Integrated Annual Report 2015 Integrated Annual Report JSC 2015

ar2015.aem-group.ru

JSC Atomenergomash provides access to the integrated interactive version of the annual report for 2015 for its stakeholders. This product allows easy information presentation of the main annual results of the Company, as well as the access to additional data, which was not included in the print version in a analysis-friendly format. —00 Contents

page 2 page 22 — — THE COMPANY IN BRIEF COMMERCIAL ACTIVITIES

page 2 page 23 — — 2015 PERFORMANCE HIGHLIGHTS INVESTMENT ACTIVITIES

page 4 page 24 — — KEY EVENTS IN 2015 RESULTS OF PRODUCTION ACTIVITIES

page 6 page 25 — — MESSAGE FROM THE COMPANY QUALITY AND INDUSTRIAL SAFETY MANAGEMENT

page 25 page 12 — — OPTIMIZATION OF PRODUCTION PROCESSES BUSINESS MODEL OF THE COMPANY

page 28 page 14 — — INNOVATION DEVELOPMENT SPECIALIZATION OF THE DIVISION’S ENTERPRISES page 29 — page 15 ENVIRONMENTAL MANAGEMENT AND — ENVIRONMENTAL IMPACT BUSINESS GEORGRAPHY

page 32 page 16 — — PERSONNEL COMPOSITION KEY MARKET PROJECTS

page 35 page 18 — — OCCUPATIONAL SAFETY AND HEALTH  STRATEGIC VISION AND OBJECTIVES

page 38 page 19 — — SOCIAL RESPONSIBILITY ECONOMIC PERFORMANCE 01 — COMMERCIAL ACTIVITIES —

The Company in brief Market share in the Russian power Total value of concluded JSC Atomenergomash (the Company, AEM) engineering industry contracts bln is a Mechanical Engineering Division of the 23% 172 rubles State Corporation (the Division) and is one of the largest Order book at power engineering the year-end bln Share of orders in the rubles portfolio of new holdings in Russia, that offers a full range of solu- 392.7 products 33% tions in the areas of design, manu- The Division is comprised of largest power-engineering businesses, facture, and supply of equipment including research, engineering, manufacturing, construction and in- for nuclear and thermal energy, stallation companies. Production capacities are located in the Russian gas and petrochemical, shipbuild- Federation, Ukraine, the Czech Republic, and Hungary. ing industries, and the market of EFFICIENCY IMPROVEMENT special steels. — The Company has full control over the production chain of key Effect of the RPS Energy Transferred Labor productivity introduction savings mln to outsourcing growth equipment for the nuclear island mln 1 GJ and the power island – from Research & Development and development of technical doc- 691 rubles >500 23% umentation to the design of industrial processes and the manufac- persons ture of equipment. In addition, the Division is developing new lines of business, the key of which are thermal energy, gas and petro- chemical industry, shipbuilding industry, and special steel. STAFF CAPACITY Equipment manufactured by the Division — has been installed in more than 20 countries; 14% of the nuclear power plants in Share of specialists Engagement Share of employees with seniority operation worldwide and 40% of the under 35 level of more than 5 years thermal power plants in the Russian years old Federation and FSU countries use the 33% 75% 57% —02 Company’s equipment. SCIENTIFIC ACTIVITIES 2015 Performance — patents and intellectual scientific Highlights 77 property certificates 256 publications ECONOMIC PERFORMANCE —

Combined AEM 1.3 EBITDA revenue bln bln SOCIAL RESPONSIBILITY 56.2 rubles 1.98 rubles — Paid to bln Charity mln the budget 6.5 rubles expenses13.6 rubles OPERATING PERFORMANCE —

Products shipped nuclear power plants Fulfillment of contractual ENVIRONMENTAL RESPONSIBILITY to 11 under construction obligations 97% — Reduction of greenhouse Environmental impact The share of production for existing nuclear power gas emissions mitigation costs plants that has passed incoming inspection mln rubles from the moment of first presentation 99% 12% 93

2 — — 3 —03 Key Events in 2015

Commercial Activities Staff capacity

ãã The first reactor vessel manufactured at the production site of the ãã JSC Atomenergomash graduated succession candidate as part of plant (branch of AEM-Technology JSC) was supplied to a project for the development of engineering and scientific per- the Belarusian after a thirty-years’ interrup- sonnel at the enterprises of the Division called “I AM AN AEM tion. In addition, this is the first WWER reactor vessel manufac- ENGINEER.” tured by Rosatom State Corporation1. ãã The team of JSC TsKBM won the branch Event Young Profession- ãã PJSC ZiO-Podolsk successfully completed contracts for the supply of als «Temp-2015» - a large-scale project of the Rosatom State Cor- steam generators to the Leningrad NPP-2 and to the second stage poration and the Rosatom Corporate Academy for attraction of of the Tianwan Nuclear Power Plant (power units No. 3 and No. 4). young professionals to work in the nuclear industry.

ãã The stage of power start-up and development of the power unit ãã Atommash (a branch of AEM-Technology JSC) held a ceremony of No. 4 with a BN-800 reactor at Beloyarsk NPP, which was devel- award of diplomas to the first graduates of the Production Fore- oped and delivered by the chief designer of fast-neutron reactor man School project, the concept of which was to create a com- units JSC Afrinkantov OKBM, was started. prehensive system of training managers under a program for in- dustrial engineers. ãã The enterprises of JSC Atomenergomash have assembled the ves- sels of two reactors of the RITM-200 power plant for the Arctic, the world’s largest Russian new-generation nuclear icebreaker, which is currently under construction.

