Annual Report 2017

Annual Report 2017 Efficiency improvement and sustainable development Annual Report 2017 Efficiency improvement and sustainable development TVEL | ANNUAL REPORT 2017 TABLE OF CONTENTS 2 3 Table of Contents

page page page page Key results Competencies of Second Social Partnership of TVEL enterprises of TVEL Business Core in the Territories 8 Fuel Company 80 Fuel Company 103 Development 131 of Presence

Message From the Chairman of the Board 3 Governance Intellectual Сapital 101 5 Appendices of Directors 4 Corporate governance 51 Innovative Activities in the Nuclear Industry 101 1. Auditor’s Report 182 Message from President 6 Scheme of TVEL JSC Corporate Governance Bodies 53 Second Business Core Development 103 2. Financial Statements 184 Key results of TVEL Fuel Company 8 Board of Directors 54 Intellectual Property 109 3. Report of the Internal Control and Audit Department Milestones 2017 10 Report of the Board of Directors of TVEL JSC on the results Human Сapital 112 of TVEL JSC Following the Results of “Public Annual of the Company development in the priority fields 55 HR Policy 112 Reporting Preparation” Audit Process 195 Sole Executive Body 56 4. Independent Assurance Report 196 1 Staff Composition 112 About TVEL Fuel Company Share Capital Structure 57 5. Statement on Public Assurance 199 TVEL Fuel Company 15 Personnel Engagement 117 Related-Party Transactions and Major Transactions 57 6. RUIE Public Endorsement of the Report 201 World Market of Front End Nuclear Fuel Cycle 18 Motivation and Reward System 118 Management Efficiency Improvement 58 7. Table of Considerations of Suggestions Fabrication Market 18 Non-Material Benefits for Employees 120 Organizational Structure of TVEL JSC 58 by the Stakeholders 202 Uranium Conversion and Enrichment Markets 18 Development of Staff Capacities 120 Efficiency Improvement of Production Support Front End Nuclear Fuel Cycle Market Growth Outlook 20 Unified Youth Policy 124 Office Functions 58 Contact Details 203 Position of TVEL Fuel Company in the World Market Social Programs 124 Concentration of Production 59 of the Front End of Nuclear Fuel Cycle 21 Information Technologies 59 Interaction with Trade Unions 126 Operating Results of TVEL Fuel Company in the Anti-Corruption 61 Occupational Health and Safety 126 NFC Front End Market 24 Internal Control System 63 Social Сapital 131 Key Results 2017 24 Procurement Management 65 Social Partnership in the Territories of Presence 131 Goals and plans in the midterm 25 Social and Charitable Activity 138 4 Performance Results Stakeholder Engagement 145 2 Natural Сapital 147 Strategy of TVEL Fuel Company Financial Capital 71 Mission and Values 29 Ecological Policy 147 Investment Management 71 Strategy 32 Environmental Impact 149 Results 2017 71 Business Model 39 Financial Results 74 Expenses Related to Environment Protection 157 Risk Management 42 Cost Reduction 78 Nuclear and Radiation Safety 159 Manufactured Capital 79 Fire and Disaster Prevention 164 Business Assets and Operational Results 79 About the Report 167 Production Management 95 Terms and Definitions 172 Quality Management 99 Abbreviations 177 TVEL | ANNUAL REPORT 2017 MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS 4 5 Message from the Chairman of the Board of Directors

Over the course of its 20-year history TVEL JSC Yuri Olenin Chairman of the Board faultlessly delivered on all contractual of Directors of TVEL JSC, Deputy Director General — commitments, which allowed the Company Director of the Division for Innovation Management of to acquire the global stature and sustainable ROSATOM State Corporation goodwill of a reliable supplier of safe and effective nuclear fuel

Dear colleagues transparency and expanding dialogue with important for the whole nuclear industry is the Complex, Novosibirsk Chemical Concentrates and friends, stakeholders — all of these efforts clearly show Proryv or Breakthrough project being realized Plant, and Bochvar Institute. the development vectors of the entire nuclear at the site of Siberian Group of Chemical TVEL Fuel Company shows steady progress TVEL Fuel Company is one of the basic divisions industry in the near future. Enterprises in Seversk: creation of the unique allowing to expect successive achievement of ROSATOM which is of key importance both TVEL Fuel Company expands the geographical platform for closed nuclear fuel cycle and minor of its strategic goals while strictly preserving for the Russian nuclear industry and for the reach of its export supplies. In 2017, TVEL JSC actinides afterburn will enable the Fuel Division safety principles and following the sustainable development of international business. By concluded several major contracts for the whole to move to a new technological level. development priorities. strengthening its technological, manufacturing operation period of the nuclear power plants TVEL Fuel Company is traditionally committed and financial potential, the Company continues under construction in Egypt, Turkey and Belarus. to high environmental stadards. The Company to create new high-quality and reliable fuel Along with the development of the traditional supports national and regional environmental products for the world nuclear power industry fuel market for Russian design reactors, the events on a regular and proactive basis, while serving the interests of its customers. Company continues to promote fuel for Western demonstrating high corporate responsibility The priorities set by the Nuclear Fuel Division design PWR reactors. regarding environmental protection and fully comply with the strategic areas of activity Technological leadership of the Company conservation of the natural wealth of the country. in ROSATOM State Corporation. Penetrating regarding front end of nuclear fuel cycle is The Company has unique competences for new markets and creation of new products, traditionally associated with the creation of new decommissioning of the nuclear facilities and innovative development, operational efficiency types of nuclear fuel for the power and research rehabilitating the areas up to the environmentally growth, sustainable development, increasing reactor models. At the same time, strategically acceptable level in Angarsk Electrolysis Chemical

Table of Contents TVEL | ANNUAL REPORT 2017 MESSAGE FROM PRESIDENT 6 7 Message from President

Natalia Nikipelova President of TVEL JSC

USD billion Foreign orders portfolio for products and services of FE NFC for a 10 year 10.8 period (as of year-end 2017)

Dear colleagues, Western design. Power unit No.3 of NPP Ringhals for the near future include the creation of new events to protect the environment. These (Sweden) successfully completed the regular designs and modifications of fuel assemblies projects were carried out in parallel with In 2017, TVEL Fuel Company of Rosatom operation cycle of TVS-K in the reactor core, for VVER type reactors, design improvement the traditional work to eliminate the nuclear showed solid financial and operational with an agreement reached to expand the pilot for TVS-K fuel, development and market launch “legacy” of the first Soviet atomic project, as performance, continued to strengthen its operation program. of the products with mixed uranium-plutonium well as to ensure radiation safety and reduce positions in the global market, develop new In 2017, the Company launched the projects fuel for thermal and fast neutron reactors (MOX the impact of enterprises on the environment. business areas and improve operating efficiency. of strategic importance aimed at improving the fuel, REMIX fuel, MNUP fuel), as well as the TVEL Fuel Company spent RUB 2.2 billion for Summarizing the 2017 results, TVEL Fuel operational efficiency. One of such projects creation of accident tolerant fuel. Market launch environmental protection in 2017. Company’s revenue amounted to RUB 180.7 involves the concentration of mechanical of an efficient tolerant fuel based on the existing In 2018 TVEL JSC and its subsidiaries will billion, which is comparable to the previous year, enterprises of TVEL Fuel Company within the FA for Russian and foreign design reactors will continue their dynamic work on implementation while the net profit compared to 2016 increased production sites of Tochmash VPA (Vladimir open a new historical page in terms of reliability of all previously launched projects with the aim by 19% up to RUB 55 billion. The ten-year region) and Kovrov Mechanical Plant (Kovrov). and safety improvement of the nuclear power to introduce TVEL Fuel Company to a new efficy export orders portfolio for traditional products All enterprises of the nuclear fuel division industry worldwide. level, while improving current products and increased up to USD 10.8 billion, including the accomplish the projects aimed at reducing TVEL Fuel Company gives traditional priority creating new types of products, diversifying its fuel supply contracts for new foreign power production sites areas and costs. to the sustainable development of the cities business and classically reliable fuel supply to units of Russian design: El Dabaa NPP (Egypt), The year 2017 laid the foundation for the and the regions where our enterprises are NPPs both in Russia and abroad. Akkuyu NPP (Turkey), Ostrovets NPP (Belarus). dynamic development of new business areas, located. Along with charitable activities and In cooperation with its traditional partners TVEL Fuel Company started the process of implementation of social projects, our work in TVEL JSC continued transferring nuclear power creating industry-based integrators. Integrator the regions is aimed at creating sustainable units to the improved, more efficient and up- companies were created in such areas as business partnerships. That means investment to-date fuel. The Company signed the contract Additive Technologies and Power Storage inflow, creation of new enterprises and jobs for for introduction of the newly modified second Devices with the view of establishing the the territories which will be a powerful impetus generation fuel assemblies for VVER-440 Oilfield Service integrators and in a number for social and economic development. reactors at the four existing power units of of other areas. 2017 was officially declared the Year Paks NPP (Hungary), which will increase The Company continues its work on creation of of Ecology in Russia. In this regard TVEL the economic efficiency of the power plant. new and modified products for our clients in our Fuel Company developed and successfully The project of global market launch is ongoing major business area — nuclear fuel fabrication. implemented a series of organizational, for TVS-K fuel intended for PWR reactors of The key areas of scientific and technical activities scientific, technical, educational and industrial

Table of Contents TVEL | ANNUAL REPORT 2017 KEY RESULTS OF TVEL FUEL COMPANY 8 9

In 2017, TVEL Fuel Company of Rosatom Key results of TVEL showed solid financial and operational performance, continued to strengthen its Fuel Company positions in the global market, develop new business areas and improve operating efficiency

Net income EBITDA (RUB million) 55,734 46,212 55,008 margin 43.5% 43.0% 41.5%

2015 2016 2017 2015 2016 2017

189,017 180,073 180,683 8.40 8.25 8.46 Revenue (net) from Labor efficiency* the sales (RUB million) (RUB million/person) 2015 2016 2017 2015 2016 2017

86.6 83.9 77.4 22,527 22,127 Adjusted free cash 21,793 flow (RUB billion) Average staff number (persons) 2015 2016 2017 2015 2016 2017

15,296 28,233 20,468 1.69 1.97 1.90 Dividends paid Total costs for occupational in the reporting year safety and health (RUB million) measures (RUB billion) 2015 2016 2017 2015 2016 2017

Foreign orders portfolio 10.3 10.1 10.8 for products and 31,283 29,233 24,128 Gross tax liabilities services of FE NFC (actually paid) for a 10 year period (RUB million) (USD billion) 2015 2016 2017 2015 2016 2017

* Labor efficiency is calculated as revenue from sales + recognition of costs carried out by external financing / average number of employees. Table of Contents TVEL | ANNUAL REPORT 2017 MILESTONES 2017 10 11 MILESTONES 2017

01 03 04 05 08 09 11 12 JANUARY MARCH APRIL MAY AUGUST SEPTEMBER NOVEMBER DECEMBER

Kovrov Mechanical Gas centrifuges unit was Start of the Lean Polyclinics Natalia Nikipelova was TVEL JSC and Institute TVEL JSC won the Grand Plant (KMZ PJSC) successfully transferred project in Novouralsk aimed appointed as President of Nuclear Physics of the Prix in the All-Russian started batch production from the site of Siberian at improving the medical of TVEL JSC (previously Academy of Sciences of Contest of the Russian of the new generation Group of Chemical services quality in the cities she had been holding the Republic of Uzbekistan Union of Industrialists and gas centrifuges Enterprises (SGChE; of TVEL Fuel Company the position of Senior concluded the nuclear fuel Entrepreneurs “Russian GC-9+. Seversk, Tomsk region) to operations. Vice-President for supply contract regarding Business Leaders: Dynamics Electrochemical Plant (PA Finance, Economy and VVR-SM research reactor and Responsibility — 2017”, ECP JSC; Zelenogorsk, Corporate Governance operated by specialists of the nomination “For achieve- Krasnoyarsk territory). since 2013). Institute of Nuclear Physics. ments in the field of occu- The supply contract was The previously shut down pational safety and health ratified with the European equipment was put into Representatives of TVEL of workers”. distributor HermitH GmbH 02 operation on the new 07 Fuel Company obtained (Germany) for more than PA ECP JSC shipped FEBRUARY production site and it now JULY three gold awards in IV 1 thousand tons of various a large batch of is effectively operated National Championship titanium production by germanium-76 isotope for A.A. Bochvar High- within the framework of of High-Tech Industries Chepetski Mechanical Plant the international scientific Technology Research design characteristics. WorldSkills Hi-Tech-2017 (CHMP JSC) with total collaboration GERDA, Institute of Inorganic (Ekaterinburg). value of RUB 2 billion. which conducts a research Materials (Bochvar TVEL Fuel Company, in the field of neutrinoless Institute) completed the China Nuclear Energy TVEL JSC and MVM double beta decay of works in the framework Industry Corporation and Paks NPP Ltd. (Paks an atomic nucleus. of three governmental Jiangsu Nuclear Power NPP, Hungary) signed the The Company signed a fuel contracts under the project Corporation signed contract for engineering supply contract for Akkuyu Proryv (Breakthrough) on the package of supply services related to NPP (Turkey). processing technology for contracts for Russian The Company signed introduction of the new irradiated mixed uranium- nuclear fuel, zirconium a contract for additional generation fuel assemblies The Company signed plutonium nitride fuel, components for fuel supply of TVS-K for for VVER-440 reactors on a fuel supply contract for treatment of radioactive assemblies and provision pilot operation at power the operating Paks NPP Ostrovets NPP (Belarus). wastes generated after of engineering services for unit No.4 NPP Ringhals 10 power units. reprocessing of irradiated Tianwan NPP power units (Sweden) starting The Company signed OCTOBER fuel, and mathematical for the amount of about from 2019. a nuclear fuel supply process simulation of USD 1 billion. contract for El Dabaa TVEL JSC launched the nuclear fuel fabrication, NPP (Egypt). management processes its processing and restructuring project treatment of radioactive within the framework of waste for new generation the concept of “business fast neutron reactors. and service functions interaction”.

Table of Contents RUB mln TVEL Fuel share in the global market Company of fuel fabrication net revenue 17% of TVEL Fuel Company 180,683 from sales

About TVEL 1 Fuel Company 1 | ABOUT TVEL FUEL COMPANY 15 TVEL Fuel Company

The Company supplies nuclear fuel to 72 energy reactors in Russia, Europe and Asia (14 countries), to research reactors of Russian and foreign design in nine countries worldwide, marine energy power units of the Russian Nuclear Powered Fleet, as well as the world’s first floating nuclear power plant. Today one out of every six power reactors in the world operates with fuel manufactured by TVEL Fuel Company

Rosatom TVEL Fuel Company1 thin-walled pipes, polishing powders, (hereinafter referred to as TVEL Fuel pinch rolls, zeolite catalysts, supercon- Company, TVEL FC, the Company) is ductor materials and other products. one of the major players on the global The enterprises of TVEL Fuel Compa- market of front end nuclear fuel cycle ny have proprietary research and devel- (FE NFC) and the only nuclear fuel opment design divisions that contribute supplier to Russian NPPs. to successful operation of hydrometal- TVEL Fuel Company is a part of lurgical, metalworking, machine-build- ROSATOM State Corporation and ing and rolling facilities. comprises the enterprises specialized TVEL Fuel Company takes a central in fabrication of nuclear fuel, uranium place in the structure of ROSATOM for conversion and enrichment, produc- the front end nuclear fuel cycle. tion of gas centrifuges, as well as The enterprises of TVEL Fuel Com- research, design and development pany are located in 10 regions of the organizations. Russian Federation. Distribution of the The core areas of activity of the Company’s assets in different regions of Company is uranium enrichment; Russia renders effective cooperation in development and production of gas a wide range of issues and aspects. centrifuges and the associated equip- Specific nature of the social envi- ment; development, fabrication and ronment of TVEL Fuel Company is sale (including export) of nuclear fuel, that three industrial enterprises of the and non-nuclear products manufac- Company are located within the Closed tured at the enterprises of the fuel Administrative Territorial Units (CATU): division. Seversk, Novouralsk, Zelenogorsk TVEL Fuel Company provides the and one is located within a so called Russian and international market with mono-town (Glazov). These enterprises Electronic versions the wide range of non-nuclear products: are town-forming organizations of TVEL FC Annual Report zirconium, lithium, calcium, magnets, and major taxpayers. 2017 and the preceding periods are available at: tvel.ru/finance/ 1 TVEL Fuel Company is the collective name annual_report/ for TVEL JSC and its subsidiary companies.

Table of Contents TVEL | ANNUAL REPORT 2017 1 | ABOUT TVEL FUEL COMPANY 16 17

Table 1 Competitive advantages of TVEL Fuel Company Regions All stages of activity comply with Competitive Means advantages of accomplishment the strict requirements regarding

XX of presence of TVEL nuclear and radiation, industrial, Cost optimization Concentration of production fire, environmental safety, XX Disposition of non-core assets as well as labor safety, physical XX Development of new and low waste technologies XX Production modernization Fuel Company protection of nuclear facilities

and nuclear materials, Package Supplies XX TVEL Fuel Company’s framework concentrates emergency preparedness all technological stages of nuclear fuel production (possibility of improving the characteristics of nuclear fuel)

Continuous XX Provision of power cycling modes, possibility improvement of of increasing the nuclear reactor capacity consumer properties XX Introduction of extended fuel life and cycles 1. Moscow 4. Vladimir region 7. Novosibirsk region of nuclear fuel XX Achievement of high-level nuclear fuel burn-up TVEL JSC, VNIINM JSC, Tochmash VPA JSC (Vladimir), NCCP JSC (Novosibirsk) MZP JSC, CPTI JSC KMZ JSC (Kovrov) 8. Tomsk region Use of various types XX Increase of commercial attractiveness of nuclear fuel SGChE JSC (Seversk) of raw materials XX Decrease the share of nuclear fuel share in power 2. Moscow region 5. Udmurt Republic generation cost MSZ JSC (Elektrostal) ChMP JSC (Glazov) 9. Krasnoyarsk territory 3. Saint Petersburg 6. Sverdlovsk region PA ECP JSC (Zelenogorsk) XX 10regions Reference fuel Proposal of reference solutions which have been tested Centrotech SPA LLC UEIP JSC, Centrotech 10. Irkutsk region and qualified in Russia of the Russian SPA LLC (Novouralsk) AECC JSC (Angarsk) Federation

Figure 1 Position of TVEL Fuel Company in Nuclear Technological Chain

FRONT END OF THE NFC

Mining Division Fuel Division

Ore Fuel Exploration Extraction Conversion Enrichment processing fabrication

POWER ENGINEERING 3 Machine-Building Division

Equipment Equipment Equipment Hook-up and Maintenance and Engineering Manufacturing Supply Commissioning Modernization 1 9 2 4

5 6 8 Electric Power Division Engineering Division 10

Energy Production Construction of Nuclear Power Design and at the Nuclear Nuclear Power Plant Maintenance Engineering 7 Power Plant Plants Transition to the closed NFC (returning the fuel to the cycle) BACK END OF THE NFC

Back End Division

Spent Fuel Radioactive Waste Competencies Decommissioning Innovation Management Management of TVEL FC

