graduated from Moscow State University with a degree in Journalism; in the governing bodies of Group. Graduated from the Institute of Economics and Culture with a degree in Law the Company’s competitors). For more information Boris Bogush (the Management Professional experience over the last five years: on the positions held by No decisions on the early termination Board member) holds 0.003843% ↗↗ 2011–2016: Head of Media Relations Directorate of the Investigative Committee of Russia the Management Board members of powers of the Management Board of RusHydro’s ordinary shares. in other companies’ governing ↗↗ 2016: First Deputy General Director; member of the Management Board and First Deputy bodies over the last 5 years, members were made in the reporting General Director of RusHydro see section 5.2.3 of the Company’s period. Nikolay Shulginov’s appointment George Rizhinashvili (the Management quarterly report for Q4 2018 terminates on September 14, 2020, Board member) no longer holds Positions held in collective governing bodies: on the Company’s website at: 1 www.rushydro.ru in accordance with his employment 0.01286% of RusHydro’s ordinary shares . ↗↗ Head of Security and Fan Relations Committee of Football Union of Russia contract. Other RusHydro’s Management Year of election to the Management Board: 2017 Board members have no fixed terms Members of the Management Board of appointment. do not indirectly hold any of RusHydro shares or own shares/stakes in any of RusHydro’s subsidiaries.
1 These material facts are disclosed on the Company’s website at: http://www.rushydro.ru/upload/iblock/80d/Soobshenie.pdf and http://www.rushydro.ru/upload/iblock/3ac/Soobshenie-o- 1 Left office on February 24, 2019 pursuant to the resolution of the Board of Directors dated February 19, 2019. sushestvennom-fakte.pdf
184 185 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Report on the Management as well as the enhancement of Items reviewed by RusHydro’s Board’s performance corporate governance and social Management Board in 2018, % AUDIT AND CONTROL and environmental responsibility In 2018, RusHydro managed to secure mechanisms. RusHydro controls its financial and business operations by using a combination of internal regulations, strong progress, which helped underpin operational practices, procedures, and methodologies involving the following key parties: Internal Audit its solid performance. RusHydro achieved In 2018, the Company approved Commission; Independent Auditor; Audit Committee of the Board of Directors of RusHydro; Internal Audit its target KPI thanks to the Company’s a number of internal regulations on Service. team governed by the Management Company’s governing bodies and other Board in close cooperation with by-laws (regulations and policies). The key principles, goals, objectives, the Board of Directors. methods, and processes of the control In 2018, the Management Board held framework are set forth in the following RusHydro’s Code of Corporate Ethics1 sets forth the ethical standards To protect the rights of investors and 68 meetings, including 22 in person, and documents approved by RusHydro’s and rules of conduct for employees and members of the Company’s shareholders, the Company continued reviewed 454 matters on the day-to-day General Meeting of Shareholders and Board of Directors and seeks to improve their job performance. The key to implement its key strategic operations of the Company, including Subsidiary management 35 0 Board of Directors: principles and ethical standards that employees, managers, and members Implementation of 19 6 goals, including safe operation of preliminary consideration of the matters the Company’s projects ↗↗ Regulations on Internal Audit of the Board of Directors must comply with are outlined in Clauses 2 and 4 the Company’s production facilities, submitted for the Board of Directors’ Business planning and investment 12 3 Commission; of the Code2. Provisions of the Code are introduced through the adoption value growth and investment review. Approval of by-laws 4 0 ↗↗ Corporate Governance Code; and implementation of in-house rules and regulations, including: returns to the shareholders, Performance management and KPI 3 5 ↗↗ Internal Control and Risk ↗↗ Anti-Corruption Policy; Other 25 6 Management Policy; ↗↗ Conflict of Interest Regulations. ↗↗ Internal Audit Policy; ↗↗ Regulations on the Audit Committee of the Board of Directors; ↗↗ Code of Corporate Ethics; Management Board performance In 2018, RusHydro’s corporate funds wrongfully obtained by ↗↗ Anti-Corruption Policy. governance systemfor 2017 was members of the executive bodies The Board of Directors evaluates assessed, including the executive and other key officers in case they the performance of the Management bodies’ performance. The assessment commit financial statement fraud or Board and its Chairman by reviewing report included the following other misconduct aimed at formal the following matters: recommendations: achievement of the Company’s KPI ↗↗ the Company’s business plan ↗↗ develop and approve by the Board and performed to the detriment The Company’s Internal Audit Commission. The Audit Committee implementation; of Directors the Company’s executive of the shareholders’ long-term Commission reports to the General discusses the auditor’s plan of annual ↗↗ the Company’s Consolidated Business management succession plan; interests. Meeting of Shareholders. The Internal audits of RusHydro Group. Plan implementation; ↗↗ consider including into the contracts Audit Commission’s opinion is submitted The documents approved by ↗↗ RusHydro’s KPI achievement; signed with members of general meeting of shareholders to the Audit Committee of the Board The Board of Directors represented ↗↗ corporate governance assessment; the executive bodies and other key are available on the Company’s of Directors of RusHydro. The Internal by its Audit Committee is responsible website at www.rushydro.ru ↗↗ the report on the Management officers the provision which will Audit Commission’s opinion issued for the functional management of Board’s performance. enable the Company to reclaim after the audit of the annual report, the Internal Audit Service, including RAS financial statements and report approval of the annual schedule of on the Company’s related-party control activities and quarterly reports transactions is a mandatory document on adherence to that schedule. that must be submitted to the General The documents approved by Meeting of Shareholders. Board of directors are available on the Company’s website at www.rushydro.ru An Auditor’s opinion is submitted to the Board of Directors’ Audit Committee and to the Internal Audit
1 Approved by Board of Directors resolution of April 7, 2016. 2 More information is available at:http://www.rushydro.ru/upload/iblock/3fa/Kodeks-korporativnoj-etiki-s-izmeneniyami-ot-27.12.2018.pdf
186 187 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Internal Audit Commission Internal Audit Service
The Internal Audit Commission is compliance with applicable laws and For the full text of Internal Audit Commission’s opinion a permanent body responsible for internal regulations, and financial and on the audit of financial and The key objective of RusHydro’s Structure of RusHydro’s Internal Audit Service (15 people): the monitoring of the Company’s business operations were conducted business operations for 2018, internal audit function is to assist financial and business operations. in the best interests of the Company see Appendix No. 17. the Board of Directors and executive The Commission consists of five and its shareholders. The opinion bodies of RusHydro Group in Head o t e nternal elected members. The Commission’s also confirms the accuracy of data enhancing the Group’s management Aud t Ser e opinion on the audit results was contained in the Company’s Annual efficiency and improving its submitted to the Annual General Report and report on interested-party operations, including by adopting Meeting of Shareholders. The audit transactions consummated in 2018. a systematic and consistent approach For details on the remuneration confirmed that the data contained in of the Internal Audit Commission to the analysis and evaluation of the reports and financial documents There were no changes in the members, see the Report on the risk management, internal control of the Company were reliable, composition of the Internal Audit remuneration of the governing and corporate governance systems. and control bodies on p. 210. eputy Head o t e Ser e the accounting and financial reporting Commission in 2018. Head of the Audit Office for functions were performed in The Internal Audit Service is RusHydro’s t e Central Re on standalone business unit that reports to the Board of Directors Members of the Internal Audit Commission through the Audit Committee and has an administrative reporting line Members Primary employment Nominated by Shareholding to the Chairman of the Management Tatyana Zobkova (Chair of Deputy Director of the Department of Corporate Russian Federation None Board – General Director of RusHydro. Audit Office the Internal Audit Commission) Governance, Price Environment and Control in 2018 Audit Office Analyt al The Head of the Internal Audit Service or t e Central in the Energy Sector of the Russian Ministry of Energy or t e ar ast Center was approved by resolution of Re on Natalia Annikova – Russian Federation None RusHydro’s Board of Directors. in 2018 Igor Repin Deputy Executive Director, Association of Institutional Russian Federation None The Internal Audit Service has Investors in 2018 the following objectives and functions: Audit Commission, and other Professional Standards of Internal Audit. Marina Kostina Deputy Director of the Corporate Governance Russian Federation None ↗↗ to conduct regular audits of business supervisory bodies in connection In 2018, the Internal Audit Service Department of the Russian Ministry of Economic in 2018 units, Company’s branches/ with internal control issues and in worked to update internal regulations Development subsidiaries, processes, lines of the course of audits and inspections applicable to the Internal Audit Service Dmitry Simochkin Head of Department, Federal Agency for State Property Russian Federation None business, projects of the Company/ of the Company or its subsidiaries and Audit Committee, and to this end: Management in 2018 subsidiaries, collect and analyze conducted by such bodies. ↗↗ updated the Regulations on audit evidence for an independent the Audit Committee of the Board of assessment and expression of opinion The general principles of, and Directors; Auditor on the reliability and effectiveness of approaches to the Company’s internal ↗↗ updated the Regulations on the: audit system are set forth in the Internal the planning and implementation of RusHydro’s accounts (financial statements) prepared in accordance with Russian and international standards • internal control system; Audit Policy approved by RusHydro’s control activities of the Internal Audit are audited on an annual basis. The auditor responsible for the independent audit of RusHydro’s RAS and • risk management system; Board of Directors. The Policy is aligned Service; IFRS accounts (financial statements) for 2018 was selected through an open tender process. • corporate governance system. with RusHydro’s Corporate Governance ↗↗ updated the Regulations on ↗↗ to liaise with the Audit Committee of Code, Methodological Guidelines and the Internal Audit Service; RusHydro’s auditor was selected in (PwC Audit: 10, Butyrsky Val, 125047, No consulting services were rendered the Company’s Board of Directors; Instructions of the Federal Agency for ↗↗ developed and implemented the a competitive process pursuant to Moscow) was declared the preferred by PwC Audit to the Company. ↗↗ to liaise with local executive State Property Management and is methodology of annual independent Article 5 of Federal Law No. 307-FZ bidder as was approved by resolution authorities of the Russian Federation, designed, inter alia, to contribute to assessment of the corporate of December 30, 2008 On Auditing, of RusHydro’s General Meeting of Accounts Chamber of the Russian the compliance of RusHydro’s Internal governance system by the Federal Law No. 44-FZ of April 5, 2013 Shareholders of June 27, 2018. For details of the independent Federation, the Company’s Internal Audit Service with the International Company’s Internal Audit Service. auditor’s remuneration, see On the Contract System in the Federal the Report on remuneration of and Municipal Procurement of Goods, PwC Audit is a member of self-regulating the governing and control bodies. Works and Services, the Charter, and organization of auditors Russian Union internal documents of RusHydro. of Auditors (Association). Number in the Following the tender procedures, Register of Auditors: principal number of АО PricewaterhouseCoopers Audit registration entry 11603050547.