Scientific Activities Efficiency improvement

ãã Commissioning of unique equipment for the industrial pro - ãã A project of restoration of the Atommash production complex duction of MOX fuel for fast-neutron reactors, which has been (branch of AEM-Technology JSC), which was accompanied by the largely developed and delivered by JSC SverdNIIkhimmash and renewal of equipment, the training of members of the personnel, JSC TsKBM. and the introduction of new processing technologies, was imple- mented. The project featured participation from the following ãã JSC TsKBM has successfully completed the resource testing of a enterprises: JSC NPO TsNIITMASH, JSC OKB GIDROPRESS, and new design of the GTsNA-1753 main circulation pump featuring PJSC ZiO-Podolsk; Rosatom State Corporation acted as a curator. a single-shaft arrangement with a water-cooled motor and wa- ter-cooled bearing units, which will increase the safety of nucle- ãã The industry RPS project of JSC Afrinkantov OKBM named «As- ar power plants. sembly, Testing, and Manufacturing of NSO 250/15 and NSO 250/30 Pump Components on the Critical Path» allowed reducing ãã Employees of JSC NPO TsNIITMASH received science and tech- the time of manufacture of the products in comparison with the nology awards from the Russian Government for their develop- previous year by 32%. ments in 2015. ãã JSC SNIIP successfully passed the first supervisory audit of the en- ergy management system based on ISO 9001:2008, which was conducted by the official representative of the Certification Body for Management Systems and Personnel of TÜV Thüringen.

ãã JSC NPO TsNIITMASH developed and implemented a new tech- nology for sectional forging of bottoms of steam generators that will save up to 40% of the metal and reduce the complexity and power consumption. 1 – Earlier, Rosatom State Corporation acquired these products from an external supplier.

4 — — 5 —04 Message from the « Labor productivity growth has been provided for, and the overall economic effect of the introduction of the Rosatom Production Company Management System is almost twice the figures of 2014 and amounts to approximately 700 mln rubles.»

Dear colleagues and partners,

I am pleased to present to you the Integrated Annual Report of JSC Atomenergomash for 2015. The report focuses particularly on production, financial, social and environmental issues related to the activities of the Mechanical Engineering Division of Rosatom State Corporation.

In 2015, the Division continued its dy - 2015, one may note a significant growth in the Lyakhova namic development. Despite macroeconom- volume of orders of thermal power, gas and Ekaterina ic difficulties, the Company demonstrates oil industry, and general engineering. The Di- — stable growth of financial and economic per- vision has also intensified its efforts to increase formance indicators while remaining one export earnings and consolidates the neces - Chairwoman of the Board of Directors of the leaders of the Russian power engi - sary resources for more active operation on of JSC Atomenergomash Director of Investment Management neering industry. foreign markets. and Operational Efficiency An important step towards sustainable de- In the context of strategic objectives at Rosatom State Corporation velopment was the final positioning of the Di- posed before Rosatom State Corporation, it vision as a complete supplier of equipment for is necessary to pay attention to the system- the nuclear industry. A significant milestone atic work of the management team of the Di- and a bright page in 2015 was the shipment vision, which is aimed at reducing the costs of a reactor for the Belarusian NPP, which was and improving the efficiency. Labor produc- the first reactor manufactured by entities of tivity growth has been provided for, and the the Rosatom State Corporation circuit. Thanks overall economic effect of the introduction to the restoration of the work of the engi - of the Rosatom Production System is almost neering giant, the Atommash, the Division is twice the figures of 2014 and amounts to ap- currently able to produce up to four sets of proximately 700 mln rubles. Another priority the reactor island equipment per year. This of development is the focus of the Compa- is fundamentally important for the uncondi- ny on innovation. Enterprises of the Division tional implementation of the portfolio of or- successfully develop advanced technological ders of the Rosatom State Corporation, which solutions, are key players in the industry pro- includes contracts for the construction of 30 jects aimed at creating new types of equip- nuclear power units in 12 countries. ment, and form an image of the future of nu- One of the priorities of the Rosatom State clear energy today. Corporation is the diversification of its busi- The achievement of such high production ness activities, the development of manufac- and financial results resulted from the Compa- ture of new products, including products that ny’s management commitment and responsi- do not fall into the framework of nuclear en- bility as well as from the high professionalism ergy. I am sure that JSC Atomenergomash and conscientious work of all its employees. should be a reference division when address- On behalf of the Rosatom State Corporation, ing these issues due to the numerous compe- I would like to thank you for your work and to tences of its enterprises and the developed wish you continued success in the develop- business development logic. At the end of ment of our Company.

6 — — 7 « One of the major industrial developments in 2015 was the shipment of the reactor for the Belarusian Nuclear Power Plant from the Atommash production site. »

Dear colleagues and partners, I present to you the 2015 Annual Report of the Mechanical Engineering Division of Rosatom State Corporation - JSC Atomenergomash.

Previous year was full of significant achievements and bright events that will not only consolidate the Company’s leading role in the market and nuclear power engineering but also achieve significant success in other industries that are not related to energy. Despite the difficult macroeconomic conditions, the combined revenues of the Division increased by 15% for the year and amounted to more than 56 bln rubles. The order book of the Company for the ten-year period amount- ed to approximately 400 bln rubles, which is 73% higher than the corre - sponding value for 2014. In particular, contracts for the supply of reactor is- land equipment to the Kudankulam Nuclear Power Plant as well as auxiliary equipment for the turbine island for Kudankulam and Bushehr Nuclear Pow - er Plants have been signed. Systematic work on the implementation of the Company’s strategy in terms Nikipelov of business diversification has resulted in a significant portfolio growth in related Andrey business areas. The volume of contracts concluded in the market of equipment — for gas and oil industry more than tripled while the volume of contracts conclud- Chief Executive Officer of ed in the power industry more than doubled; the current volume of contracts JSC Atomenergomash concluded in the shipbuilding industry was practically preserved. For example, PJSC ZiO-Podolsk started the manufacture of boiler equipment for a number of thermal power plants in Russia as well as implements projects on modernization of thermal power plants in Kazakhstan. AEM-Technology JSC signed contracts for the supply of column and reactor equipment for three re- fineries of PJSC Gazprom Neft. JSC SverdNIIkhimmash won an order for the de- sign and the supply of vacuum-evaporator installations for the receipt of «Extra» grade table salt in Kaliningrad region. In addition to the production of power re- actor plants, contracts for the supply of propellers and other equipment for the new generation of icebreakers produced by Baltic Plant were signed. One of the major industrial developments in 2015 was the shipment of the reactor for the Belarusian Nuclear Power Plant from the Atommash production site. This is the first reactor manufactured by the plant in the post-Soviet period, and the first reactor manufactured by Rosatom State Corporation.