Table of Contents TVEL | ANNUAL REPORT 2017 1 | ABOUT TVEL FUEL COMPANY | World Market of Front End Nuclear Fuel Cycle 18 19 World Market of Front End Nuclear Fuel Cycle 72 17% Number of TVEL share in the reactors running global market of fuel on Russian-made fuel fabrication in 2017

of Russian design, as well as it is According to IAEA PRIS, sufficiently competent to produce nuclear fuel for PWR and BWR as of the end of 2017 there reactors and its components from were 448 NPP power units reprocessed uranium (in cooperation with Framatome), and pellets for in operation worldwide, PHWR and BWR reactors. TVEL JSC including 35 in the Russian elaborated its own in-house design Federation. 72 reactors are of FA for PWR reactors — TVS-K, which is under the pre-test assembly running on Russian fuel program. Main events of the nuclear fuel fabrication market in 2017: XX transition of the reactor and The majority of operating power units fabrication business of AREVA Diagram 1 are located in Asia-Pacific region, Group under control of EDF, the North America and Western Europe. energy company from France; NPP units At the moment 57 power units are XX restructuring of Westinghouse, in operation as of the under construction in fifteen countries, conducted in accordance with end of 2017, ea. including seven in Russia. Chapter 11 of the US Bankruptcy Code, as a result of which the FABRICATION MARKET company will focus on nuclear 5 2 tend to reduce the volume of output XX The French company Orano At the moment, more than 80% of fuel fabrication and engineering or suspend the production completely. (known as AREVA NC until 2018), the world reactor fleet consists of services. 70 120 At the beginning of 2017 the largest which consolidated the business light water reactors (LWR) segment, supplier of conversion services of AREVA group in terms of uranium including PWR, BWR and VVER URANIUM CONVERSION ConverDyn (USA) reported the closing mining, conversion and enrichment, reactors. It is expected that within AND ENRICHMENT of a number of production sites at the completed the construction of the the next 10 years LWR will amount to MARKETS conversion plant Metropolis Works new conversion plant Comhurex II about 90% of new reactors put into In 2017, the price for separative work in USA, which led to a halving of and the new enrichment plant operation. unit (SWU) continued its decline production capacities of the enterprise, Georges Besse II. Major foreign manufacturers of fuel which began in 2011. By the end of up to 7 thousand tons U in the XX URENCO increased the capacity for light water reactors are located in 2017, the spot market price dropped form UF6/year. By the end of 2017, of its plant in USA and closed USA, Western Europe and Japan: below USD 40 per SWU. This is due ConverDyn suspended completely its a series of outdated sites in terms XX Framatome (previously AREVA NP, to the surplus capacity and presence 139 112 works on the production of uranium of technology in its enrichment 75% share belongs to EDF) — of significant nuclear fuel reserves hexafluoride until “business conditions plants in Europe. BWR and PWR; in various forms that resulted in are improved”. XX Global Nuclear Fuel (joint venture excess of conversion and enrichment North America However, in anticipation of greater of GE и Hitachi) — BWR; services over the current demand Western Europe demand in a long-term perspective, XX Westinghouse (till the end of in the market. Asia-Pacific Region several companies have chosen to 2017 owned by Toshiba) — In recent years because of the Сountries of CIS and Eastern Europe modify their facilities and replace BWR, PWR and VVER. current market conditions most South America outdated plants with more modern suppliers of conversion and Africa and efficient ones: TVEL Fuel Company is the enrichment services do not use the main supplier of fuel for reactors production capacity to the full, and Source: IAEA PRIS database

Table of Contents TVEL | ANNUAL REPORT 2017 1 | ABOUT TVEL FUEL COMPANY | World Market of Front End Nuclear Fuel Cycle 20 21

The Asian region remains the TVEL Fuel Company is sufficiently most promising market where the competent to produce and supply main construction of new units is in fuel and its components for all types progress and there are serious plans of the existing Russian reactors to build up the nuclear capacity. (VVER, RBMK, EGP, BN), light-water The reduced demand is expected in western-design reactors (PWR and FE NFC markets of Europe and North BWR), as well as fuel components America due to ageing of the reactor for western-design pressurized fleet, decommissioning of the existing heavy water reactors (PHWR). The capacity and small quantity of new Company successfully manufactures projects aimed at replacement of nuclear fuel from reprocessed uranium the retired capacity. (in cooperation with Framatome Furthermore, in 2017 the country (previously AREVA NP)) in compliance markets of nuclear power changed with the European regulations for their long-term prospects. South manufacturing technology and the Korea, which was seen as one of products manufactured. TVEL Fuel the growth drivers of the world’s Company elaborated the in-house nuclear power, set a course toward design of FA for PWR reactors — abandoning the construction of new TVS-K fuel. nuclear power plants and extending In recent years alongside with the the operating time of the existing increasing pressure on European reactors after reaching their design NPPs operators, it is widely spoken deadlines. At the same time at the end out on the issue of the necessity to of 2017 France decided to postpone reduce the energy dependence on its plans to reduce the share of Russia, to diversify supply sources; nuclear power in the national energy which can be used as a means of balance to 50% starting from 2025 competition restraint. XX Striving for self-sufficiency in FRONT END NUCLEAR FUEL Diagram 2 to a more distant future. Due to increased competition products and services throughout CYCLE MARKET GROWTH Taking into account the above, it is in the fuel fabrication market, the Key Competitors the entire nuclear fuel cycle, China OUTLOOK expected that by 2025 the nominal initiatives of TVEL Fuel Company of the Nuclear Fuel is increasing its production capacity Front end nuclear fuel cycle market capacity of the global nuclear reactor on improvement of technical and Fabrication Market in 2017, % for conversion and enrichment outlook depends on the current state fleet will grow insignificantly: from economic features of fuel, making with a focus on the development of the reactor fleet and periods of the current 390 GW up to ~400 GW. TVEL FC products more attractive for of the reactor fleet in the country: its operation, plans for construction 6 By t 2030 we can expect the capacity its customers both on traditional fuel production capacities on the of new units, as well as the reserves to grow up to ~450 GW. market for Russian-design reactors, 9 conversion exceeded 10 thousand of FE NFC accumulated by various and on the fuel market of Western- tons U/year, enrichment – reached market players. According to different 33 POSITION OF TVEL design PWR reactors, are extremely the value ~6 million SWU/year. scenarios in 2030 outlook, the FUEL COMPANY important. nominal capacity of the global reactor 11 IN THE WORLD MARKET fleet will increase, the difference OF THE FRONT END is in growth rate. OF NUCLEAR FUEL CYCLE TVEL Fuel Company is one of the global leaders in nuclear fuel production. The Company’s share in the global market of fuel fabrication Table 2 17 in 2017 reached ~17%1. TVEL Fuel Key performance indicators of the global nuclear fuel market in 2017 Company jointly with TENEX JSC Indicator Value 24 provides a significant part of the needs of foreign design reactors Number of reactors running on Russian-made fuel, ea. 72 in uranium enrichment services. Westinghouse Electric Company NPP units in operation, worldwide 448 “Framatome” (previously AREVA) TVEL FC NPP units under construction, worldwide 57 GNF 1 Taking into account the loading of nuclear fuel Countries with NPPs under construction 15 CNNC into reactors and physical start-up of Rostov NPP power unit No.4 and Leningrad NPP-2 power Others unit No.1 in December 2017.

Table of Contents TVEL | ANNUAL REPORT 2017 1 | ABOUT TVEL FUEL COMPANY | World Market of Front End Nuclear Fuel Cycle 22 23 TVEL Fuel Company in the Global Market of Nuclear Fuel for Power Reactors

Current supplies Current supplies Number of Share of national of nuclear fuel for power of nuclear fuel and units nuclear power reactors designed components in cooperation capacity in Russia with AREVA

36% 2 Finland 100% 35 Russia

100% Hungary 57% Western 4 Ukraine Europe 3 9 100% 100% Czech 6 4 Slovakia Republic 100% 100% 1 2 Bulgaria Armenia 6% 3 China

100% 1 Iran

30% 2 India

Table of Contents TVEL | ANNUAL REPORT 2017 1 | ABOUT TVEL FUEL COMPANY | Operating Results of TVEL Fuel Company in the NFC Front End Market 24 25

Within the framework of international obligations Nuclear fuel and components for 2017, the Company obtained 70 one-time for research reactors Operating Results of TVEL licenses (52 export and 18 import), the period designed abroad XX The contract was signed regarding of validity of three licenses from previously fuel supply for reopened in Fuel Company in the NFC issued licenses was extended, and received Uzbekistan research reactor two identification approvals of the Federal VVR-SM of the Institute of Service for Export Control of Russia (FSTEC), Nuclear Physics of the Academy Front End Market of Sciences of the Republic one of which — under the art. 20 FSTEC, as well of Uzbekistan, with an option as six authorizations from FGUP Gostekhstroi of further regular supplies and introduction of improved uranium- molybdenum fuel. KEY RESULTS 2017 XX A number of contracts were Within the scope of contractual obligations, signed with the foreign partners Nuclear fuel and components for qualification of zirconium fuel TVEL Fuel Company carries out a full range for Russian and western components, as well as supply design NPPs of works on the fulfilment of the legislative of fuel components for research XX Contract documents signed: requirements established by supervisory reactors of foreign design. for supply of fuel, components XX Deliveries of uranium and zirconium authorities of the Customer’s country and and engineering services for first components of nuclear fuel were and second turn units in Tianwan which are necessary for licensing of nuclear carried out within the contracts NPP (China); concluded in 2015–2017. fuel and components for reactor core supply of nuclear fuel to Haykakan XX Start-up of the contract for nuclear Atomayin Electrakayan CJSC fuel supply for experimental fast (Armenia), under which contract neutron reactor CEFR. the FA reserve will be created; TVEL JSC uses an integrated addition to fuel supply to GOALS AND PLANS approach to work in the world market Ukrainian NPPs in 2018 with IN THE MIDTERM of FE NFC. The assets of TVEL Fuel Energoatom State Enterprise XX Protection and strengthening of the Company include all process cycles National Nuclear Energy position in the traditional nuclear of nuclear fuel fabrication which Generating Company (Ukraine); fuel markets, implementation of the makes it possible to offer products fuel supply for Akkuyu NPP annual supply program. and services related to FE NFC in (Turkey); XX Implementation of the existing the form of package supplies, and fuel supply for Ostrovets NPP contracts, development of also to take into account the current (Belarus); cooperation with foreign energy and perspective market trends and engineering services related to companies and industrial partners challenges in own production activity. introduction of the new generation with the view of promoting TVS-K The result of this is the flexibility of fuel assemblies with optimized fuel at target markets. contract pricing and optimal transport water-uranium ratio on the XX Promoting the development of logistics, while the reliability of supply operating Paks NPP (Hungary) nuclear power generation as is ensured by the presence of several power units; one of the key components enterprises specializing in various additional supply of TVS-K fuel for XX The license obtained for TVSA-12 of green energy. areas of FE NFC. pilot operation at NPP Ringhals fuel operation in Kozloduy NPP XX Tenfold growth of revenue by the (Sweden) starting from 2019. (Bulgaria) unit No.5; year 2030 in non-nuclear operations XX Start up of nuclear fuel supply XX Continuation of cooperation with (including established businesses) Table 3 contract with El Dabaa NPP (Egypt). Framatome (previously AREVA NP) in comparable terms of 2014. Key indicators of TVEL FC in the world market XX Creation of nuclear fuel reserves by in terms of producing with Machine- of the front end nuclear fuel cycle customers to ensure diversification Building Plant (MSZ PJSC) facilities of supply source and energy supply nuclear fuel and components from Key indicators Value security (Armenia, Czech Republic, reprocessed uranium according Iran, Hungary). to Framatome technology for Export proceeds, USD bln 1.2 XX Continuation of licensing TVSA-T European NPPs with PWR. Export orders portfolio for products and services of FE NFC 10.8 mod.2 in the Czech Republic and for a 10 year period, USD bln preparation for delivery and loading in Temelin NPP (Czech Republic).

Table of Contents USD bln USD bln export orders portfolio export proceeds for products and services of TVEL FC 10.8 of FE NFC for a 10 year period 1.2

Strategy of TVEL 2 Fuel Company 2 | STRATEGY OF TVEL FUEL COMPANY 29 Mission and Values

Meeting the requirements of the customers of TVEL Fuel Company both in the field of nuclear fuel cycle and in the related sectors, in strict compliance with requirements of safety, security, environmental and social awareness

Mission of TVEL Fuel Company Meeting the requirements of the customers of TVEL Fuel Company both in the field of nuclear fuel cycle and in the related sectors, in strict compliance with requirements of safety, security, environmental and social awareness1.

Strategic Vision of TVEL Fuel Company Fuel Division is the global leader in front end of NFC and the related fields.

Workers of TVEL Fuel Company are governed by the Values shared by all organizations and enterprises of ROSATOM State Corporation. These core values were formed throughout the history of development of the nuclear industry in Russia and they conform with the global approach to determination of the fundamental principles of the industry.

1 Mission as a part of the development strategy of TVEL Fuel Company was approved by the Strategic Board of ROSATOM State Corporation.

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Mission and Values 30 31 TVEL Fuel Company Values of TVEL supports UN Sustainable Fuel Company Development Goals

EFFICIENCY We always look for the best solution. We are efficient in everything we do. When faced with a task, we use the company’s resources as rationally as A UNITED TEAM possible and always seek to improve the ONE STEP AHEAD We all are ROSATOM. work processes. No obstacle can prevent Our ambition is to be We have common goals. us from finding the most efficient solution. a leader in the global Working as a team of markets. We are always likeminded colleagues, one step ahead in terms we can achieve truly of technology, knowledge extraordinary results. Efficiency and qualifications of our Together we stand employees. We can tell what stronger and we can tomorrow will bring and meet our most ambitious O we stand prepared today. In September 2015, the UN adopted The most considerable advantage n goals. The achievements m e We are always learning and a the Sustainable Development of NPP is the absence of emissions of our employees are e s developing. Every day we t t the achievements of e attempt to do better than Goals (17 global goals and 169 of aerosols and greenhouse gases d p e corresponding objectives), officially in the atmosphere, which is primarily the Company. t a we did yesterday. i h n known as “Transforming Our World: due to the high quality, environmental e u a the 2030 Agenda for Sustainable friendliness and reliability of our d A Development”. These goals are products. aimed to contribute to prosperity The relevant information about while protecting the planet’s the Company’s contribution in UN environment. To achieve these Goals goals achievement is marked with the joint efforts of the governments, the pictograms in the Report. private sector, civil society and Public Integrated Report of TVEL R e y the world citizens are required. JSC was prepared in accordance with t s e Konstantin Sokolov p f TVEL Fuel Company and the International Integrated Reporting e a Vice-President c S t for Communication, its employees support the UN Framework and GRI Standards. RESPECT SAFETY Administration sustainable development goals. We respect our Safety comes first. and Energy Efficiency, Being a socially responsible company, customers, partners and Our top priority in our Tak ity Chairman of the Committee TVEL JSC aims to make a positive suppliers. We always listen ing sibil operations is to ensure respon on Public Annual Reporting contribution to achievement of the to and hear each other for ult full safety of people and regardless of the positions the res environment. When it of TVEL JSC goals that are closest to its activity: and jobs that we any of us comes to safety, every “Affordable and Clean Energy” may have. We respect the little thing matters — and “Climate Action”. Nuclear fuel history and traditions of the we know our safety rules, produced by TVEL Fuel Company industry. The achievements TAKING RESPONSIBILITY strictly follow them and of the past inspire us to FOR THE RESULT never hesitate to crack is operated by NPPs that command new levels of success. Each of us bears personal responsibility to down on safety violations. a large part in total power balance. the state, the industry, the colleagues and the Prime cost of electric power customers for the result and quality of our work. generated by NPP may compete We require excellence in everything we do. We praise the result, not the effort. A good result with other types of power plants. is the basis of our further progress.

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY 32 33

Scheme 1 Strategy Strategic targets of TVEL Fuel Company

Increased Growth on the Second Social and efficiency markets of Front Business Core ecological End of NFC Development acceptability

Table 4 Development strategy and business plan Goals correlation of ROSATOM and TVEL Fuel Company of TVEL Fuel Company for the years 2015–2019 were adopted by the Strategic Board of Strategic goals of ROSATOM State Corporation ROSATOM in December, 2014. The strategy 1. 2. 3. Operational Increase of Reduction of New products environment of TVEL Fuel Company sets core performance the international the cost of products for Russian and Prevention of adverse indicators for mid-term and long-term Strategic goals of market share and the lead time international markets environment impact TVEL Fuel Company outlook till 2030 Growth on NFC Markets

Second Business Core Priority Operation Areas regular audits of nuclear fuel Development TVEL Fuel Company faces the chal- producers and NPPs, offering lenge to strength its presence in the a reference fuel qualified at Effciency Improvement world market of NFC fabrication and Russian NPPs; enrichment by 2030. Leadership of XX accomplishment of a series Social and Ecological Acceptability TVEL Fuel Company in the front end of projects on improvement of NFC market will be ensured by a se- nuclear fuel consumer properties ries of projects being accomplished. for operating NPPs; First of all, such projects include XX development of cooperation with promotion of the Russian design European partners, China and India. TVS-K fuel on the foreign market (for reactors designed abroad). The key conditions for the develop- One of the innovative areas for NFC ment of the second core business is market is the Proryv project (“Break- the presence in TVEL Fuel Company through”) at the facilities of SGChE of the necessary infrastructure and JSC (Seversk, Tomsk region), with production capacity, as well as the re- the construction of the Experimen- quired equipment, licenses and qual- tal Demonstration Energy Complex ified staff. Financial stability of TVEL (EDEC), the main goal of which is to Fuel Company is achieved through the demonstrate stable operation of the development of non-nuclear busi- full range of facilities ensuring the ness in conditions of challenges and closure of the fuel cycle using fast changing market environment in FE natural-safety reactors. NFC markets, additional workplaces Furthermore, TVEL Fuel Company are created. The growth in revenue carries out the following tasks with from the “second core” must be fa- the view of FE NFC growth: cilitated by consolidation of scientific XX accomplishment of the Nuclear and design organizations of TVEL Fuel Fuel Zero Failure project, within the Company in a scientific-production framework of which the Company association SPA Centrotech, as well together with its partners conduct as by entrance to adjacent markets.

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Strategy 34 35

Following the achievement the stra- Table 5 tegic goal “Efficiency Improvement”, SWOT analysis the priority is given to solving the tasks of compacting the production Strengths Weaknesses areas and managing the performance. One of the striking examples of the XX High quality and reliability of products XX Need to address the problem concentration of production areas verified by its consumers of “nuclear legacy” and provision of nuclear and radiation safety is the concentration of conversion cycle in Siberian Group of Chemical XX Reference of the products due to cooperation with XX Social and environmental commitments in the regions Enterprises (at the sublimate and Russian NPPs within the operation of new types of fuel, of presence, rehabilitation of sites possibility to pass fuel qualification in RF radiochemical plants), which started in 2016. Under unfavourable global XX Product management on all FE NFC cycles, XX Insufficient business diversification economic conditions with the price control over production at all stages for natural uranium conversion service XX Strong technical and scientific cluster that allows dropped and continuing to decrease, continuous improvement of nuclear fuel characteristics TVEL Fuel Company decided to withdraw the uranium conversion XX Financial stability due to efficient resource management from Angarsk Electrolysis Chemical on all FE NFC cycles

Complexand Chepetsky Mechanical Following the achievement the strategic XX Load following and increased fuel cycles due Plantand concentrate this production goal “Efficiency Improvement”, the priority to fuel characteristics at Siberian Group of Chemical Enter- is given to solving the tasks of compacting XX Flexible technological and commercial conditions prises. A series of investment projects of cooperation was accomplished in order to secure the production areas and managing a stable operation of the branch the performance XX Price competitiveness of the products due conversion center. In particular, the to cost optimization modernization of fluorine production XX Support on the part of ROSATOM and the state was carried out. As a result of this the (support and development of small XX use of feed material RRM and RF; conversion capacity was increased by and medium-sized business in cities, XX supplies of nuclear fuel and 1.5 times. creation of new jobs, improvement of components for research reactors XX Recognizable brand One of the key projects is the tran- cities, etc.) in the territories of ROSA- of western and Russian design; sition of mechanical production from TOM presence. XX expansion of supplies of Opportunities Threats the facilities of Tochmash VPA JSC The strategy of TVEL Fuel Compa- zirconium components. (Vladimir) to the site of KMZ PJSC ny is oriented at achievement of the XX Supply of nuclear fuel for new VVER units XX Reduction of prices for the products (Kovrov, Vladimir region). At the end of following indicators by the year 2030: in the Russian Federation and abroad and services of FE NFC

January 2017, the Strategic Board of XX Strengthening the presence in XX Expansion of PWR XX Low rate of NPP capacities commissioning ROSATOM approved the concept of the global market of uranium markets presence on the traditional markets concentrating the production of Toch- enrichment and nuclear fuel XX Expansion of cooperation with the XX Competition with conventional and mash VPA JSC and KMZ PJSC. This fabrication services owing to South-East Asian countries alternative power sources solution will increase the production manufacture of traditional products efficiency of these enterprises. having good consumer properties XX Supply of nuclear fuel and components XX Growing tension on external markets, Performance management objec- and entry to new nuclear markets. for research reactors including VVER segment XX tives include increasing productiv- Twofold growth of the revenue in XX Development of new modifications of nuclear fuel, XX Quantitative restrictions on Russian products ity, reducing costs and optimizing comparable terms of 2014. improvement of fuel cycles and campaigns on separate markets resources. XX Tenfold growth of revenue in XX Development of scientific and technological XX Efforts made by the market players The main priorities are still careful non-nuclear businesses (including cooperation with foreign partners to improve the efficiency attitude to the environment, transfer of established businesses) in “clean” areas after nuclear production comparable terms of 2014. XX Application of different types XX Need for additional efforts to preserve prime cost benefits in to future generations, introduction of XX Threefold growth of labor efficiency of raw material conditions of inflation and volatility in currency exchange rates non-waste technologies and reduction in comparable terms of 2014. XX Expansion of zirconium components supplies of the “nuclear legacy”. In terms of ensuring social accepta- Drivers of growth and achievement bility, TVEL Fuel Company’s activity is of objectives in NFC markets: XX Scientific and technological support of the customer at the fuel operation one of the successful examples of the XX supplies of nuclear fuel for implementation of the concept of cre- new VVER units in the Russian XX Development on the markets of general industrial ating territories of the advanced social Federation and abroad; activities and future-oriented products and economic development (TASED), XX global commercialization social and charitable programs of TVS-K fuel;

