Annual Report
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S.P. Korolev Rocket and Space Corporation Energia ANNUAL REPORT OF S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION ENERGIA FOR 2018 This Annual Report of S.P. Korolev Rocket and Space Public Corporation Energia (RSC Energia) was prepared based upon its performance in 2018 with due regard for the requirements stated in the Russian Federation Government Decree of December 31, 2010 No. 1214 “On Improvement of the Procedure to Control Open Joint-Stock Companies whose Stock is in Federal Ownership and Federal State Unitary Enterprises”, and in accordance with the Regulations “On Information Disclosure by the Issuers of Outstanding Securities” No. 454-P approved by the Bank of Russia on December 30, 2014. Accuracy of the data contained in this Annual Report was confirmed by RSC Energia’s Auditing Committee Report as of May 23, 2019. This Annual Report was submitted for preliminary approval by RSC Energia’s Board of Directors on May 27, 2019, (Minutes No. 20 of 28.05.2019). This Annual Report was approved at RSC Energia’s General Shareholders’ Meeting on June 29, 2019 (Minutes No 38 of 01.07.2019). TABLE OF CONTENTS 1. BACKGROUND INFORMATION ABOUT RSC ENERGIA............................... 6 1.1. Company background ........................................................................................................................ 6 1.2. Period of the Company operation in the industry .............................................................................. 7 1.3. Information about the purchase and sale contracts for participating interests, equities, shares of business partnerships and companies concluded by the Company in 2018 ............................... 7 1.4. Information about the holding structure and the organizations involved ........................................... 7 2. PRIORITY DIRECTIONS OF RSC ENERGIA OPERATION .......................... 10 2.1. Information about the Company strategies and development programs .......................................... 10 2.2. Prospects for development of the Company .................................................................................... 10 2.3. Level of investment with a breakdown by financing sources in 2018 ............................................. 11 2.4. Quality Management System in force at the Company .................................................................... 11 3. REPORT OF THE BOARD OF DIRECTORS ON THE RESULTS OF THE RSC ENERGIA DEVELOPMENT IN THE HIGH-PRIORITY AREAS OF ACTIVITY .............................................................................................................. 14 3.1. Financial and economic results of activities in 2014-2018 .............................................................. 14 3.2. Major competitors in the industry .................................................................................................... 17 3.3. The Company’s share in respective market segment in terms of its core business and dynamics of this indicator over the last 3 years ...................................................................................... 19 3.4. Transportation and engineering support of the ISS, flight operation of rocket and space complexes and systems ........................................................................................................................... 19 3.5. ISS operation .................................................................................................................................... 21 3.6. Results of scientific programs onboard the ISS RS ......................................................................... 25 3.7. Advanced space systems .................................................................................................................. 26 3.8. Launch vehicles ................................................................................................................................ 27 3.9. Unmanned space systems ................................................................................................................. 29 3.10. The use of space technologies on Earth ......................................................................................... 30 3.11. International activities of the Company ......................................................................................... 30 4. ENERGY CONSERVATION AND ENERGY EFFICIENCY. INCREASE IN PRODUCTION ECOLOGICAL SAFETY ........................................................... 33 4.1. Measures to enhance energy efficiency ........................................................................................... 33 4.2. Information about the volume of different types of fuel-and-power resources used by the Company in 2018 (in physical and money terms) as compared with the past year ................................ 35 4.3. Ecological efficiency ........................................................................................................................ 36 5. SOCIAL RESPONSIBILITY. PERSONNEL DEVELOPMENT AND SOCIAL POLICY ......................................................................................................... 37 5.1. Personnel policy ............................................................................................................................... 37 3 5.2. Personnel motivation........................................................................................................................ 40 5.3. Social policy ..................................................................................................................................... 41 6. CORPORATE GOVERNANCE ............................................................................. 43 6.1. Corporate governance concepts and structure ................................................................................. 43 6.2. Information about the Company General Shareholders’ Meeting held ........................................... 46 6.3. Information about the Company Board of Directors ....................................................................... 47 6.3.1. Board of Directors’ Regulations ................................................................................................... 48 6.3.2. Company Board of Directors membership during the accounting year ........................................ 49 6.3.3. Background information about the persons who were the members of RSC Energia Board of Directors in 2018...................................................................................................................... 50 6.3.4. Regulations on ad hoc Committees at the Company Board of Directors, their memberships and information about the meetings held .......................................................................... 56 6.3.5. Provision on Remuneration of the Company Board of Directors members ................................. 58 6.3.6. Information about remuneration paid to the Company Board of Directors members in 2018 ..... 59 6.4. Information about the Company executive bodies .......................................................................... 59 6.4.1. Chief Executive Officer ................................................................................................................ 59 6.4.2. Collective Executive Body of the Company ................................................................................. 60 6.4.3. Company Management Board membership in 2018..................................................................... 60 6.4.4. Background information about the persons serving on the Company Management Board in 2018 .......................................................................................................................................... 62 6.4.5. Provision on remuneration of the Company executive bodies members ...................................... 68 6.4.6. Information about remuneration paid to the Company executive bodies members in 2018 ......................................................................................................................................................... 68 7. EQUITY CAPITAL .................................................................................................. 69 7.1. Equity capital structure .................................................................................................................... 69 7.2. Dividend Policy................................................................................................................................ 70 7.3 Information about distribution and disposition of the profit earned by the 2017 performance in 2018 ............................................................................................................................... 73 8. INTERNAL CONTROL AND RISK MANAGEMENT ....................................... 74 8.1. Description of the key risk factors associated with the Company activities .................................... 74 8.2. Internal control ................................................................................................................................. 81 8.3. Internal audit .................................................................................................................................... 82 8.4. Information about the Company Auditing Committee .................................................................... 83 8.5. Membership of RSC Energia Auditing Committee during the accounting year ............................. 84 8.6.