8 — — 9 Since 2012, when Atommash became a part of the Division, the Company has implemented a large-scale program to restore the production of equipment for the nuclear industry. This in- cluded the modernization of machinery equipment, the instal- KPIs set for the Chief Executive Officer of JSC Atomenergomash in 2015 lation of new welding equipment, and other operations. At the same time, staff training and introduction of new technologies were implemented. Assistance was provided by specialists of Indicator Target Actual value Performance value Status several companies of the Division: JSC NPO TsNIITMASH, JSC Last year, the amount of work of JSC OKB GIDROPRESS, OKB GIDROPRESS, PJSC ZiO-Podolsk. Successful shipment of a which is the chief design office for new power plants of Russian AEM’s adjusted free cash flow -5.4 2.0 Maximum reactor for Belarusian Nuclear Power Plant and steam genera- design in Finland, Vietnam, Egypt, and other countries, signifi- (AFCF), bln rubles tors for Rostov Nuclear Power Plant has confirmed that the plant cantly increased. JSC SNIIP received a record revenue based on Labor productivity, bln rubles/ 3.31 2.947 Minimum has completely regained its competence in the nuclear field and year results, which was also contributed to by the implemented person is able today to produce up to four sets of reactor island equip- revamping program, which has led to a significant increase in ment per year. Currently, the Company is manufacturing equip- terms of efficiency. In the course of the year, PJSC Energomashs- Index of implementation of the 100 100 Target ment for a number of Russian and foreign nuclear power plants. petsstal confirmed its reputation as a reliable partner by ensur- REA Concern Investment Program as it pertains to AEM, % Also, the production for Kursk Nuclear Power Plant, “Kudanku- ing timely execution of orders for such metallurgical and energy lam” Nuclear Power Plant, and Hanhikivi Nuclear Power Plant giants like ArcelorMittal and General Electric. The Company has Integral indicator for new 100 120 Maximum will be launched soon. consistently strengthened its presence in Europe, India, South products, % In the reporting year, the power start of a new unit at Belo- Korea, and Iran and expanded the reference of supply. Moreo- Integral indicator of investment 100 93 Minimum yarsk Nuclear Power Plant with a BN-800 fast-neutron reactor ver, all of the enterprises of the Division that are involved in the performance2, % was implemented. This is a major event for the entire industry performance of the State Defense Order fulfill their obligations and, above all, for JSC Afrinkantov OKBM, which is the chief de- in full and on time. Revenue from new products 22,695 17,134 Not performed outside the contour and inside the signer of this type of reactors. PJSC ZiO-Podolsk, JSC OKB GI- In 2015, JSC Atomenergomash expanded its comprehensive contour on a competitive basis, DROPRESS, JSC SverdNIIkhimmash and other enterprises of the technological cooperation with the world’s largest engineering mln rubles Division were involved in the production of equipment for the companies. During the year, it signed a Memorandum of Under- Semi-fixed costs, mln rubles 23.84 23.45 Target power unit. Earlier, the launch of of MOX fuel production at standing on joint implementation of projects in the field of pro- Gas Chemical Complex FSUE had been implemented. A signifi- duction of boiler equipment for the SCSP with Mitsubishi-Hitachi Overseas revenue, mln USD 128 122 Minimum cant part of the unique equipment was developed by JSC TsK- Power Systems. Two Memoranda of Understanding in the field BM and JSC SverdNIIkhimmash. During this project, we have also of manufacture of equipment for a new generation of incinera- LTIFR, % 0.63 0.42 Target acquired a huge scientific and technological experience, which tors were also signed: with Mitsubishi Heavy Industries Environ- Fulfillment of the State Defense 100 100 Target will be in great demand in the future. mental & Chemical Engineering and with Hitachi Zosen Inova AG Order (SDO), % and LLC RT-Invest. Issues of implementation of joint projects in Book of orders of the State 70,748 116,304 Maximum other areas are discussed with such companies as Siemens, Gen- Corporation for 10 years for new eral Electric, and AREVA. products, mln rubles Enhancing production efficiency, including through fur- ther implementation of the Rosatom Production System, ful - Book of foreign orders for 10 99 129 Maximum years, mln USD filling all contractual obligations in a timely manner, increas - ing the revenue across all business lines, and participating IRR of the portfolio of projects for 12 34 Maximum actively in import substitution programs will remain our stra - new businesses, % tegic priorities in 2016. In conclusion, I would like to express my sincere gratitude to our customers and partners for their trust and constructive cooperation and to all the employees of JSC Atomenergomash for their successful and efficient work and commitment to the Failure to comply with key indicators at the target level is due to the postponement of values of Rosatom State Corporation. I am confident that the a number of non-nuclear and foreign projects for long-cycle equipment and to the overall results of the reporting year will be a solid basis for subsequent macroeconomic situation. sustainable development of JSC Atomenergomash as a glob - al Company that provides its customers with the most reliable and efficient solutions.

2 – Detailed information is contained in the relevant section.