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Strategy 36 37

Table 6 Table 6 (continued) Contribution of the results 2017 in achievement of the strategic goals of TVEL Fuel Company Contribution of the results 2017 in achievement of the strategic goals of TVEL Fuel Company

Target Project Results Effect Target Project Results Effect

XX XX Fuel supply to NPPs XX Conclusion of contractual documents for supply of fuel, XX Market Increasing In 2017, within the framework of the industry project Efficiency of Russian design components and engineering services development the efficiency of “Branch Topology Concept” and with the aim of solving improvement for NPPs abroad industrial sites problems on the concentration of industries, TVEL Fuel areas use Company initiated a separate program “Increasing the efficiency of areas use in TVEL Fuel Company”. Fuel supply for fast XX Successful completion of preliminary tests of XX Development neutron reactors, a complex of carbothermic synthesis of nitrides that prospects XX The Company established the list of objects unclaimed creation of the facilities has no analogues in the world, made at the request of for the implementation of the Company’s strategy with ONFC and RU BREST SGChE JSC for the Proryv project their subsequent inventory made and the costs for (the Proryv project) their maintenance determined. XX SGChE JSC completed successfully acceptance testing of 3 experimental fuel assemblies with mixed XX The concept of production concentration and further uranium-plutonium nitride fuel, the products were use of unclaimed objects is prepared. delivered to Beloyarsk NPP and loaded into BN-600 nuclear reactor core Development XX KMZ PJSC and SPA Centrotech LLC started serial Growth on NFC of new Gas production of the modernized gas centrifuge GC-9+. markets Promotion of fuel XX A number of contracts were signed with the foreign XX Market Centrifuges In terms of productivity, modernized GC significantly components produced partners for qualification of zirconium fuel components, development outperforms the previous GCs, while production using Russian and as well as supply of fuel components for research cost is lower. foreign technologies to reactors of foreign design Efficiency world markets improvement Infrastructure XX The Company started the project on transformation cost management of corporate functions. Promotion of TVS-K to XX Continuation of works on promotion of TVS-K XX Market foreign markets fuel for power reactors PWR 17x17 development of foreign design Rehabilitation of XX VNIINM JSC developed new technologies and mobile XX Maintenance contaminated areas facilities for the decontamination of radiation hazardous of objects that are being decommissioned. environmental Design and XX Successful completion of licensing XX Market security improvement of nuclear the modified fuel type TVSA-12 for unit No. 5 retention XX Successful progress of the works on liquidation and social fuel and reactor cores Kozloduy NPP (Bulgaria) of the nuclear “heritage” facilities within he Federal awareness for nuclear power units target program “Nuclear Radiation Safety 2” in the cities ( FTP NRS-2): preservation of B-1 and B-25 basins, of TVEL Fuel ground storage areas of solid radioactive waste at the Company Creation and XX Integrator companies on new areas such as Additive XX Entering facility 16 KhMZ JSC, SGChE JSC, decommissioning presence development of new Technology and Energy Storage Devices were created new markets of the unit Y-5, facility 53 at VNIINM JSC businesses within TVEL Fuel Company’s framework (completed in 2017), decommissioning of the facility 804 at Angarsk Electrolysis Chemical Complex XX ChMP JSC and Severstal JSC signed the contract for calcium wire supplies (AECC JSC), decommission of FA production for IUGR at NCCP JSC. XX The Company signed a 5-year contract with Hermit GmbH (Germany) for supply of a large batch of titanium mill products of ChMP JSC Program for XX Organizationals works on TASED creation XX Maintenance regional work and in Novouralsk and Seversk before signing the RF of XX Creation in cooperation with QSIL GmbH (Germany) of social projects Government Regulation about their establishment. environmental a joint venture for the production of highly pure quartz security Second XX concentrate Social and Opening of School Technoparks in the cities and social business core environmental of TVEL Fuel Company operations — awareness development XX Completion of works on the pilot model of second acceptability Zelenogorsk, Novouralsk, Seversk and Glazov. in the cities generation metal powder 3D printer of TVEL Fuel

XX Significant increase of the revenue from sales of Company automotive catalysts and neutralizers produced operations by Ecoalliance LLC

Concentration of XX Start-up of the investment project production facilities of “Concentration of Production Facilities of VPA VPA Tochmash JSC Tochmash JSC and KMZ PJSC” and KMZ PJSC (Vladimir region)

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY 38 39

Table 7 Factors of long-term business sustainability and cooperation with the customers Business model Factors Description

Safety and XX Fuel safety is the strategic priority of TVEL Fuel Company. reliability of fuel XX The Company makes considerable investments in safety of fuel.

XX Implementation of the zero failure program.

Creation of zero-waste XX SGChE JSC completed the five-year work on improving the technology technologies, and of preparation of liquid radioactive wastes for deep burial. rehabilitation of sites XX Bochvar Institute (VNIINM JSC) developed new technologies and mobile facilities for the decontamination of radiation hazardous objects that are being decommissioned.

XX Works on liquidation of the nuclear “legacy” facilities within FTP NRS-2: preservation of B-1 and B-25 basins at SGChE, decommissioning of the facility 53 at VNIINM JSC, The value generated by TVEL Fuel Company decommissioning of the facility 804 at AECC. involves not only marketable products and increase High quality XX Production automation, minimization of the human errors. of profitability of the Company, but also a great XX Technological improvement of instrumentation operations. variety of economic, social and environmental effects XX Compliance with the requirements of international quality management. of activities. TVEL Fuel Company activity depends

Development of the XX Increase of the Company’s stability in conditions of the nuclear business cyclicality. on a great number of external and internal factors, second business core XX Expansion of the Company’s financial stability base. it provides for close cooperation with stakeholders

The value generated by TVEL process, products and results Fuel Company involves not only obtained. The business model is marketable products and increase of aimed at achieving the strategic goals profitability of the Company, but also through implementation of competitive a great variety of economic, social advantages. The business model and environmental effects of activities. takes into account the risks typical for TVEL Fuel Company activity depends the activities of TVEL Fuel Company, on a great number of external and possibilities and risk management internal factors, it provides for close capabilities of the Company. cooperation with stakeholders. Business model includes: capitals This cooperation is characterized (resources and relations) used by by the fact that tangible and intangible TVEL Fuel Company, manufactured resources used by the Company products and services, as well (financial, natural, manufactured, as results of TVEL Fuel Company human, social and intellectual operations, providing for capitals capitals1), are controlled both by TVEL changes, including increment Fuel Company and its stakeholders. of resources being used and Conversion of capitals in the course of consolidation of relations with activities is of great importance to the stakeholders. Company and its stakeholders. Business model describes the activity of TVEL Fuel Company for integrated value creating as a system to the capital employed, production

1 According to the International Integrated Reporting Framework “capital” means resources and relations being the sources and the results of value creation processes.

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Business Model 40 Business Resources model of TVEL FINANCIAL CAPITAL XX Undistributed profits and monetary assets XX Accumulated reserves of TVEL FC Fuel Company XX Consolidated investment resources XX Industry reserves XX Means of the Federal target programs XX Loans, credits, subsidies

MANUFACTURED CAPITAL XX High technology production basis, materials (including regenerated and waste uranium) XX Public infrastructure (roads, communication facilities, etc.)

INTELLECTUAL CAPITAL XX Intellectual property assets of TVEL FC XX Global achievements of science and engineering XX Domestic projects XX National intellectual resources

HUMAN CAPITAL XX Staff XX Joint ventures personnel XX Potential workers XX Youth XX Experts, consultants XX Long-service employees, retirees

SOCIAL AND RELATIONSHIP CAPITAL XX Reputation of TVEL FC and its enterprises XX Position in the Global Market of FE NFC XX Strong relations with Russian and foreign customers and suppliers XX Competitive and high quality outputs XX Recognisable and reputable brand name XX Internal relations of TVEL FC XX Public image of the country and nuclear industry XX Interrelations in supply chain XX Initiatives of the state, ROSATOM

NATURAL CAPITAL XX Proprietary and leasable land resources XX Internal resources XX Environment XX External resources XX Natural raw materials TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Business Model

Front End NFC production chain Results 2017

SERVICES PRODUCTS FINANCIAL CAPITAL Internal resources External resources Science Separation RUB bln RUB bln and technology of impurities UF Net income Paid dividends 4 Uranium customer support 55.0 20.5 Uranium tetrafluoride U concentrate Conversion Conversion UF services 6 Uranium MANUFACTURED INTELLECTUAL hexafluoride CAPITAL CAPITAL

Gas centrifuges Enrichment Enrichment production UF services Number of new 6 Enriched registered intellectual uranium RUB bln 684.7 Net assets 108 property objects Radioactive Synthesis of UO 2 waste powder UO 2 management

Zirconium concentrate Zr Powder HUMAN CAPITAL Pressing of pellets and pellets

RUB thous. Social programs Average Production of fuel rods Fuel rods Forming fuel rods expenditures per 1 employee LTIFR salary growth components components 61 0.06 4%

Assembling fuel rods Nuclear fuel

SOCIAL AND RELATIONSHIP CAPITAL

RUB bln RUB mln Second Core Main Products Gross Charitable 14.9 tax liabilities 286.9 contributions

Chemical Calcium Metallurgy Titanium industry injection wire

NATURAL CAPITAL Mechanical Power Lithium Autocatalysts engineering industry products RUB bln New areas Environmental contaminated with INES 2.2 expenses 0 radionuclides 0 rated events Isotope products

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Risk Management 42 43

Analysis of the risks affecting activity, TVEL JSC developed and the achievement of target values of approved the following regulatory Risk Management financial and economic activities of acts: TVEL JSC and the companies forming XX Strategy of currency risk TVEL Fuel Company management management in TVEL JSC; system shall be carried out at the XX Standard of TVEL Fuel Company stage of development of the budget represents the Quality Manual and medium-term plans, and at the (now a product quality document stage of their control and performance includes a separate detailed forecast, as well as at the stage section on risks); of making strategic management XX Order No. 4/49-п dated 08.02.2017 decisions, selecting the best ways to “On the implementation of implement the key projects. the Guidelines for conducting In 2017, TVEL JSC carried out an analysis of the impact of Risk Management of TVEL Fuel Company organizational work on its risk organizational changes on safety management adaptation to the best of the nuclear facilities of TVEL is based on continuous monitoring world practices and harmonization JSC and the companies forming of its external and internal environment, of the local regulatory acts in the TVEL Fuel Company management enterprises of TVEL Fuel Company. system”. complex analysis of threats and In the reporting year, TVEL JSC opportunities affecting achievement of issued the order on updating the In 2017, TVEL Fuel Company also both economic and social goals key risks for the period 2017–2019. introduced an automatic system The Company identified the factors of for risk assessment regarding the of the Company key risks, risk management methods, investment projects. assigned responsible persons for Plans on further development of the risk management. This order was RMS for 2018 include introduction of extended to all enterprises included a project risk management system, as Risk Management of TVEL Fuel The Risk Management System in the management contour of well as development and application Company is based on continuous of TVEL Fuel Company is built TVEL Fuel Company. of an early response and risk monitoring of its external and internal and optimized in accordance with In 2017, within the context of risk monitoring system. environment, complex analysis of the most modern world practices, management on certain areas of threats and opportunities affecting principles and approaches reflected achievement of both economic and in the international standard social goals of the Company. ISO 31000:2018 (over the past Main goal of the Risk Management few years has been developed by System (RMS) is identification, the International Organization for assessment and minimization of Standardization), as well as in the Table 8 threats that may affect the results concept of COSO Enterprise Risk Participants of TVEL FC risk management processes and their roles of activities of the Company. Management (issued in 2017, it has Main RMS objectives are applied significance in building the CRMS Participants Functions of RMS members in risk management the following: relationship between risk management XX timely identification of risks that and the value of the business). President XX Approval of the risk management policy of the Company; of TVEL JSC may affect the achievement of the Current trends in risk management XX Approval of the list of key risks; goals of TVEL Fuel Company; assume a transition from formal XX Appointment of key risks holders and distribution of responsibility for risks management; XX support of stable financial description of risks to the integration environment of the companies of risk management mechanisms XX Approval of the limits of particular risks, strategies, programs of particular risks management;

of TVEL Fuel Company with due into business processes, mainly XX Consideration of the issues related to distribution of authorities and responsibilities consideration of the risks; related to the adoption of strategic for particular risks management. XX continuous monitoring of risks and management decisions. control over implementation of Risk holders XX Identification and assessment of risks; (Responsible the plans of arrangements aimed XX for risks Development of key risk indicators; at reduction of likelihood of risks management) XX Development and implementation of programs for particular risks management. occurrence and minimization of the consequences of such occurrences. Risk Officer XX Organisation and methodological support of risks identification; of TVEL JSC XX Organization and methodological support of the process of development of risk management activity.

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Risk Management 44 45

Table 9 Table 9 (continued) Management of TVEL Fuel Company Key Risks Management of TVEL Fuel Company Key Risks

Risk Risk factors Risk management Trends in Trends Risk Risk factors Risk management Trends in Trends mechanisms likelihood in risk mechanisms likelihood in risk of risk significance of risk significance occurrence in the occurrence in the in the reporting in the reporting reporting year reporting year year year

 Risk of NFC XX Delays in commissioning XX Improvement of fuel technical characteristics  Risk of XX Changes in service XX Application of the principles of the Uniform Industrial product/ of power units. and introduction of new types of fuel, improvement increase tariffs of natural Procurement Standard of ROSATOM while working service sale of fuel economic characteristics. of costs of monopolies, with suppliers. XX Transition to NF volumes fabrication, sole suppliers. fabrication with XX Promotion of products XX Implementation of ROSATOM Production System. reduction enrichment XX increased long-term in new market segments.   Reduced equipment and XX Implementation of the long-term programs and performance. loading level. conversion investment projects aimed at optimization of services XX Appearance of engineering and production processes. unforeseen weak points in production chain. XX Development and introduction of the programs of Price and XX Reduction of prices XX Development and introduction  efficiency increase at all enterprises of the Company. currency for the products of the strategy of natural hedging XX Incorrect information risks and services of of currency risks on resource state. XX Adoption of production cost management TVEL Fuel Company concept in order to personalize the costs.   due to changes of XX Long-term forecasts of the demands market prices for and production capacity balance natural uranium and (together with ROSATOM and relative divisions its conversion and of ROSATOM State Corporation). enrichment services. XX Stock optimization and turnover increase. XX Reduction of prices for the products and services of TVEL Fuel Company due to changes of prices   deflator indices. Risk of XX Violation of XX Modernization and automation of facilities, XX Mismatch in assets and  nuclear, requirements in safe operation management. liabilities denominated in radiation environment protection the same currency. XX Decommissioning of nuclear and radiation hazardous safety and nuclear radiation facilities of TVEL Fuel Company, as well as the XX Growth of volatility safety. courses of the main “nuclear heritage” objects using the funds of FTP XX Insufficient level world currencies NRS-2 and the sectoral reserves. of emergency (Euro, dollar). XX preparedness. Professional development of personnel.

XX XX Lack of resources Continuous monitoring of nuclear and radiation for decommissioning safety state. of nuclear and radiation XX Setting and implementation of tasks and objectives,   hazardous facilities, and elaboration of measures aimed at reduction Risk of failure XX Decreased financial XX Provision by the contracts of payment methods and/  securing nuclear of risks in the field of NRS. on the part of and economic or methods to secure obligations to reduce the credit and radiation counterparties stability of customers/ risk level, including but not limited to a letter of credit, security, etc. XX Complex and technical inspections. (suppliers, suppliers. advance payment (100% if possible, but no less than customers) 10%), funds reservation, provision by the counterparty to fulfil of bank guarantee or guarantee of payment equal obligations to the amount of the granted trade credit under the in full and contracts providing for deferred payment for the on time delivered products/services.

XX Monitoring of financial standing of the counterparties with the purpose to detect any signs of changes in    Risk of XX Inability to comply XX Setting of tasks and objectives, and elaboration of financial standing, leading to changes in the level of environmental with the requirements measures aimed at reduction of risks in the field the credit risk and/or the measures of the credit risk safety to environment of environment protection, operational health management. protection. and labor safety.

XX Review of draft regulations containing requirements XX Qualification of counterparts using non-financial indicators. to environment protection. Interpretations of the   practical application of the requirements.

Table of Contents TVEL | ANNUAL REPORT 2017 2 | STRATEGY OF TVEL FUEL COMPANY | Risk Management 46 47

Table 9 (continued) Table 9 (continued) Management of TVEL Fuel Company Key Risks Management of TVEL Fuel Company Key Risks

XX Insufficient level XX Implementation of actions aimed at safety  Social XX Events XX Implementation of actions aimed to mitigate of emergency improvement using special reserve funds and political (political conflicts and/ the risks of social and political tension preparedness. of ROSATOM State Corporation. risks or mass social protests) in the regions of presence. resulting in substantial XX Lack of resources XX Emergency response drills and personnel XX Cooperation with regional and municipal public change in the for implementation training, provision of information with the purpose authorities on issues relating to the territories’ parameters of actions of environmental of unscheduled inspections. development, regional taxes gain and maintenance of TVEL Fuel Company safety actions. of social and economic stability. XX Comprehensive and technical inspections, audits, and its enterprises, ecological monitoring. for instance, XX Implementation of charitable social efforts missed deadlines in the cities of TVEL Fuel Company’s presence. XX Improvement of the integrated system of of commissioning environmental safety management XX Formation of the system of multi-level internal or cancellation (ISO 14001:2004), and occupational health (including on a cascade basis) and external   of construction, and industrial safety management communications. unscheduled (OHSAS 18001:2007). termination of operating XX Holding of social forum-dialogues in the regions activity, damage to of presence of the enterprises goodwill of TVEL Fuel of TVEL Fuel Company.  Risk of XX Violations of safety XX Improvement of safety culture. Company and its personnel requirements. governance. XX Implementation of actions to prevent injuries. health XX Hazardous and harmful and safety production factors. XX Promotion of safe labor.

XX XX Violation of the Provision of the Company’s staff with personal corporate code of protective equipment. Reputation XX Large-scale accidents XX Observance of the industrial regulation concerning conduct. Failure to XX Complex and technical inspections, audits.  comply with work risk in nuclear sector. organization of delivery of information to the public in XX Setting of tasks and objectives, and elaboration case of emergencies constituting a threat to business and rest schedule. XX Distribution of negative of measures aimed at reduction of risks in the field and social reputation of ROSATOM State Corporation. XX Lack of resources information about of industrial safety. for safety actions   ROSATOM State XX Implementation of the Uniform information policy implementation. XX Planning of costs for labor protection Corporation, its of TVEL Fuel Company of ROSATOM. in accordance with the Industrial Agreement. enterprises. XX Integrated communications. XX XX Improvement of the integrated professional Mass protests against XX Implementation of target communication programs (labor safety), industrial and environmental nuclear power to promote products and services of TVEL JSC safety management system engineering. and its subsidiary companies. (ISO 14001: 2004; OHSAS 18001:2007). XX Election campaigns   in regions and cities XX Formation of corporate culture values of presence. and implementation of the project “Public response to ROSATOM values”. XX Construction of burial sites for radioactive XX Enhanced activity of the information  Risk of XX Insufficient level XX Emergency response drills. wastes in the regions conciliatory committees in municipal districts industrial of emergency of presence of TVEL of the regions of presence of XX Complex and technical inspections. safety preparedness. JSC subsidiaries. TVEL Fuel Company. violation XX Performance review of outside emergency XX Lack of resources for safety actions response teams. implementation. XX Setting of tasks and objectives, and elaboration of measures aimed at reduction of risks in the field of industrial safety. XX Reservation of funds and resources,   public liability insurance.

XX Improvement of the integrated professional (labor safety), industrial and environmental safety management system (ISO 14001: 2004; OHSAS 18001:2007).

