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Investor Presentation 2019 IFRS Financial Results

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Investor Presentation 2019 IFRS Financial Results Investor presentation 2019 IFRS financial results March 2020 CAUTIONARY STATEMENT 2 The information contained in this presentation has been This presentation does not constitute an offer to sell, or solicit prepared by the Company. The conclusions presented here are any offer of subscription to, or purchase of any securities. It is based on general information collected at the time of preparation hereby understood that no provision of this presentation shall of the material, and are subject to change without notice. The create the basis of any contract or obligation of any nature. Company relies on information obtained from sources that it The information contained in this presentation should not for any considers reliable; however, it does not guarantee its accuracy or purpose be relied upon as complete, accurate or impartial. The completeness. All indicators in this document are presented with information in this presentation is subject to review, finalization rounding, and therefore the sum of rounded indicators may differ and modification. The content of this presentation has not been from the rounded amount of actual indicators. verified by the Company. Accordingly, we did not and do not give These materials may contain statements regarding future events on behalf of the Company, its shareholders, directors, officers or and explanations representing a forecast of such events. Any employees, or any other persons, any assurances or guarantees, statements in these materials that are not a statement of whether expressed or implied, regarding the accuracy, historical facts are forward-looking statements, with known and completeness or objectivity of the information or opinions unknown risks, uncertainties and other factors, in connection contained herein. None of the directors of the Company, its with which our actual results, results and achievements may shareholders, officers or employees, or any other persons shall differ significantly from any future results, results or be liable for any losses of any kind that may be incurred as a achievements, reflected or implied by such forward-looking result of any use of this presentation or its content, or otherwise statements. The Company does not undertake any obligation to in conjunction with this presentation. update any forward-looking statements contained herein so that The English version of the presentation was translated from the they reflect actual results, changes in assumptions or changes in original version in Russian. In case of any discrepancies, the factors affecting such statements. version in Russian language has priority. COMPANY OVERVIEW 3 Global leader in oil transportation by pipelines Shares outstanding* 51.05 thousand kilometers of oil pipelines, 16.45 thousand Ordinary shares 5,694,468 78.55% kilometers of petroleum products pipelines, more than 24 million Preferred shares 1,554,875 21.45% cubic meters of storage tanks and over 500 pumping stations Total number of shares 7,249,343 Transportation of 83% of crude oil and 29% of light petroleum * Only preferred shares are traded. 100% of products produced in Russia ordinary shares are owned by the Russian Oil pipelines link major Russian oilfields with refineries and export Government. markets in Europe and Asia, either directly or through sea Preferred shares of Transneft are included in the terminals. Petroleum products pipelines link refineries with key tier 1 list of the Moscow Exchange. consumption centers, sea ports, and other domestic and export In accordance with Transneft’s Articles of Association, DPS per 1 preferred share may not be distribution markets less than DPS per 1 ordinary share. A natural monopoly Credit Ratings Moody’s Baa2 / Stable The monopoly operator of Russian network of oil and petroleum products pipelines S&P ВВB- / Stable Tariffs for services of oil and petroleum products transportation RAEX ruAAA / Stable are set by the Federal Antimonopoly Service (FAS) of Russia KEY INFRASTRUCTURE ASSETS OF TRANSNEFT GROUP 4 Length, thousand km Oil trunk pipelines 51.05 Petroleum products trunk 16.45 pipelines Diagnostics and replacement of pipelines, tkm Year Diagnostics Replacement 2018 41.5 1.02 2019 55.4 1.00 Plansfor replacement of pipelines in 2020-2024 At least 1 thousand km per year * * Classified as associate (7% - indirect ownership, 24% - held in trust by the Company) TABLE OF CONTENTS 5 01. RECENT DEVELOPMENTS 02. KEY OPERATING AND FINANCIAL RESULTS 03. OUTLOOK FOR 2020 04. NCSP GROUP DEVELOPMENT STRATEGY 05. KEY FACTORS OF INVESTMENT ATTRACTIVENESS 06. ENVIRONMENTAL, SOCIAL AND GOVERNANCE ASPECTS (ESG) 07. APPENDIX. SEGMENT BREAKDOWN OF KEY FINANCIAL RESULTS 01. Recent developments KEY EVENTS 7 2019 February Upgrade of Moody’s credit rating to Baa2, with Stable outlook April Incident involving the injection of organic chloride into Druzhba oil trunk pipeline resulted from unlawful activities of third parties Signing a contract on the sale of Novorossiysk Grain Terminal June Crude oil transportation was restored in all directions AGM decision on dividends. 