188 189 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
The schedule of control activities is ↗↗ implementation efficiency of internal control system efficiency, and A third-party independent assessment Throughout 2018, the Company’s approved by the Audit Committee investment projects involving avoid repeated violations. The Internal of the Company’s internal audit system auditor regularly reported to on an annual basis and defines construction of new generation Audit Service is also involved in the is planned to be held in 2019–2020 the Audit Committee on plans the priorities of the internal audit facilities; coordination and follow-up control of to ensure its compliance with the and results of the audits, shared work subject to RusHydro Group’s ↗↗ R&D efficiency of the Company’s corrective actions. Corrective actions BASED ON THE MANAGEMENT’S International Professional Practices its vision on important qualitative objectives, resources available, subsidiaries (RusHydro Group taken after inspections by supervisory FEEDBACK ON THE RESULTS Framework governing internal aspects of RusHydro’s accounting and risk-based approach to control institutes). authorities are monitored in a similar OF CONTROL ACTIVITIES, auditing. practices, including its accounting activities. manner. THE INTERNAL AUDIT FUNCTION policy, estimates, and disclosures In 2018, the Internal Audit Service WAS HIGHLY EFFECTIVE IN 2018 in financial statements, and raised The control activities involved assessed the Company’s system of The Internal Audit Service is also IN TERMS OF IDENTIFYING GAPS Assessment of the efficiency matters that based on the auditor’s an assessment of effectiveness of internal control, risk management, responsible for the liaison with TO BE RESOLVED IN ORDER of internal and external audit professional judgment are important internal controls over RusHydro corporate governance, and non-core supervisory authorities, if and when TO REDUCE OR ELIMINATE ANY by the Audit Committee of for the oversight over the financial Group’s activities aimed at ensuring asset management. The Board of examinations and inspections are NEGATIVE FACTORS IMPAIRING RusHydro Board of Directors reporting process. reliable and safe operation of Directors reviewed the Internal Audit carried out at RusHydro Group. In THE EFFICIENCY OF RUSHYDRO’S RusHydro Group’s facilities and Service’s assessment of the internal 2018, the Internal Audit Service worked On a quarterly basis, the Audit In 2018, The Audit Committee assessed AND ITS SUBSIDIARIES’ the stable development of electricity control, risk management and with supervisory authorities (Accounts Committee reviews the report on the performance of the Company’s OPERATIONS. generation, including: corporate governance systems of Chamber of the Russian Federation, the implementation of the schedule auditor (including the auditor’s ↗↗ investment program efficiency the Company and recommendations Prosecutor General’s Office, and of control activities prepared by Head reports) and the effectiveness of as regards rehabilitation & on their improvement. Russia’s Ministry of Energy) in the of the Internal Audit Service. Report external audit as a process. Based on modernization at existing course of nine audits conducted by describes material violations, flaws the assessment, the Audit Committee generation facilities; The Internal Audit Service submits them. Internal audit system and gaps identified in the operations found the process to be effective. its quarterly report on the control development plans of RusHydro and its subsidiaries, The Company’s auditor is unbiased activities to the Audit Committee of In accordance with the approved includes information on substantial and independent from RusHydro, the Company’s Board of Directors. Internal Audit Quality Assurance In 2019, further steps will be taken risks and issues of controls and has no conflict of interest or any The report describes key/system and Improvement Program, in order to enhance the Company’s internal corporate governance, and provides circumstances that might challenge IN 2018, THE INTERNAL weaknesses identified in RusHydro to ensure adequate control and audit function, including: recommendations on remedial actions its independence. Materials that Group’s internal control system and assessment of the internal audit ↗↗ update of the regulatory and improvement of internal controls. the external auditor prepares and AUDIT SERVICE CONDUCTED gives recommendations on possible function and to identify improvement framework of the Internal Audit presents to the Audit Committee 12 SCHEDULED CONTROL improvements. areas, the Internal Audit Service Service in compliance with According to feedback received on are informative and enable the Audit PROCEDURES AND THREE conducted an annual self-assessment the International Professional control activities, the internal audit Committee to control the quality of UNSCHEDULED AUDITS The results of the control activities of the internal audit function based Practices Framework (IPPF); function performed very effectively the auditor’s performance. AS PROVIDED BY THE SCHEDULE carried out by the Internal Audit on which the Audit Committee ↗↗ further automation of RusHydro’s in 2018 in terms of identifying matters OF CONTROL ACTIVITIES Service are used by RusHydro Group’s recognized that the internal audit internal audit function, including to be resolved in order to mitigate APPROVED BY THE BOARD management to design and roll out function performed by the Company’s in terms of follow-up control or eradicate any negative factors OF DIRECTORS’ AUDIT a corrective action plan to address Internal Audit Service “meets of corrective actions based on impairing the efficiency of RusHydro COMMITTEE. the identified gaps, improve the the relevant requirements”. internal or external audits. and its subsidiaries.
190 191 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Anti-corruption efforts Comprehensive Program of Anti-Corruption Activities
RusHydro Group’s anti-corruption ANTI CORRUPTION ACTIVITIES STRUCTURE In 2018, the Company rolled out a number of anti-corruption initiatives in accordance with the approved framework is aligned with the laws of action plan for implementing the Comprehensive Program of Anti-Corruption Activities for 2018-2019. Russia in order to reflect the national e Co pany s oard o re tors policy in internal measures that Program workstreams What we did in 2018 the Group takes to combat corruption, (Audit Committee of the Company’s Board of Directors) minimize corruption risks, provide for Establishes the key goals, objectives and principles of the Anti-Corruption Developing and updating the Company’s ↗↗Approval of a new Regulation on RusHydro Group’s Line of Trust (Order No. 689 transparent and honest operations, Policy and monitors the results of its implementation. anti-corruption regulations and by-laws of September 12, 2018) updating the procedure for processing and responding improve corporate culture, follow best to the reports received through the Line of Trust. practices of corporate governance, ↗↗Amendment of the Rules of RusHydro’s Line of Trust Operation to change the 24/7 hotline number (Order No. 1018 of December 27, 2018); and maintain strong business ↗↗Amendment of the Code of Corporate Ethics in terms of the measures reputation. designed to prevent the substantial shareholders’ misconduct in connection C a r an o t e ana e ent oard eneral re tor with the Company’s transactions involving a conflict of interest1, as well as RusHydro and its subsidiaries use mitigating the effects of such misconduct (the Board of Directors minutes No. 281 of December 27, 2018); a system of corporate policies and Manages goals, objectives and principles of the Anti-Corruption Policy and selects business units responsible for developing, implementing ↗↗Update of the Regulations on the Procedure to Report Presents Received standards to regulate anti-corruption and monitoring the anti-corruption procedures. by RusHydro’s Employees (Order No. 60 of February 5, 2019); measures and define the main ↗↗Amendment of RusHydro’s Regulations on the Prevention and Management of objectives, goals and focus areas Conflicts of Interest in terms of the procedure for considering notices of potential conflicts of interest of employees holding positions named in the list approved of activities aimed at preventing by Resolution of the Government of the Russian Federation No. 613 of July 22, 2013 and combating corruption. These and clarified by the Executive Office of the Government of the Russian Federation2 documents include the Code of RusHydro s Control and R s ana e ent epart ent (Order No. 44 of January 29, 2019). Corporate Ethics, Anti-Corruption Develops anti-corruption activities and organizes and controls Policy, Regulations on the Prevention their implementation Providing for transparency and availability ↗↗The following information is published on RusHydro’s website and intranet portal and Management of Conflicts of Coordinates activities aimed at corruption prevention of information on the Company’s anti- and updated on a timely basis: Interest, Regulations on the Procedure corruption policy and ensuring employees’ ↗↗the Company’s local internal documents on combating corruption and preventing Conducts control measures and develops activities to assess awareness of anti-corruption legislation wrongdoings and conflicts of interest; to Report Presents Received by and minimise corruption risks ↗↗action plans and reports on the implementation of the Comprehensive Program RusHydro’s Employees, RusHydro’s Oversees legal compliance of anti-corruption efforts of RusHydro of Anti-Corruption Activities; Regulations on the Committees for and its subsidiaries. ↗↗information, effective laws and regulations, and guidance on combating corruption. Compliance with the Corporate ↗↗RusHydro has put in place a permanent Line of Trust (http://www.eng.rushydro. Ethics Standards and Management of ru/form/), a communication channel available to RusHydro Group’s employees and third parties (including anonymous) to report issues in an effort to combat fraud and Conflicts of Interest. corruption, prevent wrongdoings and conflicts of interest, and improve RusHydro’s n ts o RusHydro and ts su s d ar es depart ents operations. In order to improve the performance o se ur ty, HR, procurement, Ethics Committee, etc.) ↗↗In 2018, the Company developed and placed in its offices and branches new roll up of RusHydro’s anti-corruption efforts, banners providing information about the Line of Trust, and released a video displayed regularly in the Company’s offices. the Group has developed and approved Implement activities aimed at corruption prevention within the Comprehensive Program of Anti- the scope of each department’s operations. Corruption Activities for 2016–2019 Providing for investigations into any reports ↗↗In 2018, the Company considered 195 reports received through the Line of Trust, (the “Program”) to define the focus of wrongdoings of which 67 (34%) were confirmed to be true and involve violations of rights and/or other wrongdoings. The Company took measures to eliminate all verified violations. areas of corruption prevention: ↗↗ developing and updating the Company’s anti-corruption ↗↗ cooperation with state regulatory regulations and by-laws; bodies and law enforcement ↗↗ providing for transparency and authorities responsible for combating availability of information on corruption; Documents are available online at: the Company’s anti-corruption policy ↗↗ measures to prevent wrongdoings http://www.rushydro.ru and ensuring employees’ awareness by the Company’s employees; of anti-corruption legislation; ↗↗ enhancing internal controls. ↗↗ providing for investigations into any reports of wrongdoings;
1 Transactions involving a conflict of interest are the Company’s transactions with persons affiliated with (related to) substantial shareholders of RusHydro (other than the Russian Federation) aimed at receiving unjustified profit (enrichment) at the Company’s expense. 2 No. P17-69370 of December 29, 2018.
192 193 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Employee training in the existing anti-corruption policies in 2018 Region Top Middle Junior White-collar Program workstreams What we did in 2018 management management management employees Number % of Number % of Number % of Number % of Cooperating with the state regulatory ↗↗In 2018, the areas of the Company’s cooperation with government authorities bodies and law enforcement authorities (the Government of the Russian Federation, the Ministry of Energy of Russia, etc.) of people employees of people employees of people employees of people employees responsible for combating corruption included: Moscow 14 11.67 30 25.00 63 52.50 13 10.83 ↗↗disclosure of information upon an authorized request; ↗↗reporting on the Company’s anti-corruption practices; Republic of Dagestan 3 27.27 3 27.27 1 9.09 4 36.36 ↗↗filing queries for the clarification of anti-corruption law enforcement practices; Kabardino-Balkarian 1 14.29 6 85.71 – – ↗↗sending proposals on amending Article 13.3 of Federal Law No. 273-FZ On Republic Combating Corruption of December 25, 2008 (draft). Karachay-Cherkess 1 7.14 9 64.29 – – 4 28.57 Republic Measures to prevent wrongdoings ↗↗In 2018, following the amendments of legislation and RusHydro’s internal local by the Company’s employees documents, the Company updated its corporate distance learning courses: Republic of North 1 11.11 2 22.22 5 55.56 1 11.11 Combating Fraud at RusHydro and Combating Procurement Fraud. Ossetia – Alania ↗↗In December 2018, the employees of the Headquarters, branches and subsidiaries Amur Region 8 36.36 10 45.45 – – 4 18.18 of RusHydro holding positions exposed to corruption risks1 were tested to check their knowledge of Russian anti-corruption laws and the Company’s local internal Volgograd Region 3 37.50 4 50.00 – – 1 12.50 documents on combating corruption. Perm Territory 6 28.57 10 47.62 1 4.76 4 19.05 ↗↗In 2018, as part of the effort to identify and resolve conflicts of interest, the Company collected and checked 2017 income records of 387 employees (the top management Samara Region 4 30.77 4 30.77 – – 5 38.46 of RusHydro and its subsidiaries). As a result, 40 officers failed to comply with the Moscow Region 5 55.56 3 33.33 – – 1 11.11 relevant requirements. In response to all 40 cases of non-compliance, RusHydro’s Central Ethics Committee, Yaroslavl Region 5 55.56 2 22.22 – – 2 22.22 after reviewing the results of the declaration for 2017, issued recommendations on Stavropol Territory 5 62.50 2 25.00 – – 1 12.50 the elimination of the identified gaps and violations, prevention or resolution of actual and/or potential conflicts of interest and use of disciplinary action. Nizhny Novgorod 5 50.00 4 40.00 – – 1 10.00 Region Novosibirsk Region 3 21.43 7 50.00 – – 4 28.57 Enhancing internal control system ↗↗RusHydro develops, updates and implements internal control improvement plans on an annual basis. For more information on relevant initiatives, see Risk management Saratov Region 3 37.50 3 37.50 – – 2 25.00 section of this report. Republic of Khakassia 4 36.36 6 54.55 – – 1 9.09 Chuvash Republic 4 36.36 5 45.45 – – 2 18.18 Total 75 24.6 110 36.1 70 23 50 16.4 Anti-corruption awareness of the Company, featuring RusHydro conducts annual program and training [205–2] information on this Policy; assessment of employees ↗↗ regular training on preventing in the positions with high exposure The Company promotes awareness and combating corruption to corruption risk in order to test and educates employees on anti- in the Company; their knowledge of the anti- corruption practices. The Company’s ↗↗ individual consultations for corruption laws. anti-corruption measures include, the Company’s employees among other things: regarding the application of ↗↗ distance learning induction for anti-corruption standards and new (newly hired) employees procedures.