Growth Decrease Without change

Table of Contents RUB bln RUB bln total amount saved dividends paid by enterprises of TVEL FC by TVEL FC from procurement through public 2.7 competitive procedures 20.5

3 Governance 3 | GOVERNANCE 51 Corporate Governance

Principal direction for corporate governance improvement is to ensure rapid decision-making by governing bodies along with detailed consideration of the matters which enables efficient activities of TVEL JSC and its subsidiaries

In corporate governance TVEL JSC reduce the time and improve the (further the Company) adheres to the quality of corporate paperwork. policy of compliance with Russian and international standards, as well as In the reporting year the system with ROSATOM corporate governance of corporate governance in TVEL practice which ensures the unity Fuel Company was focused on of nuclear industry enterprises improvement of interaction between management. the governing bodies, and increase Principal direction for corporate of their efficiency. Similar plans governance improvement is to remain for the next year. ensure rapid decision-making by In the course of corporate policy governing bodies along with detailed implementation the Company consideration of the matters which coordinates and controls subsidiary enables efficient activities of TVEL companies activity in production, JSC and its subsidiaries. scientific and research, investment, Measures taken by TVEL JSC to financial, price, selling, social and improve the corporate governance: personnel fields. Legal relations XX Exclusion to the extent possible between TVEL JSC and subsidiary of the circulation of paper media companies in decision making applied for convening meetings procedures in the process of and for submission to the Board production economic activity are of Directors of materials on the based on the approved regulations agenda. The decision-making on interaction of ROSATOM with process by the management bodies TVEL JSC, as well as interaction is implemented through the Uniform of TVEL JSC with its subsidiaries. industry-specific electronic document management system. XX Local regulatory acts are being amended with the purpose to

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE | Corporate governance 52 53

TVEL JSC is not a public joint-stock Decisions on the issues referred company, and the Company discloses to the competence of the General all the required information on the Meeting of shareholders are taken by website: www.e-disclosure.ru/ the sole shareholder of TVEL JSC — portal/company.aspx?id=400 Atomenergoprom JSC. (in conformity with the Regulation The supreme executive bodies on Disclosure of Information by of the subsidiaries of TVEL Fuel the Issuers of Equity Securities) Company are general meetings on a voluntary basis, assuming no of shareholders (members). The obligations on regular and required procedure of decision-making at disclosure, namely: general meetings of shareholders XX the articles of association, (members) of the companies included amendments and supplements in TVEL Fuel Company is determined thereto, annual reports, annual by internal regulations on these financial statements (including bodies. audit reports); The governance bodies of TVEL XX decisions on issuance (additional JSC and the companies governed issuance) of securities; XX information about approval of annual financial statements; In the reporting year the system of XX explanatory notes to annual corporate governance in TVEL Fuel financial statements; Company was focused on improvement XX audit reports; XX lists of affiliates; of interaction between the governing XX notices of disclosure of the list bodies, and increase of their efficiency. of affiliates and acquisition of more Similar plans remain for the next year than 20% of voting shares in other joint-stock company.

The basic documents regulating the by TVEL Fuel Company include the activity of the corporate governance boards of directors and the sole system are the Articles of Association executive bodies acting on the ground of TVEL JSC and the Regulations on of relevant regulations approved by the Board of Directors of TVEL JSC. the general meetings of shareholders. TVEL JSC puts into practice The governance bodies in the some provisions of the Corporate companies of TVEL Fuel company Scheme 2 Governance Code recommended include audit committees1, operating Structure of TVEL JSC corporate governance bodies by the letter dated April 10, 2014 on the ground of relevant regulations No 06-52/2463 of the Central Bank approved by the general meetings of of Russia, with due regard to specific shareholders (members). ROSATOM STATE CORPORATION TVEL JSC TVEL JSC’S SUBSIDIARY character of the legal status of No committees and commissions ROSATOM set by legal regulatory operated within the Board of Directors Shareholder Meeting acts of the Russian Federation, of the Company during the reporting Atomenergoprom JSC President of TVEL JSC of TVEL JSC’s subsidiary providing for unity of nuclear industry period. enterprises management.

Sole Executive Body SCHEME OF TVEL JSC of TVEL JSC’s subsidiary CORPORATE GOVERNANCE BODIES Resolutions of the General TVEL JSC governance bodies are Meeting of Shareholders Board of Directors Board of Directors of TVEL JSC formed in accordance with the Articles or of sole shareholder of TVEL JSC’s subsidiary of Association of the Company. Resolutions of the Board of Directors Participating in the Shareholders Meeting 1 Audit Committees are active in MSZ PJSC, Binding directives for the subsidiary NCCP PJSC, KMZ PJSC, RusAt LLC.

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE | Corporate governance 54 55

BOARD OF DIRECTORS By the decision of the Sole Share- There are no independent members 2017. All members of the Board of XX approval of the budget and The Board of Directors plays a key holder of TVEL JSC No. 41 dated in the Board of Directors within the Directors of the Company get salary scheduled financial-economical role in strategic management of November 1, 2017, Lokshin Aleksandr meaning of the Corporate Governance according to the place of their primary indicators of activity of TVEL JSC; TVEL JSC and TVEL Fuel Company Markovich was excluded from the Code of TVEL JSC. business. XX approval of recommendations to the in general. The Board of Directors Board of Directors. In accordance with the Articles of Sole Shareholder concerning net is formed by the Sole Shareholder of Members of the Board of Directors Association of TVEL JSC the decision REPORT OF THE BOARD income distribution following the TVEL JSC — Atomenergoprom JSC are not shareholders of TVEL JSC. In on payment of remuneration to the OF DIRECTORS OF TVEL JSC results of 2016; with due regard to qualification and 2017, members of the Board of Di- members of the Board of Directors ON THE RESULTS OF THE XX approval of organizational structure expert knowledge that are required rectors committed no transactions on of the Company falls within the COMPANY DEVELOPMENT of TVEL JSC; to solve the specified problems. acquisition or alienation of the Com- competence of the General Meeting IN THE PRIORITY FIELDS XX approval of recommendations to The Board of Directors consists pany’s shares. Information on TVEL of Shareholders (decision of the In 2017, the Board of Directors held the Sole Shareholder concerning mainly of outside directors (not JSC shareholding must be disclosed Sole Shareholder of TVEL JSC — 20 absentee meetings and made dividend payment following the the employees of the Company), by the candidates to the position of the Atomenergoprom JSC). decisions1, on the most important results of nine months of the professionals who have wide member of the Board of Directors at No remuneration and compensation issues of TVEL JSC activity, including: reporting year; experience in the industry and the time of filling the consent form for of the expenses related to XX termination of membership in ALVEL understanding of the specifics of election. Biography of the members of performance of obligations were a.s. (ALVEL JSC); the nuclear industry and the the Board of Directors is available in provided for the members of the XX approval of recommendations to 1 The Board of Directors did not held any Company activities. the interactive version of the Report. Board of Directors of TVEL JSC in attendee meetings. the Sole Shareholder concerning From January 1, 2017 till alterations made to the Articles The supreme executive September 25, 2017 the members of Association of TVEL JSC and bodies of the subsidiaries of the Board of Directors were approval of the revised Articles of of TVEL Fuel Company the following persons: Association of TVEL JSC; XX the decision was taken to are general meetings XX Barabanov Oleg Stanislavovich; participate in limited liability of shareholders company “Rusatom — Additive XX Zalimskaya Lyudmila Mikhaylovna; (members). Technologies”; The procedure of XX Korogodin Vladislav Igorevich; XX pre-agreed appointments to the posts directly subject to TVEL JSC XX Lokshin Aleksandr Markovich; decision-making at President. general meetings of XX Solomon Nikolai Iosifovich; shareholders (members) XX Olenin Yuri Alexandrovich. of the companies included in TVEL Fuel By the decision of the Sole Company is determined Shareholder of TVEL JSC No. 40 dated September 25, 2017 the by internal regulations following seven members were on these bodies elected to the Board of Directors:

XX Barabanov Oleg Stanislavovich;

XX Zalimskaya Lyudmila Mikhaylovna;

XX Korogodin Vladislav Igorevich;

XX Lokshin Aleksandr Markovich;

XX Olenin Yuri Alexandrovich;

XX Solomon Nikolai Iosifovich;

XX Nikipelova Natalia Vladimirovna.

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE | Corporate governance 56 57

SOLE EXECUTIVE BODY The Company’s authorized capital which (excluding the accrued interest During the period from 01.01.2017 amounts to Twenty-two million nine for using the loan, forfeits) at each till 25.09.2017, in accordance hundred sixty-one thousand six time of the contract can not exceed with the decision of the Sole hundred seventy (22,961,670.00) 140,000,000,000.00 (one hundred Shareholder the functions of the rubles. and forty billion) rubles. The interest Sole Executive Body were imposed The Company placed registered rate under the contract is 3 to 10.65 on the President of TVEL JSC — common shares with nominal value percent per annum of the amount of Olenin Yuri Alexandrovich. of one (1) ruble per each in the money provided. The contract is valid Yuri Alexandrovich Olenin does amount of Twenty-two million nine until May 11, 2019. not hold any shares of TVEL JSC. hundred sixty-one thousand six In 2017, he committed no transactions hundred seventy (22,961,670) pieces. on acquisition or alienation of the All shares of TVEL JSC are issued Company’s shares. in non-documentary form. Starting from 26.09.2017, No changes were made in the share in accordance with the Articles of capital structure in the reporting year. Association of TVEL JSC by the Resolution of the Sole Shareholder RELATED-PARTY of the Company and on the ground TRANSACTIONS AND MAJOR of the Contract executed with the TRANSACTIONS Company the functions of the Sole During the period 01.01.2017 till Executive Body are performed 18.01.2017, TVEL JSC made no by the President of TVEL JSC — transactions classified as related- Natalya Vladmirovna Nikipelova1. party transactions. Natalya Vladmirovna Nikipelova On January 18, 2017 the new holds no shares of TVEL JSC. edition of the Company’s Articles In 2017, she committed no trans- was registered which contains the actions on acquisition or alienation provision on non-application to the of the Company’s shares. Company of Chapter XI of the Federal In accordance with the contract Law of 19.12.1995 No. 208-FZ concluded between TVEL JSC and “On Joint Stock Companies”. the President of TVEL JSC, the In 2017, the Company concluded amount of remuneration following a major transaction (Minutes of the the year results shall be determined meeting of the Board of Directors by the resolution of the Board of of TVEL JSC dated 29.06.2017), Directors according to the financial- the subject of which is the property economic performance of the which value is 25 to 50 percent of Company and the key performance the book value of the Company’s indicators (KPI) percentage of assets — Additional Agreement the President of TVEL JSC. Key Target indicators of strategic growth and SHARE CAPITAL STRUCTURE to Loan Contract between Performance Indicator Card includes complex programs of efficiency increase “Atomic Energy Power Atomenergoprom JSC (Borrower) 11 indicators. For the information approved by the governance bodies of TVEL Corporation” Joint Stock Company and TVEL JSC (Lender). The subject concerning achievement of indicators (Atomenergoprom JSC) is the owner of the transaction is the provision of please refer to the Section “Financial Fuel Company’s subsidiaries are based of 100% of voting shares of TVEL monetary funds on loan terms in full Performance”. on optimization of production functional Joint-Stock Company. or in parts, the amount of debt on structure and costs reduction due to The authorized capital of TVEL JSC introduction of new and modernization is formed from nominal value of the Company’s shares held by the Sole of current production units, technological Shareholder — Atomenergoprom JSC. process improvement, implementation of efficient system of labor motivation, restructuring of non-profile assets and production units

1 Biographical data are contained in the online version of the Report in the section “Board of Directors”.

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE | Management Efficiency Improvement 58 59

were identified. The results included The main condition for work on opening and implementation of Management Efficiency 309 projects and 487 activities to compacting areas is the preservation of improve the efficiency of functions, jobs in the cities where Fuel Company which allowed to reduce the cost of TVEL is present Improvement functions by RUB 449.3 million. In 2018, it is planned to continue works on improving the efficiency of in areas of land plots of production IT Strategy of TVEL Fuel Company functions through the formation of an enterprises in TVEL Fuel Company TVEL Fuel Company developed optimal order from production flows by 65%, reduction of the areas of the strategy of information technolo- (supply chains), building a feedback buildings by 48%, reducing the cost gies development till 2013 aimed at system with production flows both of maintaining the sites by 29%. introducing information technologies with customers, increasing the speed When forming the concept, the to improve the efficiency of manage- of response by support services to following factors were primarily ment and production activities. In 2017, TVEL Fuel Company focused production problems. taken into account: The main directions of development XX New business development that is (strategic guidelines) were revised: on the implementation of the strategic CONCENTRATION OF a portfolio of products, timing of the XX the vector of IT development was goal for development of the second PRODUCTION projects implementation, possibility shifted from automation of the In 2017, within the framework of the of reserving current sites or building financial and economic block core of business — formation of industry project “Branch Topology new ones; (supporting and auxiliary processes) a mechanism for managing the creation Concept” and with the aim of solving XX Site development model which is to digitalization of production of new non-nuclear products and problems on the concentration of development of the Company’s activities of the enterprises of industries, TVEL Fuel Company business or creation of a new TVEL Fuel Company. Improvement their promotion to the market initiated a separate program business, attraction of residents. of the system of products “Increasing the efficiency of areas engineering data management use in TVEL Fuel Company”, which INFORMATION TECHNOLOGIES (2018–2022) allows switching to contour included all companies of With the view to increase the work with a “digital double” of ORGANIZATIONAL organizational structure of TVEL Fuel TVEL Fuel Company. During the efficiency and optimize business the product throughout the life STRUCTURE OF TVEL JSC Company with the aim of creating implementation of the program in processes, TVEL Fuel Company uses cycle of the Company’s products. Changes in organizational structures a more effective system for managing 2017, the Company conducted an up-to-date information technologies Digitalization of processes made by TVEL Fuel Company are the development, production and inventory of all objects, determined (IT) and solutions. of operational management stipulated by structures formation sale of products of general industrial the costs for their maintenance, Department of Information of discrete manufacturing based on target programs, objectives activity. and formulated a register of objects Technologies develops and (2017–2023) and continuous and strategy of TVEL Fuel Company. Thus, the positions of Vice- unclaimed for implementing the introduces new information systems production (2019–2023), as well This approach is in line with the President for New Business company strategies. in accordance with Information as automation of maintenance and industry-wide standards, and was Development and Vice-President for The concept of sites development Technologies Transformation Program repair management processes adopted within implementation Technological Development were of TVEL Fuel Company enterprises of ROSATOM State Corporation, (2018–2022) allow for a systematic of the project of ROSATOM for introduced into the organizational and further use of unclaimed objects and with due regard to the needs increase in labor productivity and harmonization of the organizational structure of TVEL JSC. was formulated, with the following and development plans of TVEL a reduction in the cost per unit structure of the companies comprising results by the year 2030: decrease Fuel Company. of output; the industry. The ultimate goal of EFFICIENCY IMPROVEMENT these transformations is to establish OF PRODUCTION SUPPORT functional chains of ROSATOM — OFFICE FUNCTIONS TVEL JSC — subsidiary company, In 2017, the Company continued to to enhance the efficient interaction improve the efficiency of production Table 10 between the management levels support office functions. Change Targets on Increasing the Areas Use Efficiency within TVEL Fuel Company and teams and expert boards were to cut the red tape. created. The Company organized Current status 2022 2025 2030 In 2017, TVEL Fuel Company training of heads of change teams in focused on the implementation of the the area of process management on Land area, thous. 19.2 8.1 7.0 6.6 strategic goal for development of the the functions improvement — a total second core of business — formation of 82 people, trainings on the program Area of buildings, mln m2 6.6 4.6 4.3 3.4 of a mechanism for managing the “Analysis and Improvement of creation of new non-nuclear products Business Process Efficiency” for 230 Costs of maintenance and operation and their promotion to the market. participants of the project. of premises, infrastructure costs, 12.4 10.7 10.3 8.8 Within the framework of this direction, The maps of all key processes bln rubles there have been changes in the were prepared, the main problems

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE 60 61

XX moving towards centralization of IT solutions at the divisional level, which will reduce the cost Anti-Corruption of ownership of IT solutions, the costs of their integration, provide the necessary base for unifying business processes in enterprises and, as a result, their transparency, speed and control, improve efficiency of the IT service response to the needs of TVEL Fuel Company business in terms of changing rate in IT solutions. The Unified Sectoral Guidelines for In IT strategy, a new direction The management and the Assessment of Corruption Risks was identified — “Increasing in the companies of ROSATOM are the operational efficiency of the the workers of TVEL Fuel aimed at: IT function”, which integrates Company fully share XX establishment in the companies of all activities (events, projects, ROSATOM of general approaches organizational changes) aimed at the anti-corruption policy to identify processes and business developing and improving the internal implemented by the operations in the activities of an processes of IT functions, maximizing Government and ROSATOM organization, the implementation of their centralization at the divisional which is associated with likelihood level, transition to a customer-oriented State Corporation of corrupt practices committed by service model, commercialization of The Company works out the systematic employees of such organization, promising areas of IT development both for personal gain and for the in TVEL Fuel Company. application of the technology of production benefit of the organization; systems simulation and reengineering in TVEL Concentration in TVEL Fuel Company XX ensuring compliance of anti- Fuel Company and in the industry as a whole of significant material, financial and corruption measures implemented intellectual resources determines the with the specifics of the critical importance of ensuring their organization’s activities and the security (including counteracting the tasks of rational use of resources misuse of assets, their theft, corruption focusing at carrying out work to and other economic abuses). prevent corruption; formation of In order to create conditions for the list of posts associated with reduction of corruption and embezzle- high corruption risk; development ment, the enterprises of the Company of a set of measures to eliminate or adopted a local regulatory document minimize corruption risks; “Concerning implementation of the XX ensuring minimization of possible Complex program for anti-corrup- corruption manifestations and Contacts of the corporate hot line tion and anti-embezzlement in TVEL risks in the implementation of of ROSATOM for anti-corruption JSC and companies of the manage- large-scale projects with the and anti-embezzlement ment system of the Fuel Company”. government participation, including in nuclear sector: The document is based on the ap- infrastructure projects financed phone: 8 (800) 100-07-07 proved by ROSATOM “Anti-Corruption within the framework of federal e-mail: [email protected] Plan 2016-2017 of the State Atomic target programs and at the expense Energy Corporation “Rosatom”. of the National Welfare Fund. For details visit ROSATOM In 2017, TVEL JSC enacted the website: following anti-corruption orders: Normative legal acts and local www.rosatom.ru/about/ XX “On application of the Unified Sec- documents of TVEL JSC in the field protivodeystvie-korruptsii toral Guidelines for the Assessment of anti-corruption are posted on the And TVEL Fuel Company of Corruption Risks in TVEL JSC”; Company’s official website: website: XX “On approval of the Procedure for www.tvel.ru/about/theft/. www.tvel.ru/about/theft/ the employees of JSC TVEL to take measures to prevent any possibility of conflict of interest”.

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE 62 63

Scheme 3 System for combating unlawful behavior in TVEL FC Internal ROSATOM State Corporation Assets Protection Department Control System TVEL Fuel Company

TVEL JSC Security Unit of TVEL JSC

Internal Control System (ICS) of TVEL Fuel Company is an interconnected integral complex Nuclear fuel Gas Conversion R&D Asset Assets protection subdivisions fabrication centrifuges and enrichment Protection Unit (at the level of subsidiaries) of organizational structures, processes, their rules, and characteristics of management system that is continuously or from time to time performing internal control function and ensuring internal control goal achievement

Group of economic security Group of organization of commercial and anti-corruption confidentiality regimes Internal Control System (ICS) of TVEL SDIC of TVEL JSC (the unit of the Fuel Company is an interconnected Director for Internal Control and Audit) To arrange a system for prevention Main fields of structural Main results of asset protection integral complex of organizational operates in accordance with regula- of illegal behavior the following was subdivisions’ work: subdivisions in 2017: structures, processes, their rules, and tory legal acts of the Russian Feder- established in TVEL Fuel Company: XX ensuring economic security and XX the economic effect associated characteristics of management sys- ation, local regulations of TVEL JSC XX the security unit (at the level protection of assets of TVEL with the performance of the tem that is continuously or from time and ROSATOM State Corporation, of TVEL JSC), including Asset JSC and its subsidiaries in the asset protection subdivisions to time performing internal control and the provisions on these structural Protection Unit comprising the course of production and financial of TVEL Fuel Company was function and ensuring internal control subdivisions. group of economic security and economic activity; RUB 1,588 million; goal achievement. SDICs were created in 9 companies anti-corruption and the group XX revealing, prevention and XX 219 checks were carried out Special Department of Internal Con- of TVEL Fuel Company: AECC JSC, of organization of commercial localization of threats (risks) to for safety of carriers containing trol (SDIC) is a subdivision of TVEL VNIINM JSC, KMZ PJSC, MSZ PJSC, confidentiality regimes; economic interests and business the information representing Fuel Company’s organization engaged NCCP PJSC, SGChE JSC, UEIP JSC, XX assets protection subdivisions reputation of TVEL JSC and its a commercial or official secret; in internal control activities with re- ChMP JSC. at the level of subsidiaries. subsidiaries; XX 33 business processes were spect to various spheres of business. XX information and analytical support evaluated in the framework The main objectives of the of the President of the Company of execution of the order security unit of TVEL JSC are to and structural subdivisions of the on corruption risks; Table 11 create conditions for the effective Company regarding the economic XX inspections were carried out on Number of control activities conducted by the specialists of SDIC development of the Company security; 102 appeals received through and the companies forming TVEL Fuel Company , ea. by successfully countering the XX arrangement in the Company and the specialized communication negative influences of external its subsidiaries of the regime of channels “Hot Line”; Indicator 2015 2016 2017 2017/ 2016, % and internal factors that threaten commercial and business secrecy; XX 174 employees were brought Number of control activities in accordance the implementation of its strategic XX development and implementation to disciplinary responsibility. 120 125 118 94 initiatives and the fulfilment of the of measures aimed at prevention with the plan, including: production plans of the nuclear of corrupt behavior. with Audit Committees 15 2 1 50 industry. As of December 31, 2017, in the audit of financial and business activities including 84 75 71 95 asset protection subdivisions, there procurement and personnel record management were 64 qualified specialists with the internal audit 12 8 16 200 necessary knowledge and experience.