10 — — 11 05 Public Business Model of the 1.1%

Mechanical Engineering Division 978 0.57% solutions

of the Rosatom State Corporation and Transport marine energy 0.68% 1,176 Thermal power modernization Maintenance and 2015 results Staff turnover reduction 13% Staff Increase in productivity 23% Growth of personnel share with higher education of realized investment 3.7 bln RUB Volume Increase in the percentage of products to existing nuclear power plants that passed input control from the first time Increase in combined revenue 15% Revenue from secondary assets 909 mln rubles Patents and intellectual activity results certificates granted 77 Research papers and works published 256 0.72% 1,234 Shipbuilding increase by increase by 2014 73% by 1.90% 3,273 Special steels and commissioning Equipment installation Strategic objective Enhancement of employee and development of efficiency employee potential and Enhancement of efficiency flexibility of manufacturing capacities and Economic efficiency sustainability Product competitiveness and technological leadership 2.62% 4,503 RAW/SNF Creation of value for the Company Creation of value

economic Personnel composition supply Financial and performance Technologies Infrastructure Equipment Transport and marine energy solutions Transport and marine fleets, floating nuclear plants icebreaker Reactors for and the Russian Navy fleet Thermal power VVER designs Reactor plant monitoring and control system for Gas and petrochemical industry oil refineries and marine Oil and gas processing equipment for and ship-based plants General equipment Special equipment and heavy machinery components the military–industrial complex for Wind power Wind power facilities equipment Other 2.66% 4,582 bln RUB (excl. VAT) 392.7 Contracts signed in 2015 by business area (bln RUB) 3.77% General General 6,491 equipment portfolio Total order Total Equipment production emissions, 19,9% 2 Revenue growth driven by an expansion of the order portfolio and an enhancement of operational efficiency and an enhancement of operational an expansion of the order portfolio Revenue growth driven by 5.77% 9,915 industry Gas and → petrochemical Exclusive manufacturing capacities and modern equipment

→ A balanced portfolio of actively developing traditional and potentially innovative power technologies of actively developing traditional A balanced portfolio Natural capital Decrease in waste volume 12.7% Reduction in СО Social capital Deductions for budget 6.5 bln RUB Spending on charity 13.6 mln rubles → Over 19,000 qualified employees AEM resources → design 25.93% 44,591 Equipment New products Nuclear power/ Core activities Sales Nuclear power Reactor compartment, turbine plant and auxiliary NPP equipment RU MCS VVER designs Reactor plant monitoring and control system for RAW/SNF and processing equipment transportation storage, RAW/SNF Special steels from special steel Castings and forgings Shipbuilding shipbuilding types of equipment for Various Personnel composition Human capital Infrastructure Manufacturing capital Financial and economic performance Financial and economic capital Technologies Innovation capital Creation and development of internationally competitive technological solutions for the power industry in the power solutions for technological of internationally competitive and development Creation of living and boost the Company’s performance. to maintain a high standard order Creation of value for stakeholders Creation of value

55.37% Mission 95,212 Core products Nuclear power/ Products by business area

12 — — 13 —06 —07 Specialization of the Business Georgraphy

Nizhny Novgorod, Division’s Enterprises Russia — JSC Afrikantov OKBM Nizhnyaya Tura, Russia Dubna, — Russia OJSC Venta —

JSC IFTP

Division’s Petrozavodsk, Russia

enterprises Nuclear power WWER RUMCS* RAW/SNF** TMES*** Shipbuilding Special steels Thermal power Gas and petro- chemical industry General equipment Wind Power — Petrozadovskmash branch of AEM-Technology JSC AEM-Technology JSC St Petersburg, Russia PJSC ZiO-Podolsk — JSC TsKBM AEM-Technology JSC JSC ZIOMAR EC LLC AAEM

JSC TSKBM Moscow, Russia JSC OKB GIDROPRESS — JSC Atomenergomash JSC NPO TsNIITMASH JSC Afrikantov OKBM JSC VNIIAM CJSC ATM JSC SNIIP JSC OKTB IS ARAKO spol. s.r.o. JSC OZTMiTS LLC EMKO JSC GSPI JSC SverdNIIkhimmash Opava, the Czech Republic JSC GSPI — ARAKO spol. s.r.o.

JSC SNIIP

Ekaterinburg, LLC AAEM Russia — JSC SverdNIIkhimmash PJSC EMSS Kramatorsk, Ukraine Budapest, — Hungary PJSC EMSS Volgodonsk, — Russia Ganz EEM LLC Podolsk — Russia Atommash branch of AEM- — Technology JSC

* WWER RUMCS - Water-water energetic reactor assembly monitoring and control system. JSC OKB GIDROPRESS ** RAW/SNF - Radioactive waste/spent nuclear fuel. PJSC ZiO-Podolsk *** TMES - Transport and marine energy solutions. JSC ZIOMAR EC

14 — — 15 08 Moscow — Russia Reftinskiy — Russia Moscow Refinery Zarechny3 — Reftinskaya TPP Key Market Projects Udomlya Russia Russia — Beloyarsk Taraz — Kalinin NPP Yaroslavl Kazakhstan Russia — Zhambylskaya TPP Polyarniye Zori — Yaroslavl CHPP Russia Omsk — Arkhangelsk, Russia Kola NPP Russia — — Sosnovy Bor Omsk Refinery Arkhangelsk CHPP Russia — Pyhajoki Leningrad NPP Balakovo Izluchinsk Finland Leningrad NPP-2 Russia Russia — — — St Petersburg Hanhikivi NPP Balakovo NPP Nizhnevartovsk TPP Russia Ostrovets Novomoskovsk — Nazarovo Belarus Russia Tsentralnaya CHPP Russia — — — Belarus Novomoskovskaya TPP Nazarovskaya TPP (Ostrovets) NPP Trnava Slovakia Levice Temelin — Slovakia Czech Republic Bogunice NPP — — Paks Orsk Mohovce NPP Hungary Temelin NPP Kozloduy Russia — — Paks NPP Bulgaria Tianwan — Orsk Refinery China Kozloduy NPP Explanations: Verkhniy Tagil Aksu — Tianwan NPP Russia Kazakhstan — — Verkhnetagilskaya TPP Aksu TPP Nuclear Thermal Gas and power power petrochemical Nizhnekamsk industry Belene Russia Bulgaria — Russia 10 8 5 Nizhnekamsk Refinery — CIS 1 2 - Belene NPP Bushehr Non-CIS 10 1 - Iran El Oro — Ecuador Desnogorsk Bushehr NPP — Russia Termogas Machala TPP — Smolensk NPP Astrakhan Russia — Field named after Kudankulam Kurchatov Filanovsky India Russia — — Kudankulam NPP Kursk NPP Volgodonsk Kursk NPP-2 Russia — Novovoronezh Rostov NPP Russia — Novovoronezh NPP 3 – Sverdlovsk region. Novovoronezh NPP-2