1 The list of the positions exposed to corruption risks was approved in accordance with the Company’s Anti-Corruption Policy.
194 195 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Key developments in 2018 ↗↗ amended RusHydro’s Regulations on Providing for transparency The information on the ways to file Information contained in 67 (34%) Number of reports considered, the Prevention and Management of and availability a report is available on notice boards was confirmed to be true and involve pcs In order to keep the Company’s anti- Conflicts of Interest in terms of the of information [102–17] and information screens in the offices violations of rights and/or other corruption regulations updated, procedure for considering notices of RusHydro Group companies. wrongdoings. The Company took RusHydro undertook the following of potential conflicts of interest of The following information is published on measures to eliminate the verified in 2018: employees holding positions named RusHydro’s website and intranet portal The results of the Line of Trust’s violations: ↗↗ approved a new Regulation in the list approved by Resolution and updated on a timely basis: operation are disclosed on ↗↗ based on three reports, disciplinary on the Procedure for Accepting, of the Government of the Russian ↗↗ the Company’s local internal documents the Company’s intranet portal action (reprimand, censure) was Processing and Responding Federation No. 613 of July 22, 2013 on combating corruption and preventing and in the corporate newsletter. taken against five employees to the Reports received through and clarified by the Executive wrongdoings and conflicts of interest; (managers) of RusHydro Group, RusHydro Group’s Line of Trust1, Office of the Government of the ↗↗ action plans and reports who committed violations; including the following additions Russian Federation (Order No. 44 of on the implementation of Line of Trust ↗↗ two reports resulted in the managers 1 1 and amendments: January 29, 2019). the Comprehensive Program of being stripped of their bonuses; • adding and modifying terms and Anti‑Corruption Activities; In 2018, the Company reviewed ↗↗ Two employees (one of them being 1 1 18 definitions; ↗↗ information, effective laws and 195 reports received through the Line a manager) faced termination of their • updating a list and Anti-corruption program regulations, and guidance on combating of Trust. The reports that did not meet employment contracts by mutual responsibilities of the officers and implementation roadmap corruption. the criteria set by the Rules of RusHydro’s consent; Reports by topic, pcs divisions in charge of receiving for 2019 Line of Trust Operation (email spam, ↗↗ organizational measures, including: and considering reports received RusHydro works in close cooperation advertisements, mass mailing, etc.) were • preventive discussions; through the Line of Trust; In 2019, the Company will continue with the law enforcement authorities not accepted. The number of reports • necessary employee training; • updating the procedure for rolling out the Comprehensive and supervisory bodies and provides increased by 17% year-on-year. • amendments made responding to the reports Program of Anti-Corruption Activities, assistance to them in case of audits and to procurement documents, received through the Line of which will include: inspections, requests of information The increase was mainly driven by cancellation/postponement Trust; ↗↗ developing and updating on the Company’s anti-corruption the integration of RusHydro’s Line of procurement procedures; ↗↗ amended the Rules of RusHydro’s the Company’s anti-corruption compliance (including with respect to of Trust, its promotion, as well as • payment adjustments; Line of Trust Operation2 to change regulations and by-laws; storage and transfer to the authorities the Group’s organizational changes • other measures aimed the dial-in hotline number; ↗↗ providing for transparency and of the information and documents on made to improve performance of at eliminating identified gaps ↗↗ amended3 the Code of Corporate availability of information on corruption offences), investigations of electricity retailers that included and violations. Ethics in terms of the measures the Company’s anti-corruption corruption cases, and inspections seeking deployment of new software, unified Sales 85 designed to prevent the substantial policy and ensuring employees’ to check how the Company prevents and payment documents, etc. Procurement 38 HR payroll 21 shareholders’ misconduct in awareness of anti-corruption combats corruption. Abuse of power 13 connection with the Company’s legislation; Other 38 transactions involving a conflict ↗↗ providing for investigations into In 2018, the Company completed of interest, as well as mitigating any reports of wrongdoings; the integration of RusHydro Group’s the effects of such misconduct; ↗↗ Cooperating with the state hotlines into the single Line of Trust and ↗↗ approved the Regulations on regulatory bodies and law updated the Regulation on the Procedure There are several ways to file a report via the Line of Trust [102–1 ] the Procedure to Report Presents enforcement authorities for Accepting, Processing and Responding Received by RusHydro’s Employees4 responsible for combating to the Reports Received through the updating the reporting procedure corruption; Line of Trust, which sets the list and and the criteria, limits and ↗↗ measures to prevent wrongdoings responsibilities of the officers and divisions restrictions for giving presents and by the Company’s employees. in charge of receiving and considering Email: nl ne eed a or Hotl ne ans er p one ld rus ydro ru on the Company’s website at: (service available 24/7): using of representation allowances ↗↗ other measures for improving reports, and defines the procedure for http://www.rushydro.ru 8 0 and hospitality expenses; efficiency of anti-corruption efforts. responding to them. and ntranet portal at https://my.rushydro.ru/helpful/pub rec/default.aspx
Line of Trust boxes Postal ser e In-person meeting pla ed n t e Co pany s t t e nternal Control offices and R s ana e ent re tor C e Aud tor
1 Order No. 689 of September 12, 2018. 2 Order No. 1018 of December 27, 2018. 3 Board of Directors minutes No. 281 of December 27, 2018. 4 Order No. 60 of February 5, 2019.
196 197 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Control over major transactions and interested-party transactions RISK MANAGEMENT
RusHydro has a transaction control Depending on transaction value, and approval details, see Appendix No.2 System of internal control system in place. RusHydro’s the review is done by legal departments to the annual report. All the transactions Regulations on Contracts and of the Company’s branches or requiring approval by the Company’s and risk management Agreements govern a common at the Company’s Headquarters. governing bodies were approved. procedure for negotiating, concluding Consequently, none of them involved and executing contracts on behalf For the list of interested-party conflict of interest. RusHydro’s operations are subject to a number of risks that, in certain circumstances, may have an adverse of the Company. Draft contracts transactions concluded by RusHydro impact on the Company’s operating and financial performance and its social and environmental footprint. are subject to review to ensure in 2018, including the subject of the In 2018, RusHydro made no major The Company has a risk management system in place to mitigate negative effects of potential threats while compliance with Russian laws. transaction, interested parties involved transactions. capturing favorable opportunities in line with the Development Strategy of RusHydro Group until 2020 with an outlook for 2025.
Preventing the use of insider information Control and Risk Management Organizational Chart
Aud tor In response to the requests of security RusHydro has put in place Regulations The data that constitutes n or at on market operator (PJSC Moscow oard o re tors on Insider Information to secure the Company’s insider information is ntera t on compliance with laws and regulations also published in Russian in the news Exchange), RusHydro provided it with of the Russian Federation in terms of feed of an authorized news agency 12 lists of insiders as of the respective nternal Aud t prevention of unauthorized use of insider Interfax Corporate Information dates of the requests. Co ss on Aud t information and market manipulation. Disclosure Center (for more information, Co ttee The Regulations are in line with see www.e-disclosure.ru) and in In 2018, RusHydro received two the world’s best corporate governance English in the London Stock Exchange’s notifications from its insider George practices, including Disclosure and News Monitoring Service (for more Rizhinashvili, the member of Transparency Rules of the Financial information, see https://www. the Management Board, First Deputy Conduct Authority. londonstockexchange.com/exchange/ General Director of the Company, prices-and-markets/stocks/exchange- regarding the sale of his ordinary C a r an o nternal Aud t The Regulations specify the persons that insight/company-news.html?fourWayKe registered shares in RusHydro through t e ana e ent are included in the Company’s list of y=US7821834048USUSDIOBE). organized trading. Ser e insiders, the rules of access to the insider oard information and its confidentiality RusHydro’s list of insiders is updated The member of the Management Board eneral re tor protection, as well as restrictions upon inclusion or exclusion of insiders. and First Deputy General Director on the use of insider information in As at December 31, 2018, the Company’s in charge of the unit of financial Ad n strat e transactions with the Company’s financial list of insiders incldued 18 legal entities and corporate law management report n instruments and disclosure thereof to and 86 individuals. During 2018, six legal supervises the Company’s compliance nternal Control the third parties. entities and 16 individuals were added with the laws on insider information un t onal and ad n strat e and R s ana e ent to the list, while four individuals and one and submits quarterly reports report n re tor The list of insider information is made legal entity were excluded. to the Audit Committee of the Board in Russian and English and published of Directors of RusHydro. The Audit un t onal on the Company’s website. In Q2 2018, RusHydro sends proper inclusion/ Committee includes the information on report n the Company approved a new revised exclusion notifications to the insiders. the Company’s compliance with these list of insider information1. In 2018, 27 notifications were sent. requirements into its annual report.