51.2% of normalized consolidated 2018 net profit under IFRS were allocated to dividends (total amount of dividends – RUB 77.6 bln) July Connection of Komsomolsk refinery to the ESPO pipeline system September Commissioning of the plant for manufacturing drag reducing agents in the Alabuga Special Economic Zone (the Republic of Tatarstan, Russia) November Completion of the expansion of the ESPO pipeline system to its maximum capacity December Approval of Development Strategy for NSCP (entity controlled by Transneft) 2020 February Moody’s and S&P reaffirmed credit ratings for Transneft with a Stable outlook AGM – Annual General Meeting ESPO – East Siberia – Pacific Ocean SETTLING THE INCIDENT AT THE DRUZHBA OIL PIPELINE 8 MEASURES TAKEN: on the operation side Crude oil transportation resumed at all of the directions Transneft completed the Road Map of the Incident Recovery signed with the Belarus party and completed transportation of nonconforming crude oil out of Belarus Crude oil quality control for organic chloride contents upgraded to a daily procedure on settling the consequences of the incident with shippers (Russian oil companies) On 24 July 2019, Transneft’s Board of Directors approved the compensation procedure for shippers’ losses caused by unlawful actions of third parties resulting in the ingress of nonconforming crude oil into the system and agreed on a payment cap for shippers under oil transportation services contracts on the basis of USD 15 per 1 bbl of nonconforming crude on condition that shippers provide documentary proof of material losses Within the framework of agreements on out-of-court settling of the consequences of the incident, payments were made to the shippers in the amount of RUB 8.2 bln (including RUB 3.3 bln in Q4 2019 and RUB 4.9 bln in Q1 2020). on evaluation of the damage caused by the incident for Transneft and its disclosure in financial statements The IFRS financial statements of Transneft PJSC for 2019 contain the provision for settlement of the consequences of the incident with shippers within the framework of signed contracts for the provision of oil transportation services for 2019, subject to documentary justification of their losses and confirmation of the relevant negative consequences and their size on the legislation improvement side Transneft prepared proposals on measures required for increasing of the quality control over crude oil delivered for transportation to Transneft pipeline system. Transneft’s proposals have been submitted to the Government of the Russian Federation, the Ministry of Energy, the Ministry of Economic Development and other interested authorities and organizations 02. Key operating and financial results KEY FINANCIAL RESULTS 10 4Q19 4Q18 YoY 2019 2018 YoY RUB bln Revenue 271 264 ▲3% 1,064 980 ▲9% EBITDA* 110 119 ▼8% 486 433 ▲12% Profit attributable to shareholders of Transneft 35 53 ▼34% 179 224 ▼20% Operating cash flow 127 123 ▲3% 361 346 ▲4% (minus) CAPEX** -82 -76 ▲8% -268 -268 ►0 Free cash flow 45 47 ▼4% 93 78 ▲19% Total debt at the end of the period 637 673 ▼5% 637 673 ▼5% * Less crude oil sale and purchase operations under contracts with Rosneft and China National United Oil Corporation ** Purchase of property, plant and equipment adjusted for proceeds from sale of property, plant and equipment Key financial results breakdown by Transneft segment and NCSP segment are provided in the appendix (section 7 in the presentation) IMPACT OF NCSP SEGMENT ON TRANSNEFT’S FINANCIALS 11 NCSP consolidation 2018* 2019 . In September 2018 Transneft Key indicators, NCSP Transneft Share of NCSP Transneft Share of Group obtained control over RUB bln segment Group NCSP segment segment Group NCSP segment NCSP PJSC as the result of shares acquisitioning Revenue 15.9 980.0 1.6% 56.1 1,063.8 5.3% . The financial results of NCSP and its subsidiaries have been recognized in the consolidated 2.4% 8.2% figures of the Group starting EBITDA 10.2 433.4 40.0 486.3 from the end of 3Q 2018 . Before obtaining control over Profit attributable to NCSP Group, its share of profit 1.6 224.3 0.7% 23.9 179.4 13.3% shareholders of Transneft in Transneft Group profit was recognized in share of profit from associates and jointly Free cash flow 5.0 78.2 6.4% 18.5 93.0 19.9% controlled entities . In 2Q 2019 NCSP Group sold 99.9968% share in Total debt 69.7 673.0 10.4% 49.9 637.4 7.8% Novorossiysk Grain Terminal at the end of the year (NGT), the terminal carries out transshipment of grain
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