16 — — 17 The strategy of JSC Atomenergomash identifies long-term targets that outline the implementation of the aforementioned strategic objectives: Combined revenue by geographical area/country (mln rubles) Share of the Russian power engineering industry 50 Total — 22 23 24.2 65,133 20 Total 2013 2014 2015 2016 (forecast) 2030 (plan) — 7,316 Total 56,154 Total — 851 — 48,917 6,696 46,272 12.54 476 25% 3,448 15.70 8.86 12.77 6.93 5,650 886 6.76 7.11 Non-CIS 1,615 8.72 40.99 50% CIS 30.06 30.51 56,965 22.73

Russia 48,982 2013 2014 2015 2016 (forecast) 2030 (plan) 39,007 44,583

Share of revenue from Share of revenue that is Share of revenue from foreign operations5 formed by foreign assets6 non-nuclear sectors (new businesses)

10 2013 2014 2015 2016 (forecast)4 — 09— Economic Strategic Vision Performance and Objectives Combined revenue by operating sector (mln rubles) Total — Strategic Objectives of JSC Atomenergomash 65,133 Total — Become a supplier of key equipment for nuclear power plants (nuclear and turbine islands) Total 56,154 Total — Equipment for nuclear power industry — 48,917 23,119 Long-Term Objectives (horizon: 2030) 46,272 20,191 Equipment for thermal At least, 50% of revenues Become one of the major players in adjacent non-nuclear markets power industry from adjacent markets 18,245 19,105 10,822 Equipment At least, 30% of revenue for GPI Become one of the major players in the global market for power engineering from overseas operations 7,743 5,761 1,780 3,677 1,107 3,330 917 897 Equipment Not less than the average values 1,054 for TSNP Increase profitability (EBITDA) and performance 1,700 for the world power engineering industry 2,143 Other products, 20,293 26,082 Medium-term objectives (horizon: 2019) 26,216 work and services 22,294 Reduce fixed costs By 30%

Reduce the length of the production cycle By 30% 2013 2014 2015 2016 (forecast)

5 – Information on 2015 is provided without regard to projects carried out for RAOS Project Oy at Hanhikivi Nuclear Power Plant (according to the methodology of Rosatom State Corporation for calculating foreign revenue of the Mechanical Engineering Division). 4 – Revenue forecast for 2016 is presented on the basis of JSC Atomenergomash Business Plan for 2016-2018. 6 – ARAKO spol. s.r.o. and PJSC Energomashspetsstal.

18 — — 19 Labor productivity within the Division (thousand rubles/person per year)7

3,555 2,947 2,131 2,395

2013 2014 2015 2016 (forecast)

Net debt structure (mln rubles) Total — Total 48,030 — 44,080 Russian Total state-owned — banks 36,007 Foreign banks

Total Russian — commercial 22,107 banks

Other8

37,664 42,785 20,531 33,866 2,661 1,591 1,576 2,142 3,755 3,654

2013 2014 2015 2016 (forecast)

Short-term solvency ratio9 — 1.25 The process of machining of steam generator body holes (the Atommash branch of JSC AEM-Technology in Volgodonsk) 0.73 0.71 0.72

EBITDA margin (%) 2013 2014 2015 2016 (forecast) 8.66 8.47

State Aid in 2015 (mln rubles)

4.66 JSC NPO TsNIITMASH AEM-Technology JSC — — 3.52 192.3 125.4 Total — 347.7

JSC Afrikantov OKBM — 2012 2013 2014 2015 2016 (forecast) 30.0 7 – This indicator is consolidated for the budget perimeter. 8 – Including industry funding. 9 – This indicator shows the receivables to payables ratio. -0.91 Calculated from the balance sheet item “Short-term receivables”.

20 — — 21 —11 —12 Commercial Investment Activities Activities

Sectoral structure of the order book at the year-end (mln rubles) Volume of investments by EMP and country (mln rubles)

6,474 (1.6%) 5,199 (1.3%) — — Total 3,665 In the reporting year, the volume of General equipment RAW/SNF financing of the investment program of the Company amounted to 3.7 bln 2,963 (0.8%) 7,109 (1.8%) rubles as compared to the plan of 57,332 (14.6%) — — Other 6.1 bln rubles. Thus, the investment Gas and petrochemical — 275 Other industry Shipbuilding/TMES program of the Division has been completed by a rate of 60% in 2015 4,018 (1.0%) — due to several factors: the rejection Thermal power 262 JSC NPO TsNIITMASH of the implementation of the activities and projects in view of the loss of their 1,276 (0.3%) — relevance; the postponement of the Special steels Total implementation of key projects for — subsequent periods due to changes in the timing of delivery of equipment 44,591 (11.4%) — 392,744 478 JSC TsKBM within the responsibility of the supplier; Nuclear power savings as a result of procurement procedures.

263,752 (67.2%) — Nuclear energy/ primary products

Structure of contracts concluded in the reporting year by operating segment (mln rubles)

978 (0.57%) 4,582 (2.66%) — — 1,216 JSC Afrikantov OKBM Shipbuilding Thermal power

1,176 (0.68%) 4,503 (2.62%) — — Special steels Transport and marine energy solutions

537 PJSC ZiO-Podolsk 1,234 (0.72%) 44,591 (25.93%) — 70 JSC OKB GIDROPRESS RAW/SNF — Nuclear energy/ new products 9,915 (5.77%) Total — — Other 171,956 6,491 (3.77%) — General equipment

825 AEM-Technology JSC Total 37 3,273 (1.90%) 95,212 (55.37%) — — 2 JSC Atomenergomash 37 PJSC EMSS (Ukraine) Gas and petrochemical Nuclear energy/ industry main products EMPs in Russia EMPs abroad

22 — — 23 —13 —14 Results Quality and of Production Industrial Safety Activities Enterprises holding ISO 9001 certificates