1 Order No. 236 of April 18, 2018.
198 199 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
The Company’s risk management framework at Rushydro Group, Internal regulations the Management Board. Performance Risk managers maintain an ongoing Сompanies with a Stake Owned by processes are coordinated by ↗↗ coordinating risk identification, against the risk mitigation plan is interaction with the Audit Committee the Russian Federation (approved by the Control and Risk Management assessment and management at The key regulation defining the goals, measured when determining employees’ of the Board of Directors as the order No. 86 of the Federal Agency Department set up as part of RusHydro Group, objectives and principles of bonus awards. The implementation of body overseeing RusHydro’s risk for State Property Management the internal control and risk ↗↗ carrying out centralized day-to- the Company’s corporate system of the risk mitigation plan and its progress management system in line with the (Rosimuschestvo) of March 20, 2014). management unit. Its headcount day control over RusHydro Group’s internal control and risk management are monitored and overseen by Guidelines on Audit Committees of as at 31 December 31, 2018 was operations, including assessment of is RusHydro’s Internal Control and Risk the Company’s risk managers. the Boards of Directors of Joint-Stock 26 employees. the management’s performance in Management Policy. relation to internal control function; The Control and Risk Management ↗↗ maintaining an effective anti- Department is responsible for: corruption framework and ↗↗ maintaining an effective internal coordinating RusHydro Group’s control and risk management anti‑corruption activities. The Internal Control and Risk More information of the relevant More information on RusHydro’s Management Policy is available regulations is also available on risk management cycle and on the Company’s website at: the Company’s website at: methods is available on the www.rushydro.ru www.rushydro.ru Company’s website at: Risk management: methods and approaches www.rushydro.ru
The Company applies the following that risk management knowledge Strategic risk Independent assessment of the corporate system set of risk management methods and and skills are shared throughout management cycle approaches in line with its Internal the Company and the Group, of internal control and risk management Control and Risk Management Policy: promotes learning of the basics of Appro al o t e strate ↗↗ risk management is an integral part of risk management and advances Internal Audit Service to provide management that was reviewed by r s re ster and all organizational processes: it is not the corporate culture centred External assessment of the Company’s Board of Directors the Company’s Board of Directors t e asso ated r s segregated from the Company’s key around the risk-based approach the corporate system of and the Group’s executive bodies at a meeting held in person and t at on plan business activities and processes; to management; internal control and risk with independent and objective approved by resolution of the Board ↗↗ risk management is an integral part of ↗↗ the Company’s management ensures management information about the current state of Directors on June 21, 2018. decision-making: it helps the decision effective information exchange and of the corporate system of internal makers to make informed choices, setting of communication standards The Audit Committee of the Board control and risk management against The report revealed that prioritize initiatives and find the best as part of corporate risk management. of Directors or the Chairman of its target state and to identify areas the Company’s corporate system of solutions among alternatives; the Management Board – General for its improvement. internal control and risk management ↗↗ risk management is essential to Pursuant to RusHydro’s Strategic ple entat on Director may seek an external had a moderate level of maturity, RusHydro’s continuous improvement: Management Regulations, the Company o t e r s independent assessment of In 2018, RusHydro’s Board of with elements of both systems being the Company refines and enhances its maintains a strategic risk register t at on plan the corporate system of internal Directors performed an assessment generally in line with the target state corporate system of internal control which identifies risk owners and is control and risk management by of the corporate system of internal set by the assessment methodology and risk management to raise the level reviewed annually and approved by independent third-party experts. control and risk management. as approved by the Audit Committee of its risk management maturity; the Management Board. Strategic risks of the Company’s Board of Directors. ↗↗ the Company fosters a risk-focused that are deemed critical or material are In 2018, no external independent The assessment relied on organizational culture; addressed in the risk mitigation plan assessment was performed. the methodology agreed with The priority areas for the improvement ↗↗ the top management sets risk which identifies action owners, deadlines the Audit Committee of the Board of the corporate system of internal management as a priority, makes sure and deliverables and is approved by Report of Directors and designed to assess control and risk management on t e ple entat on Internal assessment of the current state of the corporate identified by the Board of Directors o t e r s the corporate system of system of internal control and risk based on the report findings include t at on plan internal control and risk management against its target state updating the model of the Company’s management set by the methodology. business processes, benchmarking, and revising the Company’s The internal assessment of The assessment results were approach to further development the corporate system of internal presented in a follow-up report of the corporate system of internal control and risk management is on the operation of the corporate control and risk management. performed annually by the Company’s system of internal control and risk
200 201 PJSC RusHydro | Annual Report 2018
Improvement of the corporate Risk management report During 2018, the risk management Delays in commissioning and for 2018 activities centered around the critical project cost overruns were caused system of internal control and risks associated with key construction by the need to specify and amend Risks and opportunities are prioritized projects, including: the design and cost estimate risk management according to their impact on key ↗↗ delayed commissioning of new documents, coupled with low financial, environmental and social facilities at Zaramagskiye HPP financial stability and qualification of aspects of the Company’s operations, (346 MW, under capacity sale contractors, as well as contractors’ with the strategic targets, development agreements for new NPPs/HPPs); errors during the pre-commissioning The Company implemented a set of key and progress in implementing risk priorities and the Company’s mission Sakhalinskaya GRES-2 (120 MW); stage. initiatives listed below to improve its management processes with a view factored in. [103] ↗↗ cost overruns for investment corporate system of internal control and to developing a risk-based approach projects at Verkhnebalkarskaya SHPP, In 2018, measures were taken to risk management. to building the 2018 internal control In 2018, RusHydro Group’s register Zagorskaya PSPP-2 (first stage of mitigate these risks to an acceptable ↗↗ In 2018, the Company reorganized action plan and assess the efficiency consisted of 15 risks, with no changes switchgear construction), GTP-CHPP level. its internal control and risk and form of control activities. taking place throughout the year. [102-15] at the central steam and water boiler management unit. As a result, the unit ↗↗ The implementation of improvements site in Vladivostok. successfully managed a transition to in internal control over RusHydro’s key a new organizational structure and business processes is monitored on the Company approved new internal a systemic basis, with more proposals regulations governing the activities of developed for introducing new or RusHydro Group’s strategic risk radar for 2018–2019 the structural units within the internal strengthening the existing business control and risk management unit. process controls. 2 1. Delayed commissioning of new facilities ↗↗ In 2018, the Company started drafting ↗↗ The subsidiaries’ risk mitigation plans 1 2. Cost overruns for investment projects internal regulations governing for 2018–2019 are being developed the operation of the corporate subject to regular reviews and 3. Revenue shortfalls from the sale of electricity (capacity) and heat against the business plan system of internal control and risk approvals, and progress against the 1 management at the Group level risk mitigation plans is monitored on 4. Adverse changes / breaches of the law along with the methodology for a an ongoing basis. 5. Industrial disasters and accidents supporting the internal control and 1 6. Lack of funds, including those sources externally risk management process. There are no significant changes 7. Risk of non-delivery / efficiency losses associated ↗↗ RusHydro’s subsidiaries were about key risks in the reporting year with production programs assessed and prioritized by risk level compared to the previous year. 8. Terrorism and cyber terrorism 1 9. Failure to achieve project targets by engineering companies (project companies, institutes, repair companies) 10. Management system deficiencies and errors 11. Reputational risks 12 12. Damage caused by natural and industrial disasters outside RusHydro Group facilities 13. Corruption risk 11 14. Increase in receivables for electricity (capacity) and 8 heat supplied and for transmission services rendered 15. Inefficient integration of companies merged into 10 RusHydro Group
Critical risks Significant risks RISK MANAGEMENT IS AN INTEGRAL Low priority risks PART OF ALL ORGANIZATIONAL PROCESSES
203 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Risk management report for 2018
Strategic risk management at RusHydro Group
Risk and its Impact on Long-term Stakeholders Key risk mitigants Risk and its Impact on Long-term Stakeholders Key risk mitigants priority Development Program KPI priority Development Program KPI Economic aspect 3. Revenue short- Production program Shareholders and investors ↗↗automating the water level scenarios generation and falls from the sale implementation; development Employees refining the process methodology 1. Delayed RusHydro Group’s investment Shareholders and investors Data systematization for designed facilities: of electricity of a hydrometeorological ↗↗taking part in shaping the Water Use Rules as part of (capacity) and observation network; tariff Suppliers and contractors the interagency working groups for setting HPP operation commissioning program implementation Employees ↗↗developing a corporate project management system of new capacities to systematize data on the existing and designed facilities. heat against management, improvement modes Direct Federal government Building internal capabilities for expert review of design the business plan of the regulatory framework ↗↗implementing the Comprehensive Modernization Program; ↗↗Adherence to the capacity Critical risk authorities and detailed design documents: governing the power industry ↗↗drafting proposals on amending laws and regulations commissioning schedules, Regional and municipal ↗↗improving efficiency of design institutes and procurement Critical risk in the Far Eastern Federal District governing the power industry; liaising with the federal funding and spending plan government authorities processes to strengthen in-house capabilities for of Russia government authorities and the Market Council Non-Profit ↗↗ROE performing expert review of design and detailed design Partnership 1 Suppliers and contractors Direct ↗↗EBITDA documents ↗↗improving transparency of the economic dispatching ↗↗ROE business process Indirect ↗↗formalizing activities involving in-house expert review of ↗↗EBITDA ↗↗preparing the areas to be flooded to form water reservoirs ↗↗Total shareholder return (TSR) design documents. Control over the quality, timing and cost of works: ↗↗Labor productivity for the hydropower plants under construction with ↗↗keeping a blacklist of unreliable designers, participating Indirect financing coming out of the state budgets and budgets of constituent entities of the Russian Federation in selecting subdesigners ↗↗Free cash flow (FCF) 2. Project cost RusHydro Group’s investment Shareholders and investors ↗↗liaising with the federal and regional government ↗↗keeping a register of contractors’ failures to meet deadlines ↗↗Total shareholder return (TSR) overruns program implementation Employees under contracts for new construction projects and authorities on the matters of tariff regulations with a view for permanent rehabilitation & modernization (TR&M) projects to eliminating the cost-tariff gap in the Russian Far East Direct Federal government facilities ↗↗streamlining insurance and procurement processes as ↗↗Free cash flow (FCF) authorities construction applicable to construction and installation (reducing the Indirect Regional and municipal risk of project cost overruns due to the facility damage 4. Lack of funds, Refinancing the debt of RAO Shareholders and investors ↗↗maintaining sufficient cash levels and securing access Critical risk ↗↗Total shareholder return (TSR) government authorities or loss caused by design or construction deficiencies or including ES East Federal government to liquidity through credit facilities Suppliers and contractors external impact) those sources ↗↗maintaining a well-balanced model of working capital Direct authorities ↗↗drafting internal regulations for the performance of certain externally financing from both short-term and long-term sources ↗↗Adherence to the capacity types of work and introducing a work permit system for Suppliers and contractors ↗↗overseeing compliance with the terms of loan agreements such works enabling employee suspension from further Critical risk commissioning schedules, to exclude any breach of financial covenants by projects in case of material violations funding and spending plan the Company ↗↗developing a quality control system for the supplied Indirect ↗↗using short-term financial instruments (bank deposits) equipment (including its production and shipment/ ↗↗ROE to invest idle cash balances delivery) ↗↗EBITDA ↗↗introducing an interest rate and currency risk management ↗↗monitoring the progress of building grid infrastructure; ↗↗Total shareholder return (TSR) methodology subject to RusHydro’s credit policy ↗↗using a system for supervising and monitoring the timing ↗↗divesting non-core assets and cost of new construction projects based on the SAP ↗↗RusHydro completed an an additional issue of shares permanent facilities construction management system; to reduce the debt as part of the 2018–2023 investment program review, ↗↗hedging financial risks the Company measured the risk-adjusted rate of return on ↗↗diversifying the debt portfolio investment projects for permanent facilities construction ↗↗taking a more stringent stance on the contractors’ compliance with the terms of contracts ↗↗filing complaints and claims