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE 64 65

In accordance with ROSATOM Scheme 4 Internal Control Development SDIC of TVEL JSC Concept the main purpose of ICS is Procurement Management to promote the achievement of TVEL Fuel Company’s strategic goals, to Director for Internal Control and Audit contribute to corporate governance improvement in TVEL JSC and companies forming the management system of TVEL Fuel Company, in compliance with the requirements of Control and Competitive policy Internal Control auditing activity control division audit group analytical group the Russian Federation law, regulatory state authorities and international standards. The purpose of ICS development is to maintain corporate governance More than 95% of competitive procurement procedures are mechanisms, primarily the regulatory ones, consistent with changing carried out through on-line sales platforms. This promotes external and internal conditions. openness and transparency of the Company, and saves labor Apart from the scheduled inspections, the workers of SDIC and financial resources. in TVEL Fuel Company conduct Procurement procedures are implemented using the following unscheduled inspections by the electronic platforms: United Electronic Market Place JSC, order of the governance. They also participate in the working groups Fabrikant LLC and Economics Development Center JSC in the audits of their organizations and in inspections conducted by ROSATOM State Corporation. The key directions for the internal TVEL Fuel Company supports, Procurement procedures are imple- control system development in TVEL respects and protects basic human mented using the following electronic Fuel Company are as follows: rights and builds its external business platforms: United Electronic Market XX further integration of adequate relationship on the principles of hon- Place JSC, Fabrikant LLC and Eco- control procedures in the esty, integrity and openness. nomics Development Center JSC. processes, and allocation of methods and practice of appraisal and Plans 2018: More than 95% of competitive pro- Total amount saved by the subsidi- duties and responsibilities to the assessment activities XX increasing the competence in curement procedures are carried out aries of the Company in 2017 through participants of the processes for The inspections conducted at the the field of internal audit; through on-line sales platforms. This the procurement procedures on an the efficiency of internal control; enterprises of TVEL Fuel Company XX timely and full identification of promotes openness and transparency open competitive basis made RUB XX development of mechanisms for revealed violations and deviations material violations in the activity of the Company, and saves labor and 2.7 billion. involving critical stakeholders in implementation of financial and of the companies of TVEL Fuel financial resources. in internal control activities; economic operations, including Company, identification of “weak” XX ICS reliability and efficiency procurement activities. Based on the places at control facilities and monitoring development by revealed facts, corrective measures development of recommendations introduction of various methods were developed, and disciplinary for the integration of preventive to promote continuous and regular measures were applied to employees control procedures; Table 12 assessment of the internal control who committed violations. XX contribution to the achievement of Key indicators of procurement activities of TVEL Fuel Company system state; In 2017, SDIC of TVEL JSC strategic goals of the Fuel Division XX SDIC competence and potential organized an audit of the internal with regard to increase of the Indicator 2015 2016 2017 (plan) 2017 (actual) 2018 (plan) development. control system at all stages of the share in the international market, life cycle of the investment project. reduction of prime cost, increase of Share of procurement through public 97 97 95 97 95 Main results 2017 Auditing of eight investment projects revenue from new products. competitive procedures under the UIPS, % In accordance with the approved of TVEL Fuel Company being in Total amount of procurement of TVEL FC, plans for 2017, the workers of SDIC various stages of accomplishment was 130,632 100,988 60,370 95,261 103,206 RUB mln conducted 118 control activities. carried out. The audit identified the Reduction of the number of scheduled main problem areas, developed and Total amount saved by subsidiaries of inspections, as compared to the approved measures to improve the TVEL FC from procurement through minimum minimum previous period, is connected with level of reliability of the internal control public competitive procedures on an open 2,852 2,850 2,000 2,719 2,000 the change in the approach to control system at certain stages of the life competitive basis, RUB mln activities, and introduction of the cycle of investment projects.

Table of Contents TVEL | ANNUAL REPORT 2017 3 | GOVERNANCE | Procurement Management 66 67

All planned indicators for 2017 Some of the key suppliers and Diagram 3 Since September 2012 the Arbitration Diagram 4 were achieved. Dynamics in contractors of the Company enjoy Procurement structure Committee operates in TVEL JSC; the Complaints received by the the above figures indicates the monopolist position on the market. according to cost criterion, % Arbitration Committee is vested with authority Arbitration Committee of enhanced efficiency of procurement Under the provisions of UIPS TVEL JSC in 2017, ea management and transparency of (Uniform Industrial Procurement to consider complaints against actions procedures. Standard of ROSATOM State (or omission thereof) of any customer, The largest procurement groups are Corporation) no tender is provided 0.98 competent authority, procurement manager the products and services purchased for such contractors (natural 7 14.68 13.85 and/or procurement commission during the 7 from the companies of nuclear monopoly entities), only according 38 industry, power supply. These are the to the “Procurement from Sole implementation of procurement procedures largest categories in procurement Supplier” procedure. on behalf of organizations of TVEL FC from sole supplier. Basic groups of competitive management system procedures: XX materials and equipment, Key documents that regulate XX construction and installation works; second year — 75%, third year — the category management; procurement and set TVEL Fuel XX manufacture of components; 60%, fourth year — 40%, fifth year — XX the economic effect of procurement Company supplier and contractors XX repair and maintenance of 25% of total annual demand of the under the category management in selection criteria: equipment. customer. 2017 amounted to RUB 1.5 billion. 30.7 39.79 Local suppliers participate in 12 Federal Law No. 223-FZ 65 “On Procurement of Goods and Pursuant to provisions of the competitive procedures on a common In 2017, the Arbitration Committee Services by Particular Types Uniform Industrial Procurement basis, and no specific approaches of TVEL JSC received 129 complaints of Legal Entities”; Standard of ROSATOM the Company to local suppliers are applied. related to procurement activities of may not provide any preferences to The Company maintains no special the Fuel Division. 14 complaints were Up to RUB 500 thous. Recognized as reasonable ROSATOM Uniform Industrial the suppliers on a territorial basis. records for such suppliers. admitted as reasonable (partially RUB 500 thous. — RUB 10 mln Recognized as partially reasonable Procurement Standard; The exception is only envisaged for In planning and implementation reasonable). RUB 10 mln — RUB 100 mln Recognized as unreasonable outsourcing companies founded of procurement activity the In 2017, the total volume of TVEL JSC Corporate Standard during the restructuring of TVEL Fuel RUB 100 mln — RUB 1 bln enterprises of TVEL Fuel Company warehouse material assets at the Withdrawn “Procurement Process" Company. UIPS guarantees to such Above RUB 1 bln afforded priority rights to small and enterprises of TVEL Fuel Company Left unconsidered companies certain volumes of orders midsized businesses in accordance was reduced by 26% relative to the over a period of five years from the with the Federal Law No. 223-FZ fact of 2016. date of incorporation in the following “On Procurement of Goods and Suppliers and contractors are way: for the first year — 90%, Services by Particular Types of Legal evaluated using the criteria of labor Entities”, and in accordance with the practices, impact on society and Resolution of the Government of the environment subject to availability Russian Federation d/d December 11, of all permits and licenses set by 2014 No.1352 “Concerning special the law. Such criteria also include aspects of participation of small and availability of management system midsized business in procurement certificates as evaluative ones i.e. of products, works, services by forming the final evaluation for a particular legal entities”. The share of member of procurement procedure. procurement from small and midsized The Company does not perform business related to certain enterprises any evaluation study of actual and of TVEL Fuel Company makes potential impacts in the supply chain; from 19.34% to 78.44%, when the all concluded contracts are checked regulatory level is 18%. for compliance with the Russian In the reporting year, the Company legislation. initiated works within the three-year program “Transformation of the MTO process in the Fuel Company”, which made it possible to achieve the following indicators in 2017: XX reduced warehouse stocks by 26% relative to the fact of 2016; XX conducted 86 audits of manufacturers of critical products; XX 90% of goods and 60% of works and services are procured under

Table of Contents RUB mln RUB mln investments volume of sales into R&D from general 1,195 10,988 industrial activities

Performance 4 Results 4 | PERFORMANCE RESULTS 71 Financial Capital

investment policy of ROSATOM Financial Capital is the most and its organizations. vital in the Company’s activities. RESULTS 2017 Capital gains ensure current In 2017, the Committee held 32 operations and promote meetings. Amount of financing of the investments thereby generating Portfolio components of TVEL Fuel Company made RUB 26,514 mln, growth of other capitals used which is in line with the level of the by TVEL Fuel Company previous year. Amount of financing of the Portfolio of TVEL Fuel Company tends to yearly fluctuations, it depends on combination of different INVESTMENT MANAGEMENT stages of life cycle of the Portfolio TVEL Fuel Company carries out its components marketable at the same investment activities in line with the time (more than 200). Uniform Industry-Specific Policy of Funding of industrial and ROSATOM and its organizations. technological base of primary The Investment Committee of production accounts for the biggest TVEL JSC (further “the Committee”) share in overall investment outlay. is a permanent collegiate advisory board that acts under the guidance of the Chairman of the Committee and follows the principles of the

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Financial Capital 72 73

Table 13 Table 15 Structure of the investment committee of TVEL JSC in 2017 Achievement of major KPI and production indicators of TVEL FC in 20171

Name, title KPI, KPI level KPI KPI type KPI unit of KPI weight, (continuous, performance Chairman N.V. Nikipelova — President of TVEL JSC measurement Lower Target Upper % discrete, cutoff) level level Deputy Chairman M.A. Timoshenko — Vice-President for Economy and Finance of TVEL JSC AFCF of State Corporation 257 285 342 308.7 Secretary P.A. Pozdniakov — Director of Investment Department of TVEL JSC (taking into consideration Fuel 20 Continuous Division AFCF), RUB bln 60.4 67.1 80.5 77.4 Members M.G. Zarubin — Senior Vice-President for Production of TVEL JSC Investment activity integrated P.I. Lavrenyuk — Senior Vice-President for Science, Engineering, Technology efficiency indicator, % 80 100 108 10 Continuous 81.3 and Quality of TVEL JSC

Yu.A. Kudryavtsev — Senior Vice-President for New Business Development of TVEL JSC Semi-fixed costs, RUB bln 40.4 38.5 29.0 10 Continuous 36.4 K.K. Sokolov — Vice-President — Business and Fuel Power Resources Manager of TVEL JSC

K.Iu. Bergazov — Vice-President for Technological Development of TVEL JSC Labor efficiency, RUB mln/person 8.3 8.5 9.8 10 Continuous 8.46 S.I. Boridko — Vice-President for Safety of TVEL JSC Proceeds from sales of new E.V. Lyakhova — Director for Economy and Investments of ROSATOM products beyond the profile, 7.8 8.7 13.0 20 Continuous 6.12 RUB bln V.I. Korogodin — Director for Lifecycle Management of Nuclear Fuel Cycle and NPP of ROSATOM State Corporation Foreign orders portfolio for traditional products for 10 years, O.S. Barabanov — Director for Development and Restructuring 9,113 10,126 12,659 10 Continuous 10,836 USD mln of ROSATOM State Corporation

Foreign proceeds for traditional S.V. Komova — Deputy Director of Department of Economic Analysis — products, USD mln 926 1,029 1,287 10 Continuous 1,199.8 Head of Internal Pricing Division of ROSATOM State Corporation

A.S. Voronin — the expert of the Division of investment project portfolio management of the Reduction of stock, –24 –30 –45 10 Continuous –45.7 Department of Investment Management of ROSATOM State Corporation RUB bln

LTIFR and reduction of injuries at industrial sites 0,3/ of the enterprises, preservation –20 Downgrading 0.06/–33 including the contractors of basic level Table 14 (of basic level 2016), % Amount of financing for TVEL FC investment projects by directions, RUB mln State orders, including State Defense Orders from other governmental customers 100 –100 Cutoff 100 Direction 2015 2016 2017 (plan) 2017 (actual) 2018 (plan) and organizations, %

Nuclear industry 18,553 16,347 17,321 14,073 16,496 No INES events No events –100 Downgrading/ 0 In-house regulations development 1,070 529 813 1,045 579 level 2 and above Cutoff

Development of infrastructure 1,212 1,987 3,925 3,451 2,617

Safety and encumbrances 7,982 6,520 3,718 5,890 7,762

Other 309 1,131 698 2,055 108

Total for TVEL FC 29,125 26,514 26,475 26,514 27,562

1 Financial and economic indicators are given in accordance with the consolidated management statements of TVEL Fuel Company.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Financial Capital 74 75

Diagram 5 Diagram 6 Diagram 9 Diagram 10 Key profitability indices, % Revenue (net) from sales, RUB mln Gross profit, RUB mln Distribution of consolidated revenue by types of products, RUB mln 50 43.5 43 100,000 41.5 40

200,000 79,553 189,017 80,000 180,073 180,683 23,177 75,020 74,225 29.5 30.4 30 25.7 Return on sales 150,000 60,000 5,267 Return on equity 19 20 100,000 40,000 Return on assets 9 10 8.1 (ROA) 50,000 20,000 2015 7.2 2016 36,885 2015 EBITDA margin 7.9 7.6 0 0 2017 0 6.7 Источник: база данных 2015 2016 2017 2015 2016 2017 2015 2016 2017 МАГАТЭ PRIS 123,670

Diagram 7

Net income, RUB mln Diagram 11 26,243 Distribution of revenue from nuclear fuel sales by consumers’ geography, % 3,222 4 60,000 55,734 55,008 100 50,000 FINANCIAL RESULTS 7 11 12 46,212 In 2017 TVEL Fuel Company 35,037 80 40,000 2016 achieved all KPI and target 60 42 30,000 production indicators applied to 59 56 evaluate the performance. 20,000 40 In the reporting year there were 115,567 no changes in total revenue as Asian consumers 10,000 20 45 compared to the previous year 34 European consumers 0 33 (+0.3%). The main part of revenue 0 Russian consumers 2015 2016 2017 of TVEL Fuel Company comes 24,209 2015 2016 2017 from sales of nuclear fuel and its 2,949 components (63.8%), and rendering Diagram 8 of conversions and enrichment 0 EBITDA, RUB mln services (21.15%), and sales of other products (13.40%). Profitability indices of sales, equity Significant increase in revenue and assets have been increased is provided by the activities on 38,209 2017 100,000 noticeably in the reporting year due to reduction of cost, other expenses, increase of gross and net profit. 82,130 and by the effect of other uncontrolled

80,000 77,416 In 2017 the export products were 74,940 factors, in particular changes 115,315 sold to the total amount USD 1,163 mln. in exchange rate. 60,000 Sales of nuclear fuel and its components amount to 94.5% — the largest share in the export revenue. 40,000 In 2017 share of revenue received Nuclear fuel and components from FA sales made RUB 106,806 mln — 20,000 Conversion and enrichment services 59% in total consolidated revenue. Main Gas centrifuge products consumers are Russian and European 0 R&D NPPs. Number of consumers from Asian 2015 2016 2017 Other products countries has also increased.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Financial Capital 76 77

Diagram 12 Table 17 Basic financial indicators of TVEL Fuel Company in 2017, Structure of revenue from general industrial RUB mln activities in 2017, %

Revenue Net Indicator (net) from sales profit 0.4 17.4 12.7 Separation-sublimation AECC JSC 5,958 2,035 complex (SSC) PA ECP JSC 14,237 4,706

SGChE JSC 14,956 494 19.1 UEIP JSC 23,881 5,861

14.1 Total for SSC 59,032 13,096

Nuclear Fuel Fabrication MSZ PJSC 21,623 3,490 New energy Complex (NFFC) Metallurgy NCCP PJSC 8,105 1,670 Chemistry Following the results 2017 volume ChMP JSC 13,516 2,014 Machine building of sales from general industrial MZP JSC 826 –316 Other works and services activities increased by 7.8%, 36.3 Other products to RUB 10,988 mln. Total for NFFC 44,070 6,858

Gas Centrifuge KMZ PJSC 2,708 –240 Complex (GCC) Diagram 13 Centrotech SPA 2,027 –654

Net assets of TVEL Fuel Company, RUB mln Total for GCC 4,735 –894

Research Complex VNIINM JSC 2,689 61

Tochmash VPA JSC 1,892 –250

700,000 TOTAL for Research Complex 4,581 –189 684,741 680,000 Ecoalliance LLC 2,677 105

660,000 651,352

640,000 Financial soundness and liquidity 633,678 indicators of the Company are at high 620,000 level. In 2017 the current liquidity ratio Table 18 improved considerably, receivables Dividend payout, RUB mln 600,000 turnover ratio showed positive trend. 2015 2016 2017 Indicator 2015 2016 2017 ∆ 2017/2016, %

Dividends paid to Atomenergoprom JSC, RUB mln 15,296 28,233 20,468 –28

Table 16 Financial soundness and liquidity indicators of TVEL Fuel Company Dividends paid to TVEL JSC from subsidiaries 1,930 2,820 2,298 –19

Indicator 2015 2016 2017 ∆ 2017/2016, %

Ratio of borrowed and own funds 0.14 0.10 0.07 –30 Dividend policy of TVEL JSC with regard to subsidiary companies is set Current liquidity ratio 3.15 4.02 6.02 50 with account of need for investment in production, its reconstruction and Return on basic production capacity 1.31 1.15 1.13 –1.7 improvement of technical facilities.