Name of the entity Name of certification system Certificate’s validity The key performance indicators for production period activities of the Division in 2015: ARAKO spol. s.r.o. TÜV SÜD September 14, 2018 JSC Atomenergomash IQNet (the Russian Register of St Petersburg) December 26, 2016 JSC OKB GIDROPRESS BUREAU VERITAS Certification October 23, 2017 Nuclear Power JSC Afrikantov OKBM TÜV Thüringen April 17, 2017 ãã supply of products for the following NPPs: Beloyarsk Nuclear Power Plant, Bilibino Nuclear Power JSC NPO TsNIITMASH BUREAU VERITAS Certification March 11, 2017 Plant, Kola Nuclear Power Plant, Rostov Nuclear Power Plant (power units 3, 4), Kalinin Nuclear CJSC ATM AFNOR Certification November 14, 2016 Power Plant, Smolensk Nuclear Power Plant, Balakovo Nuclear Power Plant, Novovoronezh Nuclear Power Plant, Novovoronezh Nuclear Power Plant-2, Kursk Nuclear Power Plant, AEM-Technology JSC IQNet (the Russian Register of St Petersburg) July 26, 2016 Leningrad Nuclear Power Plant, Leningrad Nuclear Power Plant-2, Baltic Nuclear Power Plant, OJSC Venta GOST R VCS December 24, 2017 Mohovce Nuclear Power Plant, Tianwan Nuclear Power Plant-2, Belarusian Nuclear Power Plant, JSC VNIIAM Evro-Reestr VCS July 17, 2018 Kozloduy Nuclear Power Plant, Temelin Nuclear Power Plant (power units 1, 2), Bushehr Nuclear PJSC ZiO-Podolsk/JSC ZIOMAR EC Lloyd’s Register Quality Assurance September 14, 2018 Power Plant, and Yuzhno-Ukrainsk Nuclear Power Plant; JSC SverdNIIkhimmash Management System Register VCS September 1, 2018 Thermal Power JSC SNIIP TÜV CERT September 15, 2018 ãã commissioning of facilities that use products developed by JSC ZIOMAR EC and supplied JSC TsKBM IQNet (LLC Test – St Petersburg) June 30, 2017 by PJSC ZiO-Podolsk: LLC AAEM IQNet (the Russian Register of St Petersburg) September 15, 2018 ›› new CCGT-220T power unit at CHPP-12 of MOSENERGO; LLC EMKO IQNet (the Russian Register of St Petersburg) April 13, 2018 ›› power unit No. 1 at Chelyabinsk TPP; PJSC EMSS TÜV Thüringen August 21, 2016 ›› new combined heat and power plant at Nizhneturinskaya TPP; ãã delivery of products to the production site of PJSC Uralkali, Verkhnetagilskaya TPP, Berezovskaya TPP, Zhambyl TPP, Yaroslavl PGO-CHP, Yaivinskaya TPP, Shatura TPP, Pskov TPP, Perm TPP, etc.; ãã completion of delivery of the equipment of the waste heat boiler for the Nadezhda Metallurgical Plant of 15 the Zapolyarye branch of PJSC MMC Norilsk Nickel. — Gas and Petrochemical Industry ãã delivery of equipment manufactured by PJSC ZiO-Podolsk and the Volgodonsk branch of AEM- Optimization of Technology JSC to major Russian oil and gas companies: ›› PJSC GAZPROM (completed execution of a major contract for the delivery of central dust collecting units for the Bovanenkovo-Ukhta main natural-gas transmission pipelines); Production Processes ›› PJSC LUKOIL (completed shipment of input column separating units and equipment for oil refineries of Yamalneftegaz business unit and Kogalymneftegaz business unit respectively); ›› PJSC TATNEFT (for the large refinery complex of JSC TANEKO under construction in Nizhnekamsk, the Republic of Tatarstan); RPS costs and economic effect from RPS projects (mln rubles) ãã delivery of ARAKO equipment for the PERN Przyjazn State Oil Transportation Company (Poland). 691.37 Special Steels ãã shipment of castings and forgings for the RITM-200 reactor shell for the nuclear icebreaker LK-60 has been completed; 354.03 ãã shipment of the product to ArcelorMittal plants (Belgium, Germany, Spain, Luxembourg, France, Costs the Czech Republic), Alstom Company (Poland), VoestAlpine (Austria), Iron Acciai Speciali (Italy), 227.69 Bhushan Power (India), General Electric (the USA, Brazil), AH Industries (Denmark), OJSC Power Machines, Acciai Brianza (Italy), Eurostaal (Netherlands), Oberste-Beulmann (Germany), 24.05 11.88 7.36 Effect Euskalforging (Spain), Von Schaewen (Germany), ThyssenKrupp Rothe Erde (Germany) Voestalpine (Austria), Steinhoff (Germany), and other leading European companies. 2013 2014 2015 (actual)

24 — — 25 Number of RPS projects (pcs) Energy Consumption (thousand GJ)10

17 19 50.6 54.6 — — — — Other JSC SverdNIIkhimmash Other JSC SverdNIIkhimmash 6 — 151.2 PJSC EMSS — 4 OJSC Venta 1,468.2 — — PJSC ZiO-Podolsk 317.1 AEM-Technology JSC 2 — Total — JSC Afrikantov OKBM Total — JSC OKB GIDROPRESS 27.6 — 112.4 213 1 — — — JSC SNIIP 3,909.2 JSC TsKBM JSC SNIIP 54 89.1 33 — — — JSC GSPI JSC OKB GIDROPRESS JSC TsKBM 105 4 58.9 1,525.5 — — 22 — — JSC Afrikantov OKBM LLC ARAKO — JSC NPO TsNIITMASH PJSC ZiO-Podolsk AEM-Technology JSC

41 91 213 346.9 679.9 2,879.5 Total

2013 2014 2015 Heat Electricity Gas

Number of submitted proposals and share of realized proposals Energy savings (thousand GJ)

38 (52%) 200 (78%) 14.9 — — 20.7 — JSC SverdNIIkhimmash PJSC EMSS — JSC SNIIP JSC NPO TsNIITMASH 45.4 715 (98%) 213.1 — — JSC Afrikantov OKBM 1,139 (46%) PJSC ZiO-Podolsk — — PJSC ZiO-Podolsk JSC Afrikantov OKBM 25.9 133 (77%) 24.8 — — — OJSC Venta Total JSC OKB GIDROPRESS JSC OKB GIDROPRESS — Total -14.5 2 (100%) — — 3,426 — 37 Other JSC VNIIAM — 1,052.6 (55.6%) JSC TsKBM 2.7 — 2 (100%) JSC SverdNIIkhimmash 2 (100%) — — CJSC ATM LLC ARAKO 14 (64%) 682.6 — — 824 (29%) AEM-Technology JSC — JSC SNIIP AEM-Technology JSC 343 (40%) 14 (64%) — — JSC TsKBM OJSC Venta 10 – The data were obtained by direct measurement.