1 In this section, EBITDA refers to the indicator used for KPI calculations.
204 205 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Risk and its Impact on Long-term Stakeholders Key risk mitigants Risk and its Impact on Long-term Stakeholders Key risk mitigants priority Development Program KPI priority Development Program KPI
5. Risk of Production program Shareholders and investors ↗↗Prompt filing of complaints and claims with regard to 7. Failure to achieve RusHydro Group’s investment Shareholders and investors ↗↗Setting up a single engineering design complex of rushydro non-delivery / implementation Employees the poor quality of repairs, delivery of substandard project targets program implementation Suppliers and contractors through reorganization of subsidiary engineering design efficiency losses equipment and violation of delivery deadlines by engineering companies Direct Rehabilitation and modernization associated with Suppliers and contractors ↗↗Setting up production programs based on companies ↗↗Implementing a development program for subsidiary ↗↗Meeting the accident program production recommendations of the analytical center (subsidiary engineering design companies programs prevention target ↗↗Streamlining the contract approval process, amending engineering Direct ↗↗Implementing international experience exchange programs ↗↗ROE the company’s internal regulations governing design institutes) ↗↗Integrated innovative KPI at subsidiaries engaged in repairs and engineering design; Significant risk ↗↗EBITDA the contracting process ↗↗ROE ↗↗Organizing personnel development and training of scientific ↗↗Adherence to the capacity ↗↗Cutting costs (in line with the value growth plan) Significant risk ↗↗EBITDA staff commissioning schedules, ↗↗Maintaining control over the implementation of ↗↗Developing standard repair scope sheets for equipment Indirect funding and spending plan rehabilitation and modernization projects in compliance and hydraulic structures with the company’s standards ↗↗Total shareholder return (TSR) ↗↗Creating and maintaining a database of advanced and Indirect ↗↗Labor productivity ↗↗Total shareholder return (TSR) innovative technologies ↗↗Labor productivity ↗↗Mitigating the risks associated with inefficient management of non-core activities by their consolidation in specialized service subsidiaries
6. Terrorism and Improving the counter-terrorism Shareholders and investors ↗↗Improving armed protection of the company’s facilities by cyber terrorism and information security system Employees engaging the private guarding units of the national guard of russia (rosgvardia), guard federal state unitary enterprise 8. Management Improving the corporate Shareholders and investors ↗↗Exercising control over the implementation of directives of Direct Significant risk Suppliers and contractors of rosgvardia, and departmental protection federal state system governance system Employees the federal government authorities ↗↗Meeting the accident deficiencies and ↗↗Monitoring, analysis, and control of document management Federal government unitary enterprise of the ministry of energy of russia Direct prevention target errors Suppliers and contractors procedures authorities ↗↗Amending and maintaining up-to-date plans for ↗↗Adherence to the capacity ↗↗Adherence to the capacity ↗↗Ensuring civil liability insurance of the members of the interaction with law enforcement agencies to protect commissioning schedules, commissioning schedules, Regional and municipal Significant risk the company’s management bodies and its officers, the company’s facilities in case of threatened or attempted funding and spending plan funding and spending plan government authorities including liability to third parties and the company terrorist attacks ↗↗Share of procurement from ↗↗ROE ↗↗Using an automated procurement management system ↗↗Improving access and on-site security control systems SMEs ↗↗EBITDA at the company’s facilities ↗↗Exercising coordination and control of work on formalizing ↗↗Labor productivity the activities of structural units and officers Indirect ↗↗Planning and taking measures to identify, prevent Indirect ↗↗Implementing the company’s it strategy ↗↗Decrease in operating and suppress acts of unlawful interference against ↗↗ROE ↗↗Ensuring support and maintenance of the company’s expenses (costs) the company’s facilities in cooperation with law ↗↗EBITDA information systems ↗↗Total shareholder return (TSR) enforcement agencies ↗↗Identifying the most probable threats and developing ↗↗Total shareholder return (TSR) ↗↗Improving the formalization of activities and business response plans to remedy acts of unlawful interference process management against the company’s facilities in cooperation with ↗↗Rushydro introduces corporate management standards the local bodies of the ministry of the russian federation in all its newly acquired or newly established subsidiaries for civil defence, emergencies and elimination of and rolls out systems for managing organizational projects, 1 consequences of natural disasters in the regions of employee grading , management personnel certification the company’s operations and individual employee development plans ↗↗Equipping the company’s facilities with engineering and technical means of protection ↗↗Setting up and maintaining control of access to information 9. Increase in Managing receivables Shareholders and investors ↗↗Monitoring data on suppliers’ and contractors’ financial about on-site engineering and technical means of receivables Direct Federal government health to prevent the risk of counterparty bankruptcy protection and their condition for electricity ↗↗Filing complaints and claims ↗↗Free cash flow (FCF) authorities ↗↗Maintaining property insurance against terrorism and (capacity) ↗↗Claims and complaints management, settlements sabotage risks and heat Indirect Suppliers and contractors other than through the authorized credit institution ↗↗Increasing the share of equipment certified by the federal supplied and ↗↗Total shareholder return (TSR) on the wholesale electricity and capacity market service for technical and export control of russia, and for transmission in accordance with the agreement for accession to the share of domestically manufactured equipment services the wholesale market trading system ↗↗Conducting information and technical security audits rendered ↗↗Setting up and maintaining control of access to software and hardware of control systems and information systems Significant risk ↗↗Protecting remote access to the company’s information systems and taking measures to ensure information security of virtual, mobile and cloud services and solutions
1 Building a system of employee grades based on the assessment of the Company’s staff list, its strategy and corporate culture.
206 207 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Risk and its Impact on Long-term Stakeholders Key risk mitigants Risk and its Impact on Long-term Stakeholders Key risk mitigants priority Development Program KPI priority Development Program KPI Environmental aspect 12. Damage caused Direct Shareholders and investors ↗↗Upgrading centralized automatic emergency response by natural ↗↗Meeting the accident Consumers systems to the most advanced standards 10. Adverse Improvement of the regulatory Shareholders and investors ↗↗Ongoing monitoring of initiated and reviewed changes to and industrial prevention target and ensuring ↗↗Implementing civil defense and emergency prevention disasters zero major accidents Employees measures changes / framework governing the power Consumers the legislation that may affect the company’s operations breaches industry in the Far Eastern ↗↗Monitoring and revising the existing technical oversight outside ↗↗Adherence to the capacity Federal government ↗↗Carrying out research and development in the field of RusHydro Group remote monitoring of hpp facilities condition and operating of the law Federal District of Russia Employees standards and regulations commissioning schedules, authorities facilities modes Trade unions ↗↗Participating in any relevant activities related to legislative funding and spending plan Regional and municipal Direct ↗↗Ensuring compliance with and maintaining a production Critical risk changes and arranged by legislative, executive and judicial ↗↗ROE government authorities ↗↗ROE Federal government bodies, public associations, professional legal unions and Significant risk ↗↗EBITDA control system based on the russian industrial safety laws authorities Environmental organizations ↗↗EBITDA associations ↗↗Maintaining property insurance of rushydro group Indirect ↗↗Decrease in operating Regional and municipal ↗↗Conducting regular environmental audits and implementing Non-profit organizations ↗↗Decrease in operating expenses (costs) government authorities received follow-up recommendations expenses (costs) Indirect ↗↗Participating in working groups of the ministry of energy of Local communities ↗↗Total shareholder return (TSR) ↗↗Total shareholder return (TSR) russia on technical regulation matters; filing and managing Environmental organizations ↗↗Labor productivity ↗↗Labor productivity complaints and claims Media Suppliers and contractors Social aspect
11. Industrial Staffing system improvement Shareholders and investors ↗↗Implementing the full scope of the repairs program and 13. Reputational Improving the corporate Shareholders and investors ↗↗Ensuring compliance with the company’s regulations disasters and the rehabilitation and modernisation program risks governance system Consumers governing information activities, participation in public Production program Consumers events and information disclosure accidents ↗↗Developing a quality assurance system for equipment Direct implementation, roll-out of Significant risk Employees ↗↗Engaging with stakeholders across the company’s core Employees supplies (including the quality of production and shipment/ ↗↗Total shareholder return (TSR) intelligent systems and digital operations, including through joint public events Critical risk Trade unions delivery), construction, installation and start-up operations, Trade unions technology and tightening contractual liability of suppliers/contractors Indirect ↗↗Distributing regular press releases to share the company’s Federal government Federal government Direct for the quality of equipment and materials production and ↗↗ROE view of the matters pertaining to its operations authorities authorities ↗↗Meeting the accident delivery ↗↗EBITDA ↗↗Holding press tours and special media events Regional and municipal Regional and municipal ↗↗Filing and managing complaints and claims against ↗↗Labor productivity prevention target and ensuring government authorities zero major accidents government authorities unreliable contractors/suppliers ↗↗Implementing recommendations made in follow-up Local communities Indirect Local communities of surveyor inspections of rushydro’s facilities Environmental organizations ↗↗ROE Environmental organizations ↗↗Tightening control over contractors’/subcontractors’ ↗↗EBITDA Professional communities and activities at production sites to reduce the opportunity Professional communities and ↗↗Labor productivity higher education institutions for injuries, fires, unethical behavior and theft higher education institutions ↗↗Decrease in operating Media ↗↗Developing technical regulations to improve the quality Media expenses (costs) of design and construction management processes ↗↗Total shareholder return (TSR) Suppliers and contractors ↗↗Introducing advanced diagnostics methods eliminating Non-profit organizations the need to take equipment offline, as well as modern technologies for managing production assets, including 14. Corruption risk Improving the corporate Shareholders and investors ↗↗Developing, implementing and monitoring the company’s the required information technologies governance system Consumers anti-corruption procedures Significant risk ↗↗Coordinating activities aimed at preventing corruption; ↗↗Conducting technical equipment inspections at Improving the corporate system Employees ↗↗Devising and supervising activities aimed at assessing and hazardous production facilities and expert examinations of internal control and risk of industrial safety of technical equipment at hazardous Trade unions mitigating corruption risks management ↗↗Supervising the compliance of rushydro’s and its production facilities, as well as buildings and structures Media accommodating hazardous production facilities Improving the economic and subsidiaries’ anti-corruption activities with the legislation; Suppliers and contractors ↗Implementing procedures to prevent conflicts of interest ↗↗Developing a life cycle management system for existing information security system ↗ hydroelectric power plants Non-profit organizations in the workplace Indirect ↗Monitoring data on income, expenditures, property and ↗↗Monitoring compliance with regulations, guidelines and ↗ ↗↗ROE other documents applicable to any operations, services property-related liabilities of the company’s officers holding ↗↗EBITDA and works by the company’s officers responsible for such positions exposed to corruption risks monitoring ↗↗Total shareholder return (TSR) ↗↗Conducting expert review of procurement documents; ↗Checking counterparties for any conflicts of interest ↗↗Reviewing design documents by the customer-side experts ↗↗Labor productivity ↗ and training the general designer’s personnel to minimize ↗↗Maintaining rushydro’s anti-corruption trust line, checking the number of design errors reported allegations of wrongdoings ↗↗Conducting internal investigations of alleged wrongdoings involving the company’s employees; developing and implementing measures to eliminate identified violations/ deficiencies
208 209 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018
Board of Directors’ remuneration, ‘000 RUB1 REPORT ON REMUNERATION Type of remuneration 2016 2017 2018 OF THE GOVERNING AND CONTROL BODIES Remuneration for membership in governing bodies 5,561.5 7,472.3 27,945.0 Salary 0 0 0 Remuneration of the Board Bonus 0 0 0 Commissions 0 0 0 of Directors and Board committees Other types of remuneration 0 0 0 Total 5,561.5 7,472.3 27,945.0 Remuneration of the Board of Directors in accordance with the applicable Officers in the amount set by the Costs related to services of members of governing bodies compensated by the issuer 52.5 0 0 is based on the following principles Russian laws; Internal Regulations as provided for approved by the Regulations on ↗↗ the base remuneration of a member in the Regulations on Payment of Payment of Remuneration and of the Board of Directors is Remuneration and Compensation Compensation to Members of RUB 3.51 mn; to Members of RusHydro’s Board 1 RusHydro’s Board of Directors : ↗↗ the remuneration depends on of Directors (the “Remuneration Personal remuneration of the Board of Directors in 2018, ‘000 RUB ↗↗ the Regulations are not applicable the number of meetings attended; Regulations”). The remuneration is Full name Meetings Meetings Senior Member Multiplier Remu- Bonus Total Remu- to the members of the Board of ↗↗ the remuneration is increased paid to the members of the Board of held attended Indepen- of a Board neration remu- neration Directors who act (during their term if the member of the Board of Directors for the period from their dent committee neration payable2 in office as members of the Board of Directors is Chairman of the Board appointment as members of the Board Director Directors whether partial or entire) as of Directors (by 30%), Chairman of of Directors to the election of a new members of the Company’s collegial a Board committee (by 20%), Senior Board of Directors. Artem Avetisyan 20 13 0 0 1,755 0 1,755 1,526.9 executive body or as the Company’s Independent Director (by 15%), Maxim Bystrov 20 18 40 40 2,430 972 3,402 2,959.7 sole executive body; or member of a Board committee On June 27, 2018, RusHydro’s General Pavel Grachev 20 20 20 20 2,700 540 3,240 2,818.8 ↗↗ remuneration is not set or paid (by 10%); Meeting of Shareholders resolved2 to the Chairman and members to pay remuneration to the members of Sergey Ivanov 20 18 15 40 55 2,430 1,336.5 3,766.5 3,276.9 of the Board of Directors who The Board of Directors annually takes the Board of Directors for their services Vyacheslav 20 18 50 50 2,430 1,215 3,645 3,171.2 are (during their term in office as a decision on the Recommendations for the period from June 26, 2017 Pivovarov members of the Board of Directors to the Annual General Meeting of to June 27, 2018 in the amount, within Nikolay Rogalev 20 20 40 40 2,700 1,080 3,780 3,288.6 whether partial or entire) subject Shareholders Regarding Payment the timeframes, and in accordance Alexei 20 20 30 30 2,700 810 3,510 3,053.7 to restrictions or bans on receiving of Remuneration to Members of the with the procedure, set out in Chekunkov any payments from business entities Board of Directors who are not Public the Remuneration Regulations. Sergey Shishin 20 19 10 10 2,565 256.5 2,821.5 2,454.7 Andrey Shishkin 20 15 0 0 2,025 0 2,025 1,761.8 Total 21,735 6,210 27,945 24,312.2
The Board of Directors’ remuneration methodology setting a base policy was revised after Ernst & remuneration of each member of the Young (CIS) B.V. conducted research Board of Directors at RUB 3.51 mn, on board remuneration policies at which is in line with the market average. Russian companies of comparable This approach allowed the Company to The Regulations on Payment of Remuneration and scale in 2016. The research results were retain and attract professionals to the Compensation to Members of used to develop a new calculation Company’s Board of Directors. RusHydro’s Board of Directors is available on the Company’s website at: http://www.rushydro.ru
1 The Regulations on Payment of Remuneration and Compensation to Members of RusHydro’s Board of Directors as amended were approved by the General Meeting of Shareholders on June 26, 2017 and is available on the Company’s website at: http://www.eng.rushydro.ru/upload/iblock/977/1.5.-R-E-G-U-L-A-T-I-O-N-S-on-payment-of-remuneration-and-compensation-to- members-of-the-Board-of-Directors.pdf 1 Including personal income tax. 2 Minutes No. 17 of June 28, 2018. 2 Excluding personal income tax.