Receivables turnover period. days 80 79 96 21

Stock turnover period. days 188 168 140 –16

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS 78 79

Diagram 14 Commercial and administrative expenses of TVEL Fuel Company, RUB mln Manufactured Capital 3,500 3,232 3,127 3,033 2,971 3,000 2,939

2,500 2,073 2,000

1,500 TVEL Fuel Company comprises three complexes for type-specific production of the front end nuclear fuel cycle, and scientific and 1,000 2015 design-engineering assets. 500 2016 The plans on production and sales of products and services in 2017 the reporting year were fulfilled to the full extent, which ensured 0 Commercial Administrative compliance with all contractual commitments of the Company expenses expenses to Russian and foreign customers

COST REDUCTION XX optimization of services on heavy, BUSINESS ASSETS Work on costs optimization and routine-preventive, current repair AND OPERATIONAL RESULTS improvement of efficiency of TVEL and maintenance. Separation-Sublimation Complex Fuel Company is going on. In 2017 (SSC) comprises a group of integrated prime-cost reduction made RUB Share of administrative expense plants engaged in enrichment and 2,736 mln due to the activities on in revenue 2017 made 1.73%, in line conversion of uranium. expenses reduction. with the level of the previous year In 2017 the plan of SSC enterprises The most progress was made in (Diagram 14). For detailed structure for production of enriched uranium the following activities of TVEL JSC of TVEL Fuel Company products and achievement of the management system: please refer to: set capacity utilization factor was www.tvel.ru/about/ XX optimization of personnel structure/ accomplished to the full extent related costs; (Table 20). XX reduction of purchase price of materials and equipment; XX elaboration of target regulations on Inventory storage and consumption rates; XX reduction of materials costs due to Table 20 revision of specific requirements; Labor efficiency dynamics of the separation and sublimation complex, XX optimization of costs of RUB mln/person non-nuclear materials; XX improvement of efficiency in power Subsidiary companies 2015 2016 2017 ∆ 2017/2016, % facilities and power consumption; SGChE JSC 3.88 4.73 5.17 9

AECC JSC 4.54 5.90 7.04 19

PA ECP JSC 5.77 6.78 7.41 9

UEIP JSC 9.40 10.49 11.18 7

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 80 81 Competencies of enterprises of TVEL Fuel Company

RUB mln/person Nuclear Fuel Gas Separation- Machine Building Metallurgy New Energy R&D Chemistry Additive Labor Fabrication Centrifuge Sublimation Technologies efficiency Complex Complex Complex 8.46

MZP JSC Tochmash VPA JSC VNIINM JSC KMZ JSC UEIP JSC TVEL JSC ChMP JSC MSZ JSC SGChE JSC Centrotech SPA LLC AECC JSC

NCCP JSC PA ECP JSC

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 82 83

Main objectives 2018 of the considerably superior to its previ- design bureaus (NRDC LLC, OKB- nuclear fuel fabrication complex ous version, and its production cost Nizhny Novgorod JSC, Centrotech- of TVEL FC: is lower. SPb JSC) were united. XX production and delivery Main objectives 2018 of the GC In 2016 consolidation of main to the customer of the initial complex of TVEL Fuel Company: activity of the above-mentioned loading fuel for Unit No.1 XX completion of works on companies with the production of Belorusian NPP; concentration of gas centrifuge enterprises Uralpribor LLC XX Supply of MOX fuel for production at KMZ PJSC in one and ZEP LLC was completed. BN-800 reactor; process building in the framework The companie’s organizational XX development and launch of of the investment program structure was established at the new facility for uranium dioxide “New facility for gas centrifuges basis of UGCMP LLC (Novouralsk) power production; production”; with responsibility subdivision into XX launch of upgraded production XX production of pilot batches the section of new businesses of fuel for research reactors of long-range GC; development, the section of at NCCP PJSC. XX follow-on works on cost gas centrifuges development, improvement of GC production. and the section of operational Gas Centrifuge Complex (GCC) activity. In January 2017 the is a group of subsidiary industrial Medium-term objectives — batch company was officially renamed enterprises producing gas centrifuges production of new generation GC. as SPA Centrotech LLC2. (GC) and accessories for enterprises of the separation-sublimation Scientific and Production complex. Association Plans for batch production of With the purpose to improve research GC-9, GC-9+ and pilot batches of and design activity and to provide new advanced GC were implemented full life cycle of the products (from to the full extent. marketing to disposal), in 2015 TVEL Milestones 2017: The main activity of TVEL Fuel Launch of batch production of Fuel Company implemented the 2 XX In 2017 ChMP JSC using the Company is production and sales Launch of fluorine production unit Centrotech-SPb JSC (Saint Petersburg) is the GC-9+ and qualification tests of batch first stage of establishment of the leading design bureau established in 1945, with huge facilities for uranium tetrafluoride of fuel assemblies for power and has marked the final stage of the experience and rich history. Taking into account that production became major mile- scientific and production association production1 continued recycling research reactors. The planned major project for reconstruction Centrotech-SPb JSC joined the developing SPA, stones 2017. Performance efficiency (SPA). The scientific-design and the continuity in history and the best traditions of the of off-grade warehouse uranium volume of the manufactured fuel of the sublimate plant capacities consolidated enterprises became an important argument of the upgraded gas centrifuge is technological competencies of three to choose the name and logo “Centrotech”. to uranium oxide with further products is determined in accordance that will enable essential shipping for sublimation production with preliminary orders made by increase in uranium hexafluoride at SGChE JSC to get uranium consumers based on the plans of production volume. hexafluoride and its involvement primary charging and recharging. Thus, the program for in nuclear fuel cycle. In 2017 the plan of TVEL Fuel concentration at SGChE JSC Table 20 XX 5 sections of gas centrifuges Company for production of nuclear of all conversion cycle of Labor efficiency dynamics of the fabrication complex, of the 9th generation were fuel was implemented in full. TVEL Fuel Company of Rosatom RUB mln/person commissioned at UEIP JSC. is completed. XX SGChE JSC put into operation Milestones 2017: Subsidiary companies 2015 2016 2017 ∆ 2017/2016, % the fourth series of electrolyzers XX Launch and timely production There was no need in construction Machine-Building Plant (MSZ PJSC) for fluorine production to increase of FA simulators for Unit No.1 of separate building to launch 5.20 5.46 5.33 –2 conversion production capacity. of Belorusian NPP. the fourth series of electrolyzers: Novosibirsk Chemical Concentrates Plant (NCCP PJSC) 4.83 4.92 6.04 23 XX Production and shipment of initial the available building at the Main objectives 2018 and in the loading fuel set for Unit No.4 industrial site of the sublimate Chepetsky Mechanical Plant (ChMP JSC) 4.02 4.58 4.38 –4 midterm of the separation-sublimation of Rostov NPP. plant was used for this purpose. complex of TVEL FC: XX Production and shipment to the There was also need in production Moscow Polymetal Plant (MZP JSC) 1.56 0.97 4.48 362 XX Completion of off-grade customer of initial loading fuel set of electrolyzers: ready for service warehouse uranium recycling. for Unit No. 4 of Tianwan NPP units were purchased from (China). AECC JSC. Nuclear Fuel Fabrication Complex XX Production and shipment of FA Table 21 (NFFC) is a group of subsidiary and targets for research reactor Labor efficiency dynamics of the gas centrifuge complex, industrial enterprises that manufacture “Maria” (Poland). RUB mln/person nuclear fuel for various reactors. XX Commencement of operation of new acid storage facility at Subsidiary companies 2015 2016 2017 ∆ 2017/2016, % MSZ JSC. 1 In 2016 production of uranium tetrafluoride by ChMZ JSC was terminated; conversion program KMZ PJSC 2.33 2.58 2.79 8 was transferred to SGChE JSC.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 84 85

In 2018 an industrial cluster most promising lines of production, The industrial cluster format is the TVEL Fuel Company addresses the may appear in Novouralsk including the import substitution. tool of state support of industry range of inter-related issues through and import substitution intended to establishment of new high-technology In 2017 the enterprises of TVEL Fuel The status of industrial cluster gives promote industrial cooperation by businesses. New technologies Company in Sverdlovsk region — the right to apply for state subsidies establishment of new production in nuclear production provide UEIP JSC and Centrotech SPA LLC out of the federal budget to recover chains and integration into the advantages in technological process, started establishment of Novouralsk 50% of incurred costs. At the existing ones. Under the regulator’s contributing to increase of equipment moment, the maximal recoverable Industrial Cluster (NIC) with a focus requirements the industrial capacity, rise of degree of automation. amount within one project makes on machine-building. cluster must comprise at least ten This results in reduction of workforce about RUB 200 million per year. enterprises. At least 20% of products requirements at nuclear production. At the fist stage NIC will include ten The recoverable costs include the manufactured by each participant Development of new non-nuclear industrial enterprises of Novouralsk, costs of training, working out of the (except for manufacturer of the businesses is a real opportunity to including the city-forming UEIP JSC design documentation, licensing and finished product), must be used at employ personnel dismissed due and Centrotech SPA LLC, as well certification, production and testing other enterprises of the same cluster. to optimization of main nuclear as ANK-Service LLC and UEIP of prototypes and pilot batches, State support of industrial clusters production and to ensure social Atommashkompleks LLC. and other events. includes budgetary recovery of costs stability in the regions of presence. It is planned that at NIC the pool of Under the road map, in 2018 on a number of organizational and Moreover, new businesses mean the key competences will be set, Novouralsk Industrial Cluster will be technological activities. additional revenue, and consequently including those required for develop- included in the register of industrial additional budget revenue that may be ment of the machine-building complex clusters of the Ministry of Industry allocated to address different issues in in Sverdlovsk region, and industrial and Trade of the Russian Federation. the regions of presence of TVEL Fuel cooperation of enterprises in the Company. Objectives aimed at strengthening of the Company positions on new Development of general industrial activities markets require rapid development of scientific and technical potential, of the Company resulted in 2017 in Thus, the unified production and General Industrial which in turn implies need for preservation of 90 jobs. As of the end design complex for development and Activities improvement of R&D, projects, manufacturing of gas centrifuges for Development of non-nuclear of 2017 there were created 2,500 jobs with production, economy, promotions Russian uranium enrichment and for business — is one of priority tasks general industrial activities and sales management systems. In production of non-nuclear products set by ROSATOM to the enterprises 2017, the Company started the works was established in Novouralsk. of nuclear industry. The basis on establishment of management XX “Arrangement of energy storage Main efforts in the second business In accordance with the corporate used for determination of new system for second business core systems production”; core development are connected strategy 2017–2022 the revenue businesses development is as development. XX “Development of isotope production with expansion of market presence of of SPA Centrotech LLC from sales of follows: competences accumulated At present time TVEL Fuel Company at PA ECP JSC”; non-nuclear products, implementation non-nuclear products should increase for the years of nuclear production implements 61 non-nuclear business XX “Development of pigment titanium of investment projects, transactions from RUB 284 mln to RUB 3.8 bln. development, and availability of highly projects. The projects are at different dioxide production”; on acquisition of equity in companies Launch of batch production skilled personnel. stages, total funding in 2017 XX “Development of high-purity quartz with the required competences of GC-9+ jointly with KMZ PJSC It is also important that new amounted to RUB 900 mln. Revenue concentrate production”; and potential for development. The is the major milestone 2017 for products manufactured at the newly from general industrial activities made XX “Improvement of existing industrial works are on-going to create the SPA Centrotech LLC. established productions must be RUB 11 billion. complex for automotive catalysts management systems for non-nuclear in demand on out-of-the-industry Main projects: production”. businesses development. markets, new for TVEL Fuel Company, XX “Development of metal multipowder The following directions of non- outside the limits of nuclear fuel cycle. 3D Printer production”; Second business core development nuclear activity are being developed: This is ensured due to application of XX “Establishment of pilot metal supposes increase of interests to 18% New Energy, Machine Building, modern and efficient technologies, powder production” (including revenue from non-nuclear products in Metallurgy, Chemistry. obtained owing to successful work for additive technologies); total revenue of TVEL Fuel Company in the traditional nuclear field. XX “Arrangement and mastering by 2030. These are challenging of titanium production”; plans that require concentration of Table 22 XX “Increase of calcium wire resources. Total revenue from non- Labor efficiency dynamics of the scientific-production complex, production”; nuclear products sales must be at RUB mln/person* XX “Establishment at NCCP PJSC least RUB 143 billion by 2030. of the Centre of Competences 2015 2016 2017 ∆ 2017/2016, % for Development and Production 2.99 1.91 2.06 8 of Lithium Chemical Cells”;

* Data 2015-2016 include UGCMP LLC indicators.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 86 87

Scheme 5 Table 24 Key directions of new businesses development Metallurgy in TVEL FC New Products Basic Scope Supplies businesses enterprises geography

Special XX Zirconium alloys ChMP JSC XX Electric Power Russian Federation metallurgy XX Machine Building XX Hafnium Russian Federation/ ADDITIVE NEW XX Medicine Great Britain METALLURGY CHEMISTRY MACHINE BUILDING TECHNOLOGIES* ENERGY XX Metallurgy XX Calcium metal Russian Federation/ Estonia, XX Special metallurgy XX Stable isotopes XX Instrument engineering XX 3D printers XX Lithium and lithium- XX Calcium injection wire Kazakhstan, XX Titanium metallurgy XX Catalysts XX Equipment for NFC XX Powders based materials Norway, France, XX Superconductive XX Fluorine XX Equipment for oil and expendables XX Materials for Li-Ion cells Latvia, Belgium, materials compounds and gas industry XX Software XX Accumulators Sweden and superwire and electric power generators, XX Nickel filtering Centrotech Russian Federation elements, powders SPA LLC fuel elements

Titanium XX Seamless titanium ChMP JSC XX Different engineering Russian Federation/ metallurgy tubes, ingots, industries: Germany * Read more about this direction on page 103, section “Intellectual capital”. (full range forgings, rods, wire aircraft engineering, titanium ship-building, engine-building, Table 23 production) etc., medicine Integrator integrator. On the core Russian market Superconductive XX Superconductive ChMP JSC XX Electric power Russian Federation materials wires Integrator Purpose of establishment XX Medicine estimated at RUB 180 billion the share and XX Transportation Additive Business development in the sphere of full range additive of TVEL Fuel Company by 2025 may superwire XX High-strength Research Russian Federation technologies technologies (production of granulated metal powder, reach 7%. nanocomposite and Production XX Telecommunications (approved) 3D printers and services rendering) superwire Enterprise systems “Nanoelectro” LLC Titanium production Energy Establishment of vertically-integrated company Over the last five years ChMP JSC storage devices with own import-substituting production has carried out organizational, (approved) of smart materials and storage cells scientific-research and design- Oil service Establishment of system integrator experimental activities: regulatory Through adoption In 2017 production of spring wire for framework has been prepared and automotive industry was launched. for integrate approach to oil services rendering, of technological conversions with own import-substituting production ingot production process has been of new alloys, ChMZ JSC will of equipment elaborated. Contract with Hermith GmbH increase the level of competences The plant has launched batch In late 2016 ChMP JSC signed development, expand the Metallurgy Establishment of system integrator of metallurgical production of more than 250 products a five-year contract with Hermith product range and strengthen products to deal with import-substitution out of 19 alloys, including intermetallic GmbH — European distributor 5 of key metallurgical products – year contract titanium-based alloys. Main types of the positions of TVEL of titanium products. In 2017 with Hermith GmbH. products — are ingots, rods, seamless Fuel Company on the the contract was ratified. Delivery to the European tubes and welding wire. Production of world market. Under the contract the specialists market more than unique capillary tubes and tubes with of ChMP JSC elaborated the range Under conditions of strict 1 thous. tons of different In 2017 the works started to Metallurgy spiral fining has been mastered. of products, most demanded on requirements set by the titanium products made bring out the most challenging and In this field TVEL Fuel Company The products of the plant have the European market, in compliance designers to improvement by ChMZ JSC large-scale activity to integrators — made considerable progress: in 2017 number of serious competitive with technical requirements of of physic-chemical properties independent legal entities. sales growth of titanium products strengths, in particular: full-range foreign standards. In February 2017 and specification of materials The purpose of the integrators — was 49%, calcium wire for liquid production (from ingot melting to the the first batch, comprising mostly and alloys for the updated and is concentration of resources steel processing — more than 40%, end product) of seamless tubes within the pilot samples, was shipped new articles and components on development of marketable products of hafnium and niobium — one production site — the only one to the customer for control tests. for aircraft, ship- and machine- and efficient key-activity specific 18 and 45% respectively. Demand for in Russia. Qualification stage provided by the businesses. metals and alloys with the enhanced Under the contract the specialists building industries, titanium contract will make it possible to set > characteristics (strength, weight, of ChMP JSC have elaborated production at ChMZ JSC the rate of increase in scope of future 2 workability), as well as increase of the manufacturing process for the will be focused on development supplies. The contract provides RUB billion steel and alloys smelting efficiency products most demanded on the of the range of products for annual manifold increase total amount of will contribute to development of European market, in compliance with out of new alloys. in scope of supply, and the peak the contract with this direction within the industry requirements of foreign standards. will fall on 2021. Hermith GmbH

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 88 89

In the first quarter there were of the ingots and to get the required shipped 12 tons of titanium products quality of the products. for aircraft industry, more than 4.5 tons for medical industry that sets By 2022 ChMZ JSC Superconductive materials special requirements to the product can hold more than and superwire quality. In 2017, ChMP JSC launched production of titanium spring wire. Production of the components In autumn the first qualification batch for electrical wire was shipped to the Italian company In 2017, ChMP JSC shipped to Ferrari. New lines of cooperation with Research and Production Enterprise Hermith GmbH include also titanium 30% “Nanoelectro” LLC the pilot batch of wire for additive technologies and of the Russian conductive cores made of copper, titanium spring wire. titanium market chrome and niobium, for the winding heat-resistant wire ПОЖ-700. This Titanium for the world type of wire is applied in the reactors’ shipbuilding industry (VVER) control and safety system, and ChMP JSC produces more than improves their reliability. 50% of titanium welding wire for Revenue of ChMZ A new product represents the the Russian shipbuilding market. from sales of rectangular-sectioned wire made of The enterprise also produces more non-nuclear products copper alloy. Production process than 15 items of titanium welding wire must increase was developed by Research and applied in welding of elements of hull Production Enterprise “Nanoelectro” structures of vessels. LLC, and was introduced by the Titanium wire produced by ChMP plant specialists using the facilities JSC has additional advantages and unique up-to-date equipment due to the low hydrogen content 4.6 of the shop for production of and the quality of outer surface. superconducting materials, that times The innovative product showed good was established at ChMP JSC from RUB 2.7 bln in 2017 results with the leading enterprises of during execution of works under to RUB 12.6 bln by the the United Shipbuilding Corporation ITER International Project. In future end of 2022 and enterprises of the Russian power the enterprise is ready to master engineering industry. the production of conductive cores In summer 2017, at the International with different cross-sections and of Maritime Defence Show in Saint- various alloys, in compliance with the Petersburg ChMP JSC presented requirements of the customers. The application of titanium tubes innovative technological solutions for In August 2017 TVEL Fuel High purity of surface, improved the world shipbuilding industry. Special metallurgy in the “heart” of nuclear-power icebreaker Company shipped the batch accuracy of lines and faces — these During the International Maritime proves quality and reliability of titanium of FA jackets manufactured by are the key factors of the essential Defence Show specialists of ChMP Calcium injection wire products by ChMZ JSC. This unique article Chepetsky Mechanical Plant for production steps. Finishing process JSC reached an agreement on In 2017 ChMP JSC concluded the multi-purpose nuclear-powered steps require delicate workmanship, cooperation with titanium roll stock represents the main structural element of the contracts for delivery of Calcium icebreaker Arctic. because a hexagonal tube is consumers. More than 50 negotiation reactor of nuclear-powered vessels injection wire to the major Russian a deformable thin-walled difficult- with major shipbuilding enterprises These seamless thin-walled steel companies: Severstal PJSC, to-make profile. were held. hexagonal tubes made of zirconium Magnitogorsk Iron & Steel Works alloy with the walls 1.6 mm thick The production scheme developed PJSC, NLMK PJSC. Production of high-duty of the Russian aircraft industry by schedules decreased, and volume are manufactured in Russia at by the specialists of ChMZ metallurgy In 2017 the calcium wire was titanium alloys smelting the large ingots with diameter of products increased. ChMZ according to the unique and centre, the unique process, qualified for liquid steel processing ChMP JSC successfully mastered 450 mm, with estimated weight up Due to the big diameter of ingots exclusive technology, developed facilities and instrumentation make by foreign customer at ArcelorMittal the unique manufacturing process to 1,480 kg with subsequent cutting and their weight, there were chosen plants. by the specialists of the plant in it possible to produce hexagonal of commercial-grade large ingots of into the parts with the required the optimal modes of electrodes cooperation with the scientists tubes in compliance with customer high-duty alloys based on titanium weight. This process scheme resulted preheating prior to smelting and Production of equipment of VNIINM JSC. requirements. intermetallides VIT-1 and VTI-4. in substantial improvement of key cooling-down of ingots. Special for zirconium manufacturing The technology adopted at TVEL indicators of metallurgical process, attention was given to the ingots Hexagonal tubes for reactor plant Improvement of zirconium JSC enterprises contributed to and enabled metal loss reduction at with high level of uniformity are the super-duty articles with strict manufacturing is the strategical successful execution of the order for interstage operations and labor costs, (distribution efficiency) of alloying requirement to quality. objective of TVEL Fuel Company, that ingot production (weighing 450 kg as compared to smelting of small elements. All these actions made will strengthen position of ROSATOM each one) for the purposes ingots. Scope of smelting and orders it possible to avoid defects on the world nuclear fuel market.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 90 91