26 — — 27 —16 Innovation Participation in scientific conferences Total Development 1 224 110 36 35 2 5 3 7 4 2 429

Number of patents and intellectual property certificates (pcs) Domestic

3 — 1 31 8 0 5 0 1 1 3 0 2 10 62 PJSC ZiO-Podolsk 2 International 15 — — JSC ZIOMAR EC AEM-Technology JSC 2 119 82 24 16 2 3 0 3 2 0 2 255 12

— PJSC EMSS JSC GSPI JSC SNIIP JSC SverdNIIkhimmash JSC TsKBM PJSC ZiO-Podolsk JSC Atomenergomash AEM-Technology JSC JSC NPO TsNIITMASH JSC OKB GIDROPRESS JSC Afrikantov OKBM LLC AAEM JSC Afrikantov OKBM with reports 2 — JSC TsKBM 6 Total — — JSC SNIIP 77 12 — JSC OKB GIDROPRESS 10 17 — JSC SverdNIIkhimmash 15 — — JSC NPO TsNIITMASH Environmental 60 85 77 Total Management and Environmental Impact 2013 2014 2015

Research papers and works published in 2015 (pcs) Enterprises holding ISO 14001 certificates11 3 1 — — Companies Availability of ISO 14001 certificate 3 PJSC EMSS PJSC ZiO-Podolsk — JSC SNIIP YES LLC EMKO AEM-Technology JSC Certification is planned for 2016

PJSC Energomashspetsstal YES 61 — JSC NPO TsNIITMASH Direct emissions of greenhouse gases (tons) Total 133 — — JSC Afrikantov OKBM 576.4 461.4 Carbon dioxide 404 (CO ) 20 256 2 — JSC SverdNIIkhimmash 13.3 13.7 13.4 Nitrous oxide (N2O) 35 2013 2014 2015 — JSC OKB GIDROPRESS 11 – ISO 14001 is a series of international standards on environmental management.

28 — — 29 Emissions of ozone-depleting substances (tons) Total weight of hazardous waste (tons)

Company Substance type 2013 2014 2015 6.6 JSC SverdNIIkhimmash CCl (carbon tetrachloride) 0.04 0.04 0.04 — 4 PJSC Energomashspetsstal JSC Afrikantov OKBM CCl (carbon tetrachloride) 0.068 0.018 0.022 4 227.4 CHCl (trichloromethane) - 0.03 0.026 338.5 — 3 — JSC TsKBM PJSC ZiO-Podolsk CF CCl (trifluorotrichloroethane) 0.5 - - Other 3 3 29.8 — CHCl3 (trichloromethane) 0.006 - - JSC OKB GIDROPRESS

CCl4 (carbon tetrachloride) 0.003 0.013 0.013 1,250.9 CF Cl (trifluorochloromethane) 0.1 0.1 - — 3 PJSC ZiO-Podolsk Total — 2,520.1 — 5,279.7 AEM-Technology JSC Atmospheric emissions of NOx, SOx, and other significant pollutants (tons)

906.4 47.2 — JSC Afrikantov OKBM 351.4 194.7 100.2

2015 Total weight of non-hazardous waste (tons) 0.022 0.8

2,401.64 — Other 406.1 66.6 275.8 133.7 2,855.8 — 2014 PJSC ZiO-Podolsk

28.2 23.0

5,111.3 — JSC Afrikantov OKBM Total 18,421.9 342.2 57.9 306.3 207.6 — — PJSC Energomashspetsstal

2013 34,848.2

1,097.2 23.5 16.0 — JSC TsKBM

NOx SOx Persistent Volatile Hazardous Solid 592.9 4,367.5 organic organic air pollutants particles — — pollutants compounds JSC OKB GIDROPRESS AEM-Technology JSC

30 — — 31 18 — Share of specialists under 35 years old (%)

Personnel Composition JSC Atomenergomash 47.7

Number of employees (persons) PJSC ZiO-Podolsk 26.4

JSC Atomenergomash 258 JSC ZIOMAR EC31 43.3 PJSC ZiO-Podolsk 2,870

JSC ZIOMAR EC 284 JSC Afrikantov OKBM 33.9 JSC Afrikantov OKBM 4,259

JSC OKB GIDROPRESS 1,533 JSC OKB GIDROPRESS 30.3 JSC GSPI 1,003

JSC TsKBM 1,056 JSC GSPI 32.9

JSC SverdNIIkhimmash 551 Total number of employees JSC TsKBM JSC SNIIP 518 of the Division 30.3 — JSC NPO TsNIITMASH 504 19,536 JSC SverdNIIkhimmash OJSC Venta 340 27.6

JSC OZTMiTS 128 JSC SNIIP 28.4 AEM-Technology JSC 3,687

CJSC ATM 107 JSC NPO TsNIITMASH 29.8 LLC EMKO 26

JSC VNIIAM 124 OJSC Venta 20.9 JSC IFTP 63 LLC AAEM 92 JSC OZTMiTS 12.5 LLC ARAKO 200

PJSC Energomashspetsstal 1,933 AEM-Technology JSC 41.0

Personnel turnover (%) CJSC ATM 37.4

17 2013 LLC EMKO 19.2

30 JSC VNIIAM 2014 26.6

JSC IFTP 15.9 17 2015 LLC AAEM 28.3 JSC Atomenergomash maintains a rather high percentage of employees of LLC ARAKO enterprises who have worked for more than five years – 31.5 the average value for the Division: more than 56% PJSC Energomashspetsstal 31.8