210 211 //CORPORATE GOVERNANCE PJSC RusHydro | Annual Report 2018 Remuneration of the Management Board Remuneration of the Internal Audit Commission
Remuneration to members of the Management Board, including Chairman of the Management Board – Remuneration to members of Remuneration and Compensation There are no agreements in place General Director in 2018, was paid in accordance with the employment contracts and the Regulations the Internal Audit Commission in 2018 to Members of RusHydro’s Internal Audit on the amount of remuneration on Payment of Remuneration and Compensation to Members of RusHydro’s Management Board approved was paid for the period determined Commission amended to clarify the to members of the Internal Audit by the Company’s Board of Directors on November 11, 2016 (Minutes No. 243 of November 14, 2016). in the Regulations on Payment of calculation methodology. Commission.
In 2016, the Company engaged The current remuneration system the Board of Directors. The Company Ernst & Young (CIS) B.V. (Moscow includes a Long-Term Incentive Plan does not make “golden parachute” branch), a global consultancy firm, for the Management Board linked payouts for early termination. Remuneration of the Internal Audit Commission, ‘000 RUB to conduct large-scale research on top to the growth in share price and The maximum compensation paid to Type of remuneration 2016 2017 2018 management remuneration policies at KPI set by the Company’s Board of members of the Management Board Russian companies of comparable scale. Directors. The Plan aims to ensure upon early termination of employment Remuneration for membership in a control body overseeing the Company’s 629.5 530.5 370.8 financial and business activities The research results were used to revise closer alignment of interests of is limited to three average monthly the methodology for calculating the management and shareholders salaries as provided for by the Russian Total 629.5 530.5 370.8 remuneration of the Management in delivering consistent growth of legislation. Expenses related to duties in the control body overseeing the Company’s 0 0 0 Board. the company’s value and developing financial and business activities and compensated by the Company the business. The key objectives and For more information on Since January 1, 2017, the remuneration principles underpinning the Plan the Management’s KPI and is directly dependent on are to motivate the Company’s performance, see the Key the achievement of the Company’s management to achieve strategic Performance Indicators section on Individual disclosure of remuneration for work in RusHydro’s Internal Audit Commission, ‘000 RUB p. 36. short- and long-term KPI recommended objectives and pursue openness Internal Audit Commission members 2018 by the Nomination and Compensation to shareholders as remuneration is Committee and approved by the Board dependent on the achievement of Natalia Annikova 163.1 of Directors. the KPI, is calculated using the unified Igor Repin 207.6 methodology and is based on equal Tatyana Zobkova (Chairman of the Internal Audit Commission) – The current incentive system payment conditions. Marina Kostina – relies on the following principles: The remuneration of the members transparency, balanced approach The amount and terms of payment of the Management Board, including Dmitry Simochkin – (interests of shareholders are aligned of remuneration to the members Chairman of the Management Board – General Director, with the management’s interests of the Management Board upon is disclosed on the Company’s in achieving the Company’s long- early termination of employment website in quarterly reports Auditor’s fee and short-term goals), impartiality are determined in the regulation www.rushydro.ru (the remuneration depends on on payment of remuneration and The auditor’s fee is determined by the results of competitive bidding the matter by the Audit Committee the RusHydro’s performance and compensation to RusHydro’s the Board of Directors based on and after prior consideration of under the Board of Directors of outcomes from the implementation Management Board approved by PJSC RusHydro. of significant projects). Auditor’s fee, RUB mn1 Audited reporting year 2016 20172 2018 Remuneration of the Management Board, ‘000 RUB 1 Audit of the annual RAS financial (accounting) statements and IFRS consolidated 120.0 136.1 84.2 Type of remuneration 2016 2017 2018 statements, including review of the consolidated statements for six months Remuneration for membership in governing bodies 0 0 0 Non-audit services N/a N/a N/a Salary 71,655.3 185,393.1 157,616.6 Bonus 153,917.2 344,618.0 244,368.6 Commissions 0 0 0 Other types of remuneration 0 0 0 Total 225,572.5 530,011.1 401,985.2 Compensations 6,993.9 1,697.4 861.6
1 Including VAT 1 Including personal income tax. 2 The auditor’s fee for 2017 includes the review of the consolidated statements for nine months ended September 30, 2017.
212 213 //APPENDICES VOSTOCHNAYA CHPP WITH AN ELECTRIC CAPACITY OF139.5MWANDHEATCAPACITYOF432GCAL/H ISTHEFIRSTLARGEENERGY-PRODUCINGFACILITY IN 45 YEARS, WHICH WAS COMMISSIONED IN THE PRINCIPAL CITY OF THE FAR EASTERN FEDERAL DISTRICT. VOSTOCHNAYA CHPP HAS SET UP A HEAT CAPACITY ALLOWANCEFORTHEFAST-GROWINGCITY,ANDUSING EVEN MORE NATURAL GAS IS BENEFICIAL FOR THE ENVIRONMENT. //APPENDICES PJSC RusHydro | Annual Report 2018 AUDITOR’S OPINION
Independent Limited Assurance Report to the Management of • forming an independent conclusion, based on the procedures we have performed and the evidence we have obtained; and Public Joint Stock Company Federal Hydro-Generating • reporting our conclusion to the management of PJSC RusHydro. Company – RusHydro (PJSC RusHydro) This report, including our conclusions, has been prepared solely for the management of PJSC RusHydro in accordance with the agreement between us, to assist management in reporting on RusHydro Group sustainability performance and activities. We permit this report to be disclosed in Introduction the Reportii for the year ended 31 December 2018, to assist management in responding to their We have been engaged by management of PJSC RusHydro to provide limited assurance on the selected government responsibilities by obtaining an independent limited assurance report in connection with information described below and included in the Annual report (including information on Sustainable the Selected Information for 2018. To the fullest extent permitted by law, we do not accept or assume Development) of PJSC RusHydro (“Report”) for the year ended 31 December 2018. responsibility to anyone other than management of PJSC RusHydro for our work or this report except where terms are expressly agreed in writing and our prior consent in writing is obtained. The selected subsidiaries (“RusHydro Group”i) are listed in the Group structure section of the Report. Professional standards applied and level of assurance Selected Information We performed a limited assurance engagement in accordance with International Standard on We assessed the qualitative and quantitative information that is included in the «GRI Standards Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews of Compliance Table» for standard disclosures in environmental, workforce, safety and socio-economic Historical Financial Information’, issued by the International Auditing and Assurance Standards areas in the reporting scope (the “Selected Information”). The scope of our limited assurance Board. A limited assurance engagement is substantially less in scope than a reasonable assurance procedures was limited to Selected Information for the year ended 31 December 2018. engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. Reporting Criteria We assessed the Selected Information using Sustainability Reporting Guidelines of the Global Our Independence and Quality Control Reporting Initiative (GRI) and GRI Electric Utilities Sector Supplement (collectively, GRI Standards). We have complied with the independence and other ethical requirements of the Code of Ethics for We believe that these criteria are appropriate given the purpose of our limited assurance engagement. Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, Management responsibilities confidentiality and professional behaviour, together with the ethical requirements of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our limited assurance Management of PJSC RusHydro is responsible for: procedures in the Russian Federation. • designing, implementing and maintaining internal systems, processes and controls over Our firm applies International Standard on Quality Control 1 and accordingly maintains a information relevant to the preparation of the Selected Information that is free from material comprehensive system of quality control including documented policies and procedures regarding misstatement, whether due to fraud or error; compliance with ethical requirements, professional standards and applicable legal and regulatory • establishing objective reporting criteria for preparing the Selected Information; requirements. • measuring and reporting the Selected Information based on the Reporting Criteria; and Work done • ensuring that the Selected Information is accurate, complete and fairly presented. We are required to plan and perform our work in order to consider the risks of material misstatement of the Selected Information. For this purpose, our procedures included: Our responsibilities • enquiries of PJSC RusHydro’s management; We are responsible for: • interviews of RusHydro Group’s officials responsible for the preparation of the Selected • planning and performing the engagement to obtain limited assurance about whether the Information and collection of underlying data; Selected Information is prepared in accordance with the Reporting Criteria; • analysis of the Reporting Criteria and gaining an understanding of the design of the key systems,
processes and controls for preparing and reporting the Selected Information; and i The term “RusHydro Group” in this Report relates only to PJSC RusHydro and its selected subsidiaries included in the Report and is not equivalent to the similar term used in the Consolidated IFRS financial statements. ii PJSC RusHydro’s management is responsible for placing information on PJSC RusHydro’s web-site and for accuracy of such information. The scope of our performed work does not include reviewing these matters; consequently, we do not assume any responsibility for any amendments that might have been made to the Selected Information underlying the Independent Limited Assurance Report or any differences between the AO PricewaterhouseCoopers Audit (AO PwC Audit) report issued by us and the information presented on the PJSC RusHydro’s web-site. White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru
TRANSLATOR'S EXPLANATORY NOTE: This version of our report/the accompanying documents is a translation from the original, which was prepared in Russian. All TRANSLATOR'S EXPLANATORY NOTE: This version of our report/the accompanying documents is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. opinions, the original language version of our report takes precedence over this translation. 216 2 217
• limited substantive testing of the Selected Information on a sample basis to verify that data have been appropriately measured, recorded, collated and reported in line with the Reporting Criteria. We have not performed any audit or review procedures in accordance with International Standards on Auditing or International Standards on Review Engagements on the underlying data based on which //APPENDICES the Selected Information was prepared. PJSC RusHydro | Annual Report 2018 We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our limited assurance conclusion. Reporting and measurement methodologies There are no globally recognised and established practices for evaluating and measuring the Selected Information. The range of different, but acceptable, techniques can result in materially different reporting outcomes that may affect comparability with other organisations. The Reporting Criteria used as a basis of RusHydro Group sustainability reporting should therefore be read in conjunction with the Selected Information and associated statements reported on PJSC RusHydro’s web-site.