In 2017 the machine-building to the finished products with at least scientific collaboration GERDA. Table 25 complex of ChMP JSC was the 99% content of the base material. The delivery has been performed Chemistry first in Russia to produce the Hafnium oxide is applied to obtain under the contract concluded between unique processing equipment anoxic compounds (carbides, M. Planck Institute for Nuclear New Products Basic Scope Supplies out of HASTELLOY (rare alloy borides, nitrides) that are used for Physics and JSC Isotope — the businesses enterprises resistant to highly aggressive production of hard, wear-resistant official supplier of isotopic complex Production XX Production PA ECP JSC, XX Industries Russian Federation, media) — the absorption column coatings for heated assemblies and of ROSATOM State Corporation. of stable of 95 isotopes SGChE JSC, XX Medicine USA, isotopes of 19 chemical elements: NCCP PJSC Germany, for zirconium chlorides and parts of air-space equipment, the The first Germanium-76 for GERDA XX Research of new generation hafnium separation unit. tools for high-speed processing project was developed at PA ECP Ar, W, Ge, Fe, Ir, elementary particles Canada, This new equipment of ChMP and high-temperature materials. JSC in 2004-2005. At that time the Cd, Si, Kr, Xe, Mo, properties Republic of Korea, Ni, Sn, Os, Pb, Se, Great Britain, XX Agriculture JSC made it possible to reach new It is also applied in production of company obtained the competences S, Te,C, Zn Uzbekistan, quality of zirconium, and the team special grades of glass for fibre-optic under the special requirements set to XX Metrology China, of the subsidiary company has articles, as film-forming materials production, storage and transportation XX Researches in the sphere Japan, of geology, biology, France got new competences. ChMP JSC in optical fabrication. of this product. oceanology, etc. became the first enterprise in Russia Revenue of ChMP JSC from Due to the proper logistic scheme to work with HASTELLOY alloy delivery of products made of hafnium developed by the specialists of PA Catalysts XX Autocatalysts Ecoalliance LLC XX Industries Russian Federation on an industrial scale. to foreign customers increased ECP JSC together with JSC Isotope, (UEIP JSC XX Transportation subsidiary)

XX Zeolite catalysts NCCP PJSC XX Industry Russian Federation In May 2017 the representative of the US company QSA Global Inc. for petroleum chemistry visited PA ECP JSC to audit the Quality Management System Fluorine XX Extra pure ECP JSC XX Nuclear, oil-producing Russian Federation for compliance with CFR and ISO requirements. Following the audit compounds anhydrous fluorine SGChE JSC and chemical industry results it was acknowledged that PA ECP JSC maintains proper hydrogen XX Transport quality management system for supply of the enriched stable XX Trifluoromethanesulfonic AECC JSC XX Pharmaceutical, Russian Federation, isotope products under QSA Global Inc. order Anhydride chemical industry foreign trade supplies (Triflic Anhydride) XX Agricultural chemistry

The absorption column has eight times in the reporting year as new batch of Germanium-76 was successfully passed the acceptance compared to 2016, and amounted to delivered in due time to the purchaser tests and complies with all quality more than RUB 100 mln. In 2017 the who carried out the isotope quality requirements. enterprise completed the process of tests and proved its compliance with a new unit for production of iridium applied as starting material for The machine-building complex of iodide hafnium development. the contract terms. In addition to enriched in stable isotope iridium-191, production of radioisotopes that are If GERDA tests reveal neutrinoless ChMP JSC has also set the rectifying provision of high chemical purity and this will enable increase in production widely applied in industry, science, double beta decay, this rare and splitter columns. They will Chemistry content of target isotope, PA ECP JSC of this isotope. and medicine. reaction means that neutrino and comprise the plant that will make it Growth in demand of isotope products has completed non-routine tasks to Disks made of iridium-191 serve Starting from January 1, 2017 possible to produce nuclear purity is the crucial factor for development comply with requirements to storage antineutrino represent the same as a base for creation of gamma ray the isotope separation plant started zirconium (free of any impurities), of isotope products manufacturing. and transportation of the products. subnuclear particle, as it was radiation source based on iridium-192 commercial operation of high-tech gas to reduce power consumption and Interim storage of Germanium isotopes suggested by Ettore Majorana radionuclide in non-destructive centrifuge unit that made it possible to speed up manufacturing and Production of stable has been organized in underground in 1930s. control systems for evaluation of to widen the range of production technical processes. isotopes storehouse in special-purpose commercial products’ quality using capacity of SGChE JSC, and to ensure This will involve adjustment of ECP remains the world leader in stable enclosure to protect the products from radiography technique. utilization of gas centrifuge production the Standard model of particle Hafnium isotopes production: its products cosmic radiation. The specialists of Finished products in commodity capacities. TVEL Fuel Company develops the cover more than 40% of requirements the enterprise have also manufactured physics, which is considered to forms made of iridium 191Ir and 192Ir In 2017 SGChE JSC concluded first Russian high-tech production of the world market. In 2017 the special transport and storage be the theoretic foundation of the are delivered to USA under the long-term contract on delivery of of hafnium out of hydrometallurgical Company developed and delivered container with functionality similar to modern concepts of structure contract concluded between JSC isotope products with Russian wastes of ChMP JSC for the stable isotopes for international and underground enclosure. and development of matter. Isotope (the authorized supplier manufacturer of medical supplies. needs of metallurgy, nuclear power home scientific projects:production Silicon enriched in silicon-28 has of isotope complex products of Under the five-year contract SGChE engineering, defence industry and delivery of 40 kg batch of been manufactured and delivered ROSATOM to the international JSC undertakes to manufacture and electronics. Germanium-76 isotope; production under International project (contract market) and the company and to deliver to the customer the The elaboration by the plant of 6 kg of polycrystalline silicon-28. with Federal Physical Technical QSA Global Inc (USA). stable isotopes to the amount more specialist is considered to be unique, PA Electrochemical Plant JSC after Agency of Germany) for creation of SGChE JSC manufactures the than RUB 70 mln for application since for the first time in Russia long-term pause has delivered the mass standard “Kilogram-3”. products under 11 items of stable in diagnostic medical equipment. within one enterprise there was batch of Germanium-76 isotope In 2017 during implementation of the isotopes, including stannum, sulphur, established the full-range process to continue the tests in search of programme “Development of isotope chrome, lead, wolfram, xenon and cycle for hafnium oxide production: neutrinoless double beta decay production at Electrochemical Plant others. Stable isotopes are generally from zircon and impurity elements that are carried out by international JSC PA”, there was put into operation

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 92 93

Катализаторы in 2015 by 33% in monetary terms, Table 26 Ecoalliance LLC (Novouralsk, In 2018 the plant plans to launch the market decline continued Machine Building Sverdlovsk region) — the subsidiary new production — Chrome-50 in 2016, growth began only of UEIP JSC — is the only Russian isotope for scientific research in 2017 — revenue of Ecoalliance New Products Basic Scope Supplies manufacturer of catalysts systems in the field of neutrino physics. LLC increased. From 2014 to 2017 businesses enterprises for neutralization of exhaust Chrome-50 will become the 107th the revenue increased more than Instrument XX Car electrical Tochmash VPA XX Electric Power Russian gases. The enterprise covers three times (from RUB 0.76 bln to isotope (21st chemical element) engineering equipmen JSC XX Industries Federation full technological cycle: from RUB 2.6 bln). In 2017 sales grew XX in the range of production Transportation catalyst development to batch from RUB 1.9 bln to RUB 2.6 bln. competences of the plant. production of exhaust gases Development strategy provides for XX Static frequency Centrotech SPA XX Electric Power, Russian neutralizers. Ecoalliance LLC revenue increase up to RUB 4 bln converters LLC XX Industries Federation holds 31% of the Russian market following the results 2022. XX Dosimeters of automotive catalysts for gasoline XX Radiation meters and diesel engines. Machine Building XX Controllers Key competences of In 2017 the design of equipment set XX Printed circuit boards XX Connector boxes Ecoalliance LLC: (five items) for drilling mud cleaning XX design development and modelling was developed. Batch production Nuclear fuel cycle XX Core components Tochmash VPA XX Electric Power Russian of neutralizers, catalytic collectors of three items of the equipment for 1.5 equipment JSC XX Industries Federation of the cars with gasoline and RUB billion drilling mud cleaning started in 2017, diesel engines complying with the Revenue from sales of the products were shipped to the Equipment for XX Filters Centrotech SPA XX Electric Power Russian international standards Euro 3, products, works and services consumers. Shipment of the full sets impurities filtering LLC XX Industries Federation Euro 4, Euro 5, Euro 5+, Euro 6; of general industrial activities of drilling equipment is scheduled

XX prototype production; in 2017 at PA ECP JSC made starting from 2018. Mining industry XX Oil-fields equipment Centrotech SPA XX Mining and processing Russian XX development of catalysts for RUB 1.5 billion, and exceeds equipment LLC of mineral resources Federation purification of industrial emissions; 10% of the annual total New energy XX production of precious metals salt revenue of the enterprise solutions; Energy storage devices XX services on comprehensive testing The unified branch integrator for new Lithium and lithium-based Electrochemical Electrodes produced by TVEL to confirm compliance with business line “Energy Storage” was materials power sources Fuel Company are intended for environmental requirements of established within the group of TVEL In 2017 new projects were initiated In 2017 Centrotech SPA fulfilled production of supercondensers and automotive transport. JSC. The estimated total revenue of for diversification of the lithium a commitment under the contracts alkaline cells applied in the power the integrator will amount to RUB products range. with Energy JSC for delivery of supply systems of civil e-transport, In 2017 Ecoalliance LLC > 11 billion by 2030. High quality of lithium products was electrodes for supercondensers and for instance: underground railway, launched commercial operation RUB300 million The long-term benefits of this qualified and proved by new clients. nickel-cadmium cells. From August electric vehicles, hybrid cars, of dynamometer test stands for Annual revenue direction are provided by market Test sample of current source on 2017 to May 2017 the partners electric buses, trolley buses. light vehicles VULCAN II EMS- from sales of fluohydric demand for energy storage systems, solid oxide fuel cells (250 W) has been received 325 thousand electrodes. CD48L 2WD by HORIBA (Japan). products for the first time including for transport, and the produced, design of the pilot unit is Production technique of positive The parties signed the certificate ever exceeded initiative of major cities to use green being updated to comply with chang- electrodes was developed in 1997 of commencement of commercial RUB 300 million e-transport. es of the customer requirements. by the specialists of electrochemical operation of the test stand, and In 2017 Centrotech SPA LLC In-site e-transport of UEIP JSC and fabrication of the Plant of acknowledged thereby successful concluded the contract for elaboration PA ECP JSC was re-equipped from electrochemical transducers (at the completion of improvement of gas of manufacture and delivery of the conventional storage batteries to present time — the subdivisions analysis equipment complex of products with the leading Russian lithium-ion batteries. of Centrotech SPA LLC). Today Ecoalliance LLC. This modern test manufacturer of passenger transport Energy JSC carried out researches Centrotech SPA is the only world stand enables participation of the with grid-isolated run. Scopes of of active material for lithium-ion manufacturer of this product. subsidiary of the Urals Integrated > delivery are scheduled for 2018–2023. batteries, and obtained positive Its unique character is explained Electrochemical Plant in supplies of 14USD million Total amount of deliveries under the results proving applicability of the by great electrical capacity of products complying with EURO-5 Revenue from sales contract for the mentioned period will material in batch production of super-thin electrodes. and EURO-6 standards. of isotope products make RUB 8.6 bln. batteries by Energy JSC. Notwithstanding the difficulties on the international on the Russian automotive market — market exceeded sales of light vehicles decreased USD 14 million

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 94 95

Table 27 XX to identify and eliminate any losses New energy (excess inventory, decoupling Launch of the project “Production stocks, downtime, unnecessary planning with the supply chain”; New Products Basic Scope Supplies movements, etc.); introduction of “easy” decisions businesses enterprises XX to set an example to colleagues. at the first stage of the project allowed to reduce PT of supply Lithium and XX Lithium hydroxide-7 NCCP PJSC XX Transportation Russian lithium-based Federation, For details please refer to: chain planning by 30.5% XX Lithium metal XX Electric Power materials Germany, www.rosatom.ru/about/system. (from 82 days to 57 days). XX Lithium chloride XX Metallurgy USA, XX Aircraft Great Britain, RPS implementation is aimed By 2018 the project provides China XX Industries to integrate the idea of diligence for mapping of the planning XX Telecommunications and optimality into administrative processes, analysis of the Systems Materials XX Lithium Ferrophosphate NCCP JSC, Russian decisions-making logic at production current planning problems, for Li-Ion cells Katodnye Materialy Federation site, and through production — into XX Lithium cobaltate (Cathode Materials) determination and implementation LLC (NCCP JSC other processes and structural of arrangements for planning subsidiary) subdivisions of the company. organization in SAP, achievement Implementation of RPS projects of goals of planning PT reduction XX Lithium tetrafluoroborate SGChE JSC is focused on performance gain, and “just-in-time” production. costs reductions and improvement XX Electrolyte fluid for lithium batteries in the products quality. Knowledge of RPS tools and competence in

Accumulators XX Special purpose Centrotech XX Electric Power Russian applying these tools are a guarantee XX incentive and development and electric power (military and SPA LLC Federation XX Telecommunications of professional growth of employees programs for different level generators, space machinery) Systems engaged in the nuclear industry. employees. fuel elements electrochemical power sources Starting from 2015, ROSATOM (alkaline fuel cells) applies the system-based approach In 2017 seven enterprises of TVEL

XX Electrochemical power to deploy RPS at the pilot enterprises Fuel Company — MSZ PJSC, UEIP sources on solid oxide of the industry. JSC, KMZ PJSC, SGChE JSC, PA fuel cells The Company included into ECP JSC, ChMP PJSC, NCCP PJSC ROSATOM management system can confirmed their RPS Leader status, receive the status of RPS enterprise maintained the achieved level and only subject to system-based continued application of RPS tools application of RPS. According to the and principles. In the nearest 5 years NCCP JSC PRODUCTION Enterprises — concept of RPS development, all RPS Following the results 2017 AECC MANAGEMENT nterprises implement the integrated JSC was granted the status “RPS plans to increase revenue from RPS Leaders receive the non-nuclear products by 82% to TVEL Fuel Company has always been package of RPS arrangements, Candidate” with inclusion into the RUB 3.9 billion by 2022. concerned with special approaches package of privileges and are subdivided as follows: RPS application contour in 2018. to production and management XX RPS Leader, The work within the framework The enterprise holds strong processes in order to implement ROSATOM including the following: XX RPS Candidate, of the branch program “Complex position on the market of the strategic goals of ROSATOM Production System business-trainings at XX RPS Reserve. manufacturing optimization of nuclear commercial and isotope lithium with regard to the orders portfolio ROSATOM Production System (RPS) industry enterprises” and divisional products. expansion, to maintain efficient is the culture of lean manufacturing the enterprise, possibility The integrated package of RPS program “Transfer to operating production under conditions of severe and continuous improvement of arrangements provides for: models based on control over the The way forward is connected to share experience with XX with both export development and and ever-growing competition on processes aimed to reveal and reduce setting clear objectives to the whole supply chain” is aimed to production of high-technology the global markets. all losses in production and business the advanced Russian employees to the level of small improve performance of TVEL JSC processes, and to ensure competitive group leaders based on scope and the companies included into TVEL products — energy storage and foreign enterprises, systems based on chemical cells advantage on a global scale. definition of the enterprise, Fuel Company management system. (Li-ion cells). RPS is based on five principles family tickets, division, sector; In the reporting period TVEL Fuel which encourage the employees: XX RPS methodology training of Company opened and implemented The concept of NCCP site XX to be attentive to customer’s certificates for training the managers of the enterprises, more than 1027 RPS projects development involves continuation requirements; in ROSATOM Corporate participants of the projects; intended to address the issues in of work to upgrade production XX to respond the issues as they XX development of the product flows the product flows and to improve capacities, and to attract emerge; Academy, participation of the enterprise; efficiency of all business processes. investors for establishment of new XX to incorporate quality into the in Workspace Design XX implementation of RPS projects in More than 80% managers of TVEL productions using the available process and produce no office and at production site under FC enterprises were involved in the plant territories. defective products; project, etc. a single methodology; project activity.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 96 97

Table 28 In 2018 TVEL Fuel Company the whole TVEL Fuel Company. accepted SFIs were implemented Major RPS Projects implemented in 2017 intends to focus on the following The contest winners are awarded (in 2016 — 91,6%), which is areas of efficiency improvement: with diplomas, valuable gifts and illustrative of SFI quality growth. Enterprises Project Results product quality improvement, participation in corporate divisional 536 SFIs were found to be efficiency logistics improvement, production and branch events. suggestions. 86.8% were accepted TVEL JSC Project group for optimization XX PT reduction for the key flows by 31% flow efficiency improvement, forming The best SFIs take part in annual for realization, 89.7% — implemented. MSZ PJSC of through product flows XX Stock reduction in key flows by RUB 9.6 billion of branch RPS samples. It is also Industrial contest of suggestions In average, in TVEL Fuel Company NCCP PJSC ChMP JSC planned to develop the client-to- for improvement and projects one worker submits 5.6 SFIs. 80% of PA ECP JSC supplier principle within the supply on implementation of ROSATOM personnel of the Company participate UEIP JSC chain and the functions in relation Production system, held among in the improvement process through SGChE JSC to the material flow. the workers of the companies of SFI submission. AECC JSC ROSATOM State Corporation. Economic benefit from SFI Suggestions Following the result 2017 implementation following the results

TVEL JSC Industrial stability improvement XX Industrial stability improvement by 29 points (from 60 to 89%) for Improvement Trofimov S.V. — the maintenance of the year made RUB 289.3 mln. MSZ PJSC (Fabrication + KMZ) XX “Just-in-time” production improvement by 20 points (from 50 to 70%) The Company maintains regulated technician of UEIP JSC, became Amount of the paid personal NCCP PJSC XX payments for suggestions for the leader in the number of bonuses for the benefit from efficiency ChMP JSC RIP reduction at enterprises MSZ PJSC, NCCP PJSC, ChMP JSC, KMZ PJSC KMZ PJSC by RUB 772.1 mln improvement (SFI): implemented 174 SFIs. suggestions and SFI made RUB 40.8 XX Economic benefit under the project in 2017: RUB 39.6 mln XX payments equal to 300 / 700 / To increase involvement of the mln, amount of the operating bonuses 1,000 rubles for submitting workers in continuous improvement paid to minor groups for contribution SFIs of various categories and in 2017 KMZ PJSC organized the to efficiency improvement made

TVEL JSC Perfect turn XX Reduction by 118 thousand man-hours economic value; pilot Kaizen team with the purpose RUB 96.0 mln. PA ECP JSC (SSC enterprises) (from 2,986 thousand man-hours to 2,868 thousand man-hours) XX after SFI introduction — payment to reduce the time of SFI introduction. In 2017 enterprises of TVEL UEIP JSC XX Interoperability increase by 29.5% of interest from economic benefit In 2018-2019 it is planned to organize Fuel Company for the purposes of SGChE JSC (from 6.9 to 9.05 skills and competences per 1 worker) AECC JSC received from SFI introduction; similar Kaizen teams at other the labor efficiency improvement XX Reduction of time of response to deviation offset by 38.7% XX for assistance in implementation companies of TVEL Fuel Company. carried out the work to reduce the (from 21.6 min. to 13.2 min. per process deviation) of SFIs with technical solutions In 2017 there were filed more time spent to solve the production XX The project benefit — reduction in production (rationalization proposals): than 114 thousand SFIs. Efficiency problems, this allowed to manage costs by 66 million rubles/year up to 30% of the amount paid indicator of the SFIs process is the the time of the personnel. The to the authors. quality indicator; it is calculated as organizational arrangements were

TVEL JSC Adjustment of zirconium XX PT Reduction by 30% (from 133 days to 83 days) the ratio of the adopted SFIs to the carried out to eliminate the works that ChMP JSC products delivery for the client’s XX RIP reduction by 29% (from 193 tZr to 140 tZr) Personal and team RPS contests submitted ones. Thus, in 2017 93.8% bring no value, the measures were NCCP PJSC requirements XX 2 are also held at the level of enterprise SFIs were accepted for realization implemented aimed at improvement MSZ PJSC Warehouse reduction by 1742 m XX Economic benefit under the project: 525.8 RUB mln or structural subdivisions and (in 2016 — 93.1%), 95.4% of of labor efficiency.