32 — — 33 Share of employees with higher education (%) RAS Academicians, professors (persons)

JSC Atomenergomash 93.0

PJSC ZiO-Podolsk 31.4

JSC ZIOMAR EC 94.4

JSC Afrikantov OKBM 62.6 — — Academicians Professors JSC OKB GIDROPRESS 73.7 1 JSC Afrikantov OKBM 5 JSC GSPI 94.0 1 JSC OKB GIDROPRESS 2 JSC TsKBM 56.0 0 JSC NPO TsNIITMASH 19 JSC SverdNIIkhimmash 68.0 0 JSC Atomenergomash 1 JSC SNIIP 61.8 0 1 Total JSC GSPI JSC NPO TsNIITMASH 82.3 — Total Total — — OJSC Venta 30.9 54.6% 2 28 JSC OZTMiTS 36.7 19 AEM-Technology JSC 39.5 — CJSC ATM 67.3 LLC EMKO 80.8 Occupational JSC VNIIAM 80.7 Safety and Health JSC IFTP 90.5

LLC AAEM 97.8 Enterprises holding OHSAS 18001 certificates12 LLC ARAKO 17.5 EMPs Availability of OHSAS 18001 certificate PJSC Energomashspetsstal 43.8 JSC ZIOMAR EC Certification is planned for 2016 PJSC ZiO-Podolsk Certification is planned for 2016 JSC SNIIP YES Candidates and Doctors of Science (persons) OJSC Venta Certification is planned for 2016 AEM-Technology JSC Certification is planned for 2016 JSC VNIIAM YES PJSC Energomashspetsstal Certification is planned for 2016

LTIFR for the Division as a whole — — Candidates Doctors 1.26

83 JSC NPO TsNIITMASH 34 0.84 83 JSC Afrikantov OKBM 15 0.73 — 0.63 Base 58 JSC OKB GIDROPRESS 9 0.54 0.51 0.54 value13 0.42 18 JSC SNIIP 7

11 JSC SverdNIIkhimmash 0 2011 2012 2013 2014 Target Result for Target 88 Other 8 value for 2015 value for 2015 2016 Total Total — — 341 73 12 – OHSAS 18000 is a series of standards containing requirements and guidelines for the development and implementation of occupational safety and health management systems, which enables organizations to manage the risks integrated in their management system and improve its functioning. 13 – The baseline value: the average value for 3 years.

34 — — 35 Number of employees working under harmful conditions (people)

651 317 — — PJSC Energomashspetsstal Other 576 — 94 — JSC Afrikantov OKBM JSC SverdNIIkhimmash

37 — JSC OKB GIDROPRESS Total — 1,366 68 — — 4,900 AEM-Technology JSC

(the Atommash branch of AEM-Technology JSC in Volgodonsk) Hydrotesting of a in a special underground bench — JSC GSPI

204 — JSC TsKBM

119 1,468 — — JSC SNIIP PJSC ZiO-Podolsk

Frequency of occupational accidents14

2013 2014 2015

Occupational safety and expenditures (mln rubles)

8.1 16.3 — — Other PJSC Energomashspetsstal

Number of injuries 22 7 18 1 11 4 Number of days lost 1,629 1,714 874 29.4 owing to injuries — PJSC ZiO-Podolsk LTIFR 0.73 0.51 0.42 28.5 — 0.6 JSC TsKBM — JSC GSPI Occupational injuries and diseases 4.7 — 8.8 2013 2014 2015 — Total OJSC Venta JSC SverdNIIkhimmash — 20.4 — 223.3 JSC OKB GIDROPRESS 36.1 — AEM-Technology JSC

PJSC Energomashspetsstal 1 - - - - -

70.3 AEM-Technology JSC 2 - 2 - 1 - — JSC Afrikantov OKBM

14 – In enterprises that are not included in the table, no injuries were recorded in the period.

36 — — 37 —20 Social CONTACT INFORMATION Inna Vavulina Responsibility — Press Secretary [email protected] +7 (495) 668-20-93 (ext. 1040) Payments to the budgets of different levels (thousand rubles)

Budget Type 2013 2014 2015 2016 (forecast) Joint-Stock Company Nuclear and Power Engineering JSC Atomenergomash

Principal State Registration Number (OGRN code): 1067746426439,

registered on March 29, 2006 by the Interdistrict Inspectorate No. 46 Paid Paid Paid Paid RUB) RUB) RUB) RUB) RUB) RUB) RUB) RUB)

(thousand (thousand (thousand (thousand (thousand (thousand (thousand (thousand of the Federal Tax Service in the city of Moscow Assessed Assessed Assessed Assessed

Total 3,623,424 3,752,241 4,805,678 3,744,199 6,552,303 6,544,455 5,064,720 4,931,865 Legal address: 119017, Moscow, ul. Bolshaya Ordynka, 24.

Mailing address: 115184, Moscow, Ozerkovskaya nab., 28, bldg. 3. including: Phone: +7 (495) 668-20-93 Fax: +7 (495) 668-20-95 Federal budget 3,245,339 3,067,000 4,367,121 3,355,674 5,740,392 5,696,057 4,670,327 4,614,997 E-mail: [email protected] Budgets of the constituent entities of the 285,702 582,169 334,773 293,454 729,197 732,116 303,414 256,814 Website: www.aem-group.ru Russian Federation

Local budgets 92,383 103,072 103,785 95,072 82,714 116,282 90,979 60,054

Charity expenses (thousand rubles)

810 — JSC Atomenergomash Total 12,020 599 — — — JSC Afrikantov OKBM 13,589 JSC OKB GIDROPRESS 160 — PJSC ZiO-Podolsk

The Annual Report used the work of the photographer Vyacheslav Stepanov.

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