• limited substantive testing of the Selected Information on a sample basis to verify that data have Limited assurance conclusion been appropriately measured, recorded, collated and reported in line with the Reporting Criteria. Based on the procedures we have performed and the evidence we have obtained: • We have not performed any audit or review procedures in accordance with International Standards on nothing has come to our attention that causes us to believe that the Selected Information for the Auditing or International Standards on Review Engagements on the underlying data based on which year ended 31 December 2018 has not been prepared, in all material respects, in accordance the Selected Information was prepared. with the requirements of GRI Standards; and We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our • nothing has come to our attention that causes us to believe that the Selected Information does limited assurance conclusion. not meet the Core requirements in accordance with the Guidelines of GRI Standards.
Reporting and measurement methodologies There are no globally recognised and established practices for evaluating and measuring the Selected 30 April 2019 Information. The range of different, but acceptable, techniques can result in materially different Moscow, Russian Federation reporting outcomes that may affect comparability with other organisations. The Reporting Criteria used as a basis of RusHydro Group sustainability reporting should therefore be read in conjunction A. S. Ivanov, certified auditor (licence no. 01-000531), with the Selected Information and associated statements reported on PJSC RusHydro’s web-site. AO PricewaterhouseCoopers Audit Limited assurance conclusion
Based on the procedures we have performed and the evidence we have obtained: Engaging party: Public joint stock company Federal Hydro- Audit organization: AO PricewaterhouseCoopers Audit Generating Company – RusHydro Registered by the Government Agency Moscow Registration Chamber • nothing has come to our attention that causes us to believe that the Selected Information for the Record made in the Unified State Register of Legal Entities on on 28 February 1992 under No. 008.890 year ended 31 December 2018 has not been prepared, in all material respects, in accordance 26 December 2004 under State Registration Number 1042401810494 Record made in the Unified State Register of Legal Entities on with the requirements of GRI Standards; and 660017, Russian Federation, Krasnoyarsk Region, Krasnoyarsk, 22 August 2002 under State Registration Number 1027700148431 Dubrovinskogo str. 43, bld. 1 • nothing has come to our attention that causes us to believe that the Selected Information does Member of Self-regulated organization of auditors «Russian Union of auditors» (Association) not meet the Core requirements in accordance with the Guidelines of GRI Standards. Principal Registration Number of the Record in the Register of Auditors and Audit Organizations – 11603050547
30 April 2019 Moscow, Russian Federation
A. S. Ivanov, certified auditor (licence no. 01-000531),
TRANSLATOR'S EXPLANATORY NOTE: This version of our report/the accompanying documents is a translation from the original, which was prepared in Russian. All AO PricewaterhouseCoopers Audit possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
Engaging party: Public joint stock company Federal Hydro- Audit organization: AO PricewaterhouseCoopers Audit 3 Generating Company – RusHydro Registered by the Government Agency Moscow Registration Chamber Record made in the Unified State Register of Legal Entities on on 28 February 1992 under No. 008.890 26 December 2004 under State Registration Number 1042401810494 Record made in the Unified State Register of Legal Entities on 660017, Russian Federation, Krasnoyarsk Region, Krasnoyarsk, 22 August 2002 under State Registration Number 1027700148431 Dubrovinskogo str. 43, bld. 1 Member of Self-regulated organization of auditors «Russian Union of auditors» (Association)
Principal Registration Number of the Record in the Register of Auditors and Audit Organizations – 11603050547
TRANSLATOR'S EXPLANATORY NOTE: This version of our report/the accompanying documents is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
3
218 219 //APPENDICES PJSC RusHydro | Annual Report 2018 OPINION Considering stakeholders’ Proposals and ON PUBLIC ASSURANCE Recommendations
As part of interaction with the Company to the consideration of stakeholders’ Summing up, we cannot fail to note a Subject and Basis of Assurance during preparation of the Report, a proposals following the questionnaire gradual improvement in the quality and number of suggestions were made by surveys and public hearings on the draft accessibility of reporting disclosures. PJSC RusHydro (hereinafter – The scope of evaluation during We did not receive any remuneration the Company and other representatives Report, as well as obligations to review We hope RusHydro will continue to the Company) invited us to evaluate this public assurance covered the from RusHydro for participation in of stakeholders, which were fully or and accept comments when preparing follow best practices in reporting and the isclosures made in RusHydro Group’s materiality and completeness of the the public assurance procedure. partially included in the final version the 2019 Report are presented in improve mechanisms for interaction Annual Report (including information information disclosed in the Report, of the Report. Information relating Appendix No. 19 to the Report. with stakeholders. on sustainable development) for 2018 as well as the Company’s response to (hereinafter - the Report). the proposals of stakeholders. Qualification of the Report
We are unanimous in the opinion that Reporting Standard (
220 221 //APPENDICES PJSC RusHydro | Annual Report 2018
Materiality matrix
5,0 DEFINING 1
MATERIALITY AND CREATING 4,5 A MATERIALITY MATRIX [102-46] 1 11 10 2 Material topics were defined while List of material topics [102-47], [102-49] 4,0 18 12 1 preparing this annual report to ensure № Material topic 1 its compliance with international 1 standards – the International Integrated 1 1 Ensuring reliable and safe operation of RusHydro Group's facilities 3,5 Reporting Framework (
Contribution to the social and economic development of regions where RusHydro 16 Group operates (including charity projects)
17 Transparent operations and stakeholder relations
18 Anti-corruption initiatives
1 Minutes (unnumbered) dated February 14, 2019.
222 223 //APPENDICES PJSC RusHydro | Annual Report 2018 GRI CONTENT INDEX [102-55]
For the Materiality Disclosures Service, GRI Services reviewed that the GRI content index is clearly presented and the references for Disclosures 102-40 to 102-49 align with appropriate sections in the body of the report. The service was performed on the Russian version of the report.
No. Disclosure Page No. Disclosure Page
GRI 101: Foundation 2016 - does not include any disclosures 102-53 Contact information 232 GRI 102. Standard elements 2016 102-54 Claims of reporting in accordance with the GRI Standards 5 102-1 Name of the organization 12 102-55 GRI content index 224 102-2 Activities, brands, products, and services 12 102-56 External assurance 5 102-3 Location of headquarters 12, 232 GRI 201 Economic performance 2016 102-4 Location of operations 12 GRI 103 Management Approach 2016 102-5 102-5. Ownership and legal form 4, 154 103-1 Explanation of the material topic and its Boundary 222 102-6 Markets served 30 103-2 The management approach and its components 64 102-7 Scale of the organization 18, 117 103-3 Evaluation of the management approach 64 102-8 Information on employees and other workers 117-118 201-1 Direct economic value generated and distributed 68 102-9 Supply chain 113 201-3 Defined benefit plan obligations and other retirement plans 125 102-10 Significant changes to the organization and its supply chain 201-4 Financial assistance received from government 67 102-11 Precautionary Principle or approach 131 GRI 202 Markets of presence 2016 102-12 External initiatives 124 GRI 103 Management Approach 2016 102-13 Membership of associations 136 103-1 Explanation of the material topic and its Boundary 222 102-14 Statement from senior decision-maker 6-9 103-2 The management approach and its components 51 102-15 Key impacts, risks, and opportunities 203 103-3 Evaluation of the management approach 51 102-16 Values, principles, standards, and norms of behavior 148 202-1 Ratios of standard entry level wage by gender compared to local minimum wage 118 102-17 Mechanisms for advice and concerns about unethical or illegal behavior 196 GRI 203 Indirect economic impacts 2016 102-18 Governance structure 149 GRI 103 Management Approach 2016 102-26 Role of highest governance body in setting purpose, values, and strategy 160 103-1 Explanation of the material topic and its Boundary 222 102-32 Highest governance body’s role in sustainability reporting 5 103-2 The management approach and its components 126-129 102-40 List of stakeholder groups 56 103-3 Evaluation of the management approach 126-129 102-41 Collective bargaining agreements 126 203-1 Infrastructure investments and services supported 126-129 102-42 Identifying and selecting stakeholders 56 203-2 Significant indirect economic impacts 45-46 102-43 Approach to stakeholder engagement 56-57 GRI 204 Procurement practices 2016 102-44 Key topics and concerns raised 57, 158 GRI 103 Management Approach 2016 102-45 Entities included in the consolidated financial statements 20 103-1 Explanation of the material topic and its Boundary 222 102-46 Defining report content and topic boundaries 222 103-2 The management approach and its components 112-115 102-47 List of material topics 222-223 103-3 Evaluation of the management approach 112-115 102-48 Restatements of information 5, 66 204-1 Management approach: Improving procurement excellence 112-115 102-49 Changes in reporting 222 GRI 205 Anti-corruption 2016 102-50 Reporting period 4 GRI 103 Management Approach 2016 102-51 Date of most recent report 4 103-1 Explanation of the material topic and its Boundary 222 102-52 Reporting cycle 4 103-2 The management approach and its components 192 103-3 Evaluation of the management approach 192
1 No significant changes were reported in 2018.
224 225 //APPENDICES PJSC RusHydro | Annual Report 2018
No. Disclosure Page No. Disclosure Page
205-2 Communication and training about anti-corruption policies and procedures 194 306-2 Waste by type and disposal method 145 GRI 206 Anti-competitive behavior 2016 306-4 Transport of hazardous waste 145 GRI 103 Management Approach 2016 306-5 Water bodies affected by water discharges and/or runof 138 103-1 Explanation of the material topic and its Boundary 222 GRI 401 Employment 2016 103-2 The management approach and its components 115 GRI 103 Management Approach 2016 103-3 Evaluation of the management approach 115 103-1 Explanation of the material topic and its Boundary 222 206-1 Сountering unfair competition 115 103-2 The management approach and its components 125 GRI 302 Energy 2016 103-3 Evaluation of the management approach 125 GRI 103 Management Approach 2016 401-1 New employee hires and employee turnover 119 103-1 Explanation of the material topic and its Boundary 222 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees 124 103-2 The management approach and its components 102 GRI 402 Labor/Management Relations 2016 103-3 Evaluation of the management approach 102 GRI 103 Management Approach 2016 302-1 Energy consumption within the organization 104 103-1 Explanation of the material topic and its Boundary 222 302-3 Energy intensity 105 103-2 The management approach and its components 126 302-4 Reduction of energy consumption 105 103-3 Evaluation of the management approach 126 GRI 303 Water and Effluents 2016 402-1 Minimum notice periods regarding operational changes 126 GRI 103 Management Approach 2016 GRI 403 Occupational health and safety 2016 103-1 Explanation of the material topic and its Boundary 222 GRI 103 Management Approach 2016 103-2 The management approach and its components 137 103-1 Explanation of the material topic and its Boundary 222 103-3 Evaluation of the management approach 137 103-2 The management approach and its components 97, 99 303-2 Management of water discharge-related impacts 137 103-3 Evaluation of the management approach 97, 99 303-3 Water discharge 137 403-1 Worker training on occupational health and safety 98 GRI 304 Biodiversity 2016 403-2 Hazard identification, risk assessment, and incident investigation 98 GRI 103 Management Approach 2016 403-3 The categories of workers at risk of occupational diseases and the number of these workers 99-101 103-1 Explanation of the material topic and its Boundary 222 403-4 Promotion of worker health 98 103-2 The management approach and its components 138 GRI 404 Training and Education 2016 103-3 Evaluation of the management approach 138 GRI 103 Management Approach 2016 304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity 138 103-1 Explanation of the material topic and its Boundary 222 value outside protected areas 103-2 The management approach and its components 117 304-2 Significant impacts of activities, products, and services on biodiversity 138 103-3 Evaluation of the management approach 117 304-3 Habitats protected or restored 142 404-1 Average hours of training per year per employee 120 304-4 IUCN Red List species and national conservation list species with habitats in areas affected by operations 138 404-2 Programs for upgrading employee skills and transition assistance programs 121 GRI 305 Emissions 2016 404-3 Percentage of employees receiving regular performance and career development reviews 120 GRI 103 Management Approach 2016 GRI 405 Diversity and Equal Opportunity 2016 103-1 Explanation of the material topic and its Boundary 222 GRI 103 Management Approach 2016 103-2 The management approach and its components 136 103-1 Explanation of the material topic and its Boundary 222 103-3 Evaluation of the management approach 136 103-2 The management approach and its components 118 305-1 Direct (Scope 1) GHG emissions 143 103-3 Evaluation of the management approach 118 305-4 GHG emissions intensity 143 405-1 Diversity of governance bodies and employees 118 305-5 Reduction of GHG emissions 144 GRI 407 Freedom of Association and Collective Bargaining 2016 305-7 Nitrogen oxides (NO ), sulfur oxides (SO ), and other significant air emissions 144 X X GRI 103 Management Approach 2016 GRI 306 Effluents and Waste 2016 103-1 Explanation of the material topic and its Boundary 222 GRI 103 Management Approach 2016 103-2 The management approach and its components 126 103-1 Explanation of the material topic and its Boundary 222 103-3 Evaluation of the management approach 126 103-2 The management approach and its components 131 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk 125 103-3 Evaluation of the management approach 131
226 227 //APPENDICES PJSC RusHydro | Annual Report 2018
No. Disclosure Page Tables of compliance with International Integrated Standard elements of electric utilities sector disclosures Reporting Framework GRI 103 Management Approach 2016 103-1 Explanation of the material topic and its Boundary 5-8 103-2 The management approach and its components –1 The reflection of IR fundamental concepts in the report 103-3 Evaluation of the management approach –1 Fundamental concepts Use/ do not use EU1 Installed capacity 74 Creating value for the organization and stakeholders Use EU2 Net supply by primary energy source and by regulatory regime 76-77 Capitals Use EU3 Number of residential, industrial, institutional and commercial customer accounts by regulatory regime 83-84 Value creation Use EU4 Length of overhead and underground transmission and distribution lines by regulatory regime 75 EU12 Transmission and distribution losses as a percentage of total energy 75 EU13 Biodiversity of offset habitats compared to the biodiversity of the affected areas 140 Conformity of the report with the core principles of the Integrated Reporting Framework EU15 Percentage of employees eligible to retire in the next 5 and 10 years broken down by job category and by region 118 Leading principles Corresponds / does not correspond EU22 Number of people economically displaced and compensated, by type of project 45 Strategic focus and future orientation Corresponds EU23 Programs, including those in partnership with government, to improve or maintain access to electricity 77, 88 Connectivity of information Corresponds and customer support services Stakeholder relationships Corresponds EU25 Number of injuries and fatalities to the public involving company assets, including legal judgments, 96 settlements and pending legal cases of diseases Materiality Corresponds EU28 Power outage frequency 94 Conciseness Corresponds EU29 Average power outage duration 94 Reliability and completeness Corresponds Constancy and comparability Corresponds
The presence of the IR content elements in the report Content elements Report section Page Organization overview and external environment Company profile, 12, 30 Markets served Management Corporate governance 146 Business model Business model 24 Risks and opportunities Risk management 199 Strategy and resource allocation Strategic review 28 Performance Our performance 62 Outlook Strategic review, 6, 8, 28 Statements of senior-most officials
1 Due to changes in information policy rate will be opened next year.
228 229 //APPENDICES PJSC RusHydro | Annual Report 2018 Glossary
Wind power plant A power plant consisting of two or more wind power installations designed to convert RAO ES East A holding established to manage energy companies operating in the Unified Energy Sys- wind energy into electrical energy and transmit it to the consumer tem of the East (Primorye, Khabarovsk Territory, Amur Region, Jewish Autonomous Region, and South of Yakutia), as well as in six isolated energy systems Day-ahead market The competitive selection of suppliers and consumers price bids by JSC ATS a day before the actual delivery of electricity with the determination of prices and delivery volumes for RAO ES East Subgroup JSC RAO ES East, including its subsidiaries each hour of the day Renewables Renewables include all renewable energy sources defined in Art. 3 of Federal Law No. Energy efficiency Effective (rational) use of energy resources. Use less energy to provide buildings or pro- 35-FZ dated March 26, 2003 On Electric Power Industry, except for HPPs with an installed duction processes with the same level of energy capacity of more than 30 MW. Generating companies (OGKs) Electricity and power suppliers who received the status of wholesale market entities RusHydro Group PJSC RusHydro, including its subsidiaries of the wholesale electricity entered into contracts binding on wholesale market participants and made other actions RusHydro Subgroup RusHydro and its subsidiaries, without those belonging to the RAO ES East Subgroup and capacity market necessary for trading in electricity and capacity on the wholesale market in accordance with the agreement on joining the wholesale market trading system Subsidiary A legal entity that is under the direct or indirect control of a controlling person Gigacalorie A unit of measurement for heating energy Unified Energy System The combination of industrial and other property facilities of electric power industry inter- Gigacalorie-Hour A unit of measurement for heating power connected through a single process of generation (including the combined generation of electric and heat energy) and transmission of electric energy under centralized operation- Hydroelectric power plant The power plant as a single production and technological complex, including hydro-tech- al dispatch management in electric power industry nical facilities and equipment that converts mechanical energy of water into electrical energy. In the annual report, unless otherwise noted, HPPs and PSPP are also classified as Wholesale electricity and capacity Sphere for the circulation of electric energy and capacity under Russia’s Unified Ener- hydroelectric power plants. market gy System within the country’s unified economic space with the participation of large electricity producers and consumers that have the status of wholesale market entities, Hydro-technical facilities Dams, buildings of hydroelectric power stations, water discharge, drainage and outlet confirmed in full accordance with the Russian Federal Law on Electric Power Industry (by structures, tunnels, channels, pumping stations, shipping locks, ship elevators; structures the Russian Government). The criteria for including electricity producers and consumers designed to protect against floods and destruction of the banks of reservoirs, banks and in the category of large producers and large consumers are also established by the Rus- the bottom of river beds; structures (dams) enclosing liquid waste storage facilities of sian Government industrial and agricultural organizations; facilities against washing-away in channels, as well as other structures designed to use water resources and prevent the harmful effects ESC RusHydro Subgroup JSC ESC RusHydro, PJSC Krasnoyarskenergosbyt, PJSC Ryazanenergosbyt, JSC Chuvash- of water and liquid waste skaya Electricity Sales Company Installed capacity Total nominal active capacity of generators at electric power plants which are part of the Group’s structure Kilowatt-Hour A unit of measurement of generated electrical energy Megawatt A unit of measurement for electrical capacity Net electricity delivered Electricity received by consumers Net heat delivered Heat energy delivered to the consumer (consumers) at the boundary of operational re- sponsibility (balance sheet attribution) PJSC RusHydro, the Company Public Joint-Stock Company Federal Hydro-generating Company - RusHydro, including the executive office and branches Pumped storage power plant Power plant working by transforming electricity from other power plants into the poten- tial energy of water; during reverse transformation, accumulated energy is contributed to the energy system primarily to cover deficits that may occur during peak load periods
230 231 //APPENDICES PJSC RusHydro | Annual Report 2018 LIST OF ABBREVIATIONS CONTACTS
CHPP Central heating and power plant PJSC RusHydro Public Joint-Stock Company Federal Hydro-generating Company - RusHydro, Public Joint Stock Company Shareholder relations DAM Day-ahead market including the executive office and branches Full name Federal Hydro-Generating Head of the Equity and Novgorodtsev Anton FEC Fuel & energy complex Company – RusHydro [102-1] Disclosure Department of PSPP Pumped storage power plant the Corporate Governance Gcal Gigacalorie Abbreviated name PJSC RusHydro R&D Research and development and Property Management Location 43 Dubrovinskogo Street, Bldg 1, Department Gcal/h Gigacalorie-Hour Krasnoyarsk, the Krasnoyarsk REM Retail electricity market Telephone +7 800 333 8000 ext. 2204 GRES State district power plant Region, Russia, 660017 [102-3] SPP Solar power plant E-mail [email protected] Mailing address 7 Malaya Dmitrovka Street, Mos- HPP Hydroelectric power plant Deputy Director Kovaleva Natalya cow, Russia, 127006 The report, of Corporate Governance JSC RAO ES East Joint-Stock Company the annual report the present annual report Telephone +7 (800) 333-8000 and Property Management RAO Energy Systems Fax +7 (495) 225-3737 TPP Thermal power plant Department, Corporate of the East E-mail [email protected] Secretary TR&M Rehabilitation & modernization CPA Capacity price auction Internet address in English www.eng.rushydro.ru Telephone + 7 (800) 333-80-00 ext. 4215 UES Unified Energy System E-mail [email protected] KPI Key performance indicator Social media accounts www.instagram.com/rushydro/ VNIIG All-Russian Hydraulic Engineering Research www.facebook.com/rushydro/ kWh Kilowatt-Hour Institute vk.com/paorushydro MPP Mobile power plant WECM Wholesale electricity and capacity market Investor relations MW Megawatt Head of Investor Relations, Ahmedjanov Timur WPP Wind power plant Contact persons on the preparation of the report Strategy and IR Department [102-53] Telephone +7 (800) 333-8000 ext. 1607 Head of the Equity and Novgorodtsev Anton E-mail [email protected] Disclosure Department of the Corporate Governance and Property Management Department Telephone +7 800 333 8000 ext. 2204 E-mail [email protected] Media and charity organizations relations Senior Expert of the Equity Sidelnikov Igor Director of the Corporate Nagoga Margarita and Disclosure Department Communications Depart- of the Corporate ment Governance and Property Telephone +7 (800) 333-8000 ext. 4369 Management Department E-mail [email protected] Telephone +7 (800) 333-80-00, ext. 4084 E-mail [email protected]
FEEDBACK Depository (bonds) Registrar Full name National Settlement Depository Abbreviated name NSD QUESTIONNAIRE Full name Joint Stock Company VTB Registrar Location 12 Spartakovskaya St., Moscow, See the list of important matters for Russia, 105066 Dear reader. Abbreviated name VTB Registrar the previous periods here: Telephone +7 (495) 234-48-27 http://www.eng.rushydro.ru Mailing address PO Box 54, Moscow, 127137 Fax +7 (495) 956-09-38 You are now familiar with PJCS RusHydro’s annual report. Telephone +7 (495) 787-44-83 E-mail [email protected] When drafting it, we tried to take note of all suggestions Fax +7 (495) 257-17-00 Internet address in Russian www.nsd.ru on disclosing material information. Please help us improve E-mail [email protected] Hotline telephone +7 (800) 200 6112 2019 annual report by selecting the most relevant topics Please follow the link to fill in Dividend payment e-mail [email protected] in the questionnaire. We value the opinion of every client, the questionnaire ar2018.rushydro.ru/en/ Internet address www.vtbreg.ru/en/ shareholder, contractor, and employee. The results of Auditor the stakeholder questionnaires are published in every annual Full name AO PricewaterhouseCoopers report and on the Company’s website. Audit Abbreviated name PwC Audit Depository Bank (Depositary Receipt) Location 10 Butyrsky Val Street, Moscow, Full name The Bank of New York Mellon Russia, 125047 (New York City) Telephone +7 (495) 967-6000 Contact person Olena Smirnova Fax +7 (495) 967-6001 Telephone +1 (212) 815 2510 E-mail [email protected] E-mail [email protected] Internet address www.pwc.ru
232 233