TVEL JSC Increase of the value of work XX Labor intensity reduction by 167.4 thousand hours ChMP JSC of production personnel XX Increase in labor efficiency by 4.35% NCCP PJSC XX Diagram 15 MSZ PJSC Economic benefit under the project: 87.3 RUB mln KMZ PJSC Work with suggestions for improvement in TVEL Fuel Company

MSZ PJSC “Increase of RBMK flow XX PT Reduction by 20% (from 101.7 days to 81.4 days) efficiency” XX RIP reduction by 25.4% (from 131 tZr to 97.6 tZr)

XX Increase in labor efficiency by 7.2% (from 2.34 tU/person to 2.51 tU/person) 160,000 142,156

140,000 132,363 NCCP PJSC “Optimization of lithium stock XX PT reduction by 7.4% (from 95 days to 88 days) 121,255 114,448 supplies planning process” XX 120,000

Reduction in labor intensity of the process by 25% 108,295 107,312 102,380

(from 600 days to 450 days) 99,480 100,000 XX Increase in “meeting deadline” discipline from 25% to 75% 88,483

XX Economic benefit under the project: 29.776 RUB mln 80,000

60,000 KMZ PJSC “Improvement of the process of XX Decrease in tool circulation at production site by 25% instrumental support of the GC SFIs filed XX Tools and equipment costs saving in the cost structure by 0.2% 40,000 production” SFIs accepted XX Economic benefit under the project: 68.7 RUB mln 20,000 SFIs implemented 0 2015 2016 2017

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Manufactured Capital 98 99

Table 30 The System covers the full range organization. The required documents Results 2017 of design, development, production, have been worked out to comply with The foreign companies-customers storage, delivery and scientific- the requirements of IAEA and the have performed the audit of the technical support of FA and the customers’ preferences. quality management systems SFI per 1 worker 5.6 components of nuclear reactor The works have been scheduled to within the framework of nuclear fuel Operating bonuses paid to minor groups for contribution 96.0 RUB mln cores, including the materials and transfer TVEL JSC and its subsidiaries deliver for VVER and PWR reactors. made to efficiency improvement accessories. to new versions of ISO 9001 and Following the results of inspection, To improve IMS TVEL Fuel ISO 14001 for subsequent certification the Customers have noted positive Personal bonuses paid for the benefits from efficiency suggestions and SFI 40.8 RUB mln Company has introduced and updates in 2018. The works have been provided tendencies in development of the the culture of safe production — to develop and improve IMS, to integrated management system. Workers who submit SFIs 80% the priority objective identifying introduce risk-oriented management TVEL JSC and its subsidiary Economic benefit from efficiency suggestions and SFIs 289.3 RUB mln occupational activity of the workers model for sustainable success of companies (MSZ PJSC, NCCP PJSC, and the business processes of the TVEL Fuel Company. ChMP JSC, VNIINM JSC, SGChE JSC, PA ECP JSC, UEIP JSC, AECC JSC, KMZ PJSC, Tochmash VPA JSC, Centrotech SPA LLC, “Industrial Among TVEL FC enterprises the most Innovations” JSC) successfully SFIs per one employee were registered at passed the witness audit in 2017 with AECC JSC — more than 12 suggestions, and international certification authority T V Th ringen e.V. (representatives of at SGChE JSC — more than 10 suggestions Intercertifica T V LLC together with T V Th ringen). The active Integrated Management System certificate was confirmed. All measures were evaluated in terms In the reporting year no penalties of safety, compensatory measure were charged for non-compliance with were implemented. laws and regulations concerning the This resulted in increase of labor provision and use of products and efficiency in TVEL Fuel Company by services. 4.35%, and increase in interoperability The number of nonconformities by 29.5%. Increase in labor efficiency of nuclear fuel and gas centrifuges of production functions personnel revealed by the Quality Control made 4.4%. Department and representative of the customer at the manufacturing plants QUALITY MANAGEMENT in 2017 was reduced three times as For continuous improvement of compared to the previous year. quality, industrial safety and reduction of impacts of the industry and the products on the environment, TVEL Diagram 16 JSC has introduced and operates the integrated quality, ecology, health and Number of revealed labor safety and energy management nonconformities, ea. system (IMS) that was certified in accordance with the requirements of international standards ISO 9001:2008, 400 ISO 14001:2004, ISO 50001:2011 334 and BS OHSAS 18001:2007 at TUV 300 International Certification. focused on effective operation of TVEL Fuel Company continuously improves The main strategic goal of TVEL the quality management system has 200 JSC in terms of quality is permanent been elaborated and introduced to the product quality through technical 161 improvement of the product quality and achieve this goal; customer feedback upgrade of production, improvement of the operational safety, aimed at maximum is maintained to develop and improve processes automation, and implementation 100 54 compliance with the customers’ the activity of TVEL JSC; customers’ requirements, and allowing to expand satisfaction assessment is carried out of the number of investment and RPS 0 the markets, ensure sustainable on an annual basis. projects aimed at efficiency improvement 2015 2016 2017 development of subsidiary companies. The set of measures and procedures

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS 100 101

Diagram 17 Customers’ satisfaction assessment, points (five-point scale) Intellectual Capital

2017 Contracts 2016 Conclusion 2015 5,0

Overal 4,8 Sales Evaluation Management 4,6

4,4 for long-term competitiveness and 4,2 The main objective of scientific sustainability of TVEL Fuel Company, 4,0 since FE NFC services and products and technical activities of form the base of the Company TVEL Fuel Company is to ensure enterprises’ activity (85% based competitiveness of the products on results 2017).

Feedback Products and safety of production Main R&D issues: Quality and operation XX increased burnup fraction of unloaded nuclear fuel; XX improved operating life of FA; Quality XX improved operating reliability of Assurance nuclear fuel, justification for FA operating efficiency under the There were In 2017 the customers’ satisfaction The main areas of scientific and conditions of the increased capacity was assessed. Main customers of technical activities of TVEL Fuel of power units (for VVER-1000 no claims or TVEL Fuel Company involved in the Company are as follows: to 107% from Nnom) subject to complaints filed customers’ satisfaction assessment: XX improvement of existing safety assurance; by the customers XX Rosenergoatom structures, creation of new types XX creation of new types of gas in 2017. Concern JSC (Russia); and technologies of nuclear fuel centrifuges; XX Techsnabexport JSC production; XX optimization of TVS-K design No events of (TENEX JSC) (Russia); XX design and technological (for PWR), new types of fuel for non-compliance XX Slovenske elektrarne (Slovakia); development of the separation- research reactors, floating power with regulations XX Kozloduy NPP (Bulgaria); sublimation complex; units, new cores for nuclear- XX Paks NPP (Hungary); XX innovative activities in the non- powered icebreakers. and voluntary XX Energy Study Centre (Hungary); nuclear industry. certification XX CEZ (Czech Republic); Major R&D directions concerning impact XX Fortum (Finland); The scope of research and for nuclear fuel: of the products XX Research Center (Poland); development (R&D) is defined by XX design and improvement of XX Vattenfall (Sweden); the decisions of the management nuclear fuel and reactor cores and services on XX JNPS (China); of ROSATOM State Corporation, of Russian design (primarily health and safety XX State Enterprise National Nuclear contractual obligations, and is VVER-1000/1200/1300); were revealed Energy Generating Company subject to revision on an annual XX design of nuclear fuel for Western “Energoatom” (Ukraine); basis at the meetings of the Scientific reactors (PWR); XX Research Institute (Korea); and Technical Council No. 2 of XX design of nuclear fuel for low- XX Research Institute DNRI (Vietnam). ROSATOM — “Nuclear Materials and capacity nuclear power stations, Technologies of Nuclear Fuel”, the research reactors and nuclear- The average index of the customers’ STC of TVEL JSC and its sections. powered icebreakers. satisfaction level in 2017 was 4.49 points of 5 available. INNOVATIVE ACTIVITIES IN THE NUCLEAR INDUSTRY The innovative activity in the nuclear industry is of fundamental importance

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Intellectual Сapital 102 103

Results of implementation of the Plans 2018 Design of nuclear fuel doubled as compared to 2016, and partner for creation of the first Russian project “Moving towards Zero for nuclear fuel design for Western reactors made RUB 270 mln. R&D projects plant of layer-by-layer powder Failure” in 2017: and improvement (PWR): are being implemented with co- synthesis (metal 3D printer) together XX In accordance with the plan of XX Study of TVS-K within pre-test financing on the part of the Ministry with RPA CNIITMASH JSC. The ROSATOM State Corporation, NPPs 7 Introduction of the improved and assembly program at Ringhals NPP. of Education, in 2017 the amount projected cost of the home-produced and manufacturing plants have bln RUB new nuclear fuel and cores of NPP XX Postirradiation examination of fuel of co-financing made RUB 131 printer will be by 20–30% lower than introduced or implemented the up to 7 billion rubles with VVER-1000/1200/1300 and elements at Studsvik Nuclear AB. mln. In 2017 total amount of non- that of foreign printers. measures aimed to preclude the is planned to increase VVER-440 reactors: XX Development in cooperation with nuclear innovative projects financing The Ministry of Education and events of FA failure at NPP. the revenue from the sale XX Development of justification (critical the American companies of the reached RUB 500 mln. Science of the Russian Federation XX To preclude the FA failure caused of innovative products power ration, reflood at loss-of- supporting materials to ensure Main R&D areas for non-nuclear is the co-funder of the project aimed by debris-defects the specialists by 2020 from the current coolant accident) for operation of pre-test assembly program of fuel businesses development in 2017: at establishment of production of have elaborated and proved by 600 million rubles the cores VVER-1000 with TVS-2M assemblies TVS-K in USA. XX development and creation automated complexes of layer-by- experiments the structure of with mixing grid at the capacity of 3D printer; layer synthesis of geometrically- the 2nd generation anti-debris level 107%. SECOND BUSINESS CORE XX establishment of lithium complex metal parts (3D printer); filter (ADF) with the improved XX Implementation of R&D program DEVELOPMENT hydroxide production; the project is being implemented characteristics. Introduction of new on computational-experimental TVEL Fuel Company is engaged in XX development of equipment and with involvement of the top higher batch of FA with ADF-2 is planned justification of the cores VVER- development of innovative areas of centrifuge technology for REE educational institutions of Russia, in 2018 at Rostov NPP. 1200 and VVER-TOI (safety limits, activities (additive technologies, new isotopes separation; enterprises of ROSATOM State XX Low level of failure is registered 500 radioactive GFP, controllability, etc.). materials and alloys, implementation XX development of new titanium alloys Corporation. mln RUB at Rostov NPP, Zaporozhye NPP, XX Development of TVS-2006 of new types of isotope products, and articles made therefrom; In 2017 the unified branch total amount of innovative Rivne NPP, some units of Balakovo design with the improved energy generators and storage XX development of design and integrator — RusAT LLC — was non-nuclear projects NPP. Kozloduy NPP is the leader thermomechanical behavior units, small-size gas turbine plants). manufacturing technique of the established within the group of financing in 2017 in the lowest number of failed FA (including without fuel assembly There are plans to increase revenue long-range superconducting wires; TVEL JSC in a new business area over a long period of time. From fixation in support grid). from sales of innovative products from XX establishment of energy storage of ROSATOM State Corporation. 2012 to 2017 only one failed FA was XX Preparation of materials for current RUB 600 mln to RUB 7 bln production. The integrator will ensure production detected at Kozloduy NPP, this fact XX Development of technical projects justification of operation pre-test by 2020, subject to successful and rendering of complex services proves high quality of nuclear fuel of NPP-2006 core with conventional assembly program of TVS-4 on the implementation of investment projects Additive Technologies in the field of additive technologies: production and excellent operation and regenerated fuel. Unit No. 3 Rostov NPP. and implementation of M&A plans. In 2015 Ural Electrochemical production and delivery of materials of these units. XX Conclusion of the contract with XX Implementation of the “Program It is impossible to establish new Integrated Plant (UEIP JSC) became (metal powders, rods made of Engineering Company ASE JSC of experimental and theoretical non-nuclear production without R&D. the winner of the contest organized by different materials), 3D printers, Operating results 2017 under the project Paks-2 NPP computation studies for justification Scope of non-nuclear businesses the Ministry of Education and Science production and delivery of articles. from improvement of nuclear (Units 5 and 6) for elaboration of the of extended dry storage of new R&D financing is being steadily of the Russian Federation, and Growth of the global market fuel properties and production document on nuclear fuel. type FA”. increased. In 2017 scope of works secured the status of the industrial and development of the Russian technologies XX Preparation and signing of the XX Introduction of TVSA-T.mod.2 contract for delivery of new nuclear design for Temelin NPP Design and introduction fuel and rendering of services (Czech Republic). Diagram 18 Diagram 19 of nuclear fuel and cores of involving licensing of fuel for XX Development of documentation Investments into R&D Scope of non-nuclear Russian power reactors: Akkuyu NPP. to justify the expansion of pre- by TVEL JSC, businesses R&D financing, XX Development and approval of test assembly program of the RUB mln RUB mln technical projects of fuel elements, Design of nuclear fuel for low- third generation cartridges and fuel elements with Gd and fuel capacity nuclear power stations, implementation of local parameters assemblies TVSA-T.mod.2 for research reactors and nuclear- control on the Unit No.4 Kolsk NPP. Temelin NPP. Acceptance testing of powered icebreakers: XX Expansion of pilot operation of the 300 fuel pellets (uranium and urania- XX Acceptance testing of experimental third generation cartridges on the 270

1,600 1,494 gadolinia), fuel-elements claddings, double FA MR 0039.04.00.000 power unit 4 of Kolsk NPP in order 1,400 250 bottom nozzles. The above with LEU-fuel for MARIA research to confirm representativeness of the

listed articles have been put into reactor in Poland. reactor core control using In-Core 1,200 1,460

1,195 200 1,154 production. XX Optimization of design and Monitoring System. 1,000 XX Execution of documents for production process of experimental XX Design engineering of cartridge 150 800 industrial operation of TVSA-PLUS. fuel elements of MIR type with fuel elements with outer 103 XX Preparation and signing of with high-density uranium- diameter 8.9 mm. Elaboration of 600 100 supplement to the contract for molybdenum fuel. the supporting materials will be 400 75 delivery of TVS-2M to Tianwan XX Post-irradiation examination of completed in 2019. 50 200 NPP (Units 3-4) and engineering two experimental FA IRT-3M with XX Design engineering of jacketless services. uranium-molybdenum fuel after assemblies RK-3+ for Dukovany 0 0 XX Feasibility studies of RK-3+ irradiation in MIR research reactor NPP. 2015 2016 2017 2018 2015 2016 2017 application at Dukovany NPP. with average burnup 60%. (plan)

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Intellectual Сapital 104 105

Scheme 6 At the moment neither company has Potential consumers of 3D printers reached all combined characteristics of superconducting wire set by the requirements of ECNR for FCC project. It is planned that the required characteristics will be attained by 2020. Other types of low-temperature MILITARY- INDUSTRIAL AIRCRAFT ENERGY MACHINE superconductors — NbTi-based COMPLEX INDUSTRY INDUSTRY BUILDING wires — are required for creation of modern medical equipment, primarily XX Production XX Production XX Production XX Production MRI-scanners. of geometrically- of elements of turbine of geometrically- In June 2017 VNIINM JSC complex for aircraft blades complex received the utility model patent elements of engines elements “Superconducting composite special-purpose of different magnesium diboride based (MgB2) devices structures wire”. Magnesium diboride based wires can be applied to create magnetic systems of medical additive technologies market are the Results 2017: Superconductors tomographs, where traditionally important determinants of this area. ADDITIVE TECHNOLOGIES the prototype has fuel efficiency Production of metal powder samples In furtherance of the competences there are applied superconductors By 2025 the global market is valued FOR GAS TURBINE ENGINES improved by 40% and tenfold for 3D printer with the quality in the area of low-temperature based on NbTi alloy, and also for at RUB 980 bln, and Russian — increased operation life. exceeding the foreign analogues. superconductors, TVEL Fuel Company wind machines and complex power In July 2017 TVEL JSC presented at RUB 61 bln. The estimated share at the International Aviation and The technological groundwork, laid Decision-making concerning continues the development of design lines with simultaneous transmission of the integrator will be 5% and 45%, Space Show MAKS-2017 the at development of the prototype improvement (together with and manufacturing technique of of electricity and refrigerating agent respectively. unique development by Grigory of gas turbine low-thrust engine, Centrotech SPA LLC) of powder wires for the project of the European (liquid hydrogen) in one pipe. Possibilities created by the Shanin, the student of the Bauman became the foundation of new production plant with a view to apply Centre for Nuclear Research (ECNR, Possibility of operation under integrator with 3D technologies: Moscow State Technical University. investment project opened by TVEL additive technologies internationally Switzerland) on creation of FCC conditions of refrigeration with liquid XX manufacturing of products of JSC. The Company intends to on an industrial scale. (Future Circular Collider), and for hydrogen, neon, helium vapors and The prototype of gas turbine low- any configuration and form, start pre-test assembly program of The pilot model of metal poly- magnetic systems of high-energy cryocoolers, and relative low price of thrust engine developed by Grigory with complex inner structure engines at one of its sites. powder 3D printer of the second physics facilities, and for other base materials are the advantages (inside passages, etc.); Shanin during his studies, with generation of 3D printers, developed applications. of magnesium diboride based XX considerable weight-saving support of TVEL Fuel Company by ROSATOM State Corporation, was In 2017 the design and experimental superconductors over conventional of ROSATOM, was selected for ADDITIVE TECHNOLOGIES (by 50% and more, due to removal assembled in November. Print modes technology for production of Nb3Sn- low-temperature superconductors of passive sections); competition of innovative youth FOR FA of the assembled 3D printer are based superconducting wire were (Nb3Sn and NbTi). ideas, and in 2017 was admitted XX materials saving (application of In August 2017 VNIINM JSC formed being adjusted. developed at the request of ECNR To use the specified advantages, the winner at the final stage of more than 95% material; during the work team for development of It is planned that in 2019 a high- for the project on improvement of the characteristics of wire, attained Young Professionals Tournament conventional machine processing — the pilot technology of 3D printing tech production for 3D printers the existing LHC collider. The wire by now in the world production, must “TeMP” of ROSATOM State less than 30% material is used); of FA end pieces. The capabilities of assembly will be established at was designed based on “internal be essentially improved. That is why Corporation. XX savings in production mastering additive technologies will be used Novouralsk site of TVEL JSC; this will tin source” method. Pilot lot of wire MgB2 based superconductors are not (twofold reduced lead time); The design of gas turbine low- in nuclear industry for production of additionally create nearly 30 jobs. has been sent to ECNR for tests and used widely in electrical equipment, XX savings in labor costs (labor thrust engine for unmanned elements for all types of FA. First of experimental cable manufacturing. and their application is limited to pilot intensity is reduced 3–8 times); aerial vehicles was improved with all, these are the end pieces: heads, Plans 2018: It is planned that in 2018 the and demo units with low magnetic XX creation of the articles with unique additive technologies: 70% of bottom nozzles, support grid, anti- XX Development and presentation required wire characteristics for FCC field (<5 T) and temperatures up and improved technical parameters; elements are produced using layer- debris filters. These articles are of the integrator development will be achieved with the experimental to 15–20 K. XX unique combination of materials by-layer technique. Gas turbine difficult-to-make using the existing plan, provision of the integrator samples. Conclusion of the contract At present high-temperature (creation of composites using plant can be in demand on the methods, application of 3D-printing activity funding. with ECNR for production of superconductors are considered materials that cannot be interfused world and the Russian UAV market. will make it possible to produce XX Development of the product line. qualification batch of superconducting as base materials for application in by any other way, for instance, As compared to the competitors, articles with unique design. XX Preparation of the intra-branch list wire is planned for the first half of the the wide range of electrotechnical ceramics-metal, etc.). of articles that can be produced year. VNIINM JSC is the developer of devices. Current limiters, power with application of additive design and technology, and ChMP transmission cables, transformers, technologies. JSC is involved in production of electric propulsion systems, energy the pilot batches and technology storage units — this is the incomplete elaboration. The world leading list of devices where application of companies from the USA, EU, Korea, high-temperature superconducting Japan and China are also engaged in materials may lead to significant development of wire for FCC project. improvement of performance

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Intellectual Сapital 106 107

Main results 2017: (SIT) of MEPhI NRNU of training Plans 2018: “Proryv” XX Construction of walls and floors of programs for the required job XX erection of process equipment the main process buildings, start clusters. 36 persons were accepted for MNUP fuel production; of special steel lining of the inside for re-training in first two groups. XX production and delivery to BN-600 (Breakthrough) premises. of three EFAs with MNUP fuel to XX Heating pipe main was laid to the In 2017 SGChE JSC performed justify the working efficiency of PDEC site, now the buildings are R&D using experimental benches RU BN-1200 fuel; Project connected to the heating line. for elaboration of technology for fast XX R&D for elaboration of SNF XX SGChE received non-standard reactors SNF recycling, that made reprocessing technology; equipment for 15 FRM it possible: XX state expertise of the project process plants. documentation for BREST-OD-300 construction; XX preparation of documentation for module for extraction (SNF PM) of construction of BREST-ОD-300 “Proryv” is the major modern nuclear power 99.9% nuclear materials, which will reactor; be used for MNUP fuel production. XX training of the workers for FRM project. It provides for creation of the Construction of three facilities — operation, with the involvement FRM, BREST-OD-300 and SNF RM — closed nuclear fuel cycle that will make it of the resources of the National will provide the opportunity to master Research Tomsk Polytechnic possible to preclude severe accidents at NPP, the technology and prove the closure University and Seversk Institute of of the nuclear fuel cycle; no other Technology of MEPhI NRNU. to generate power without irradiated fuel country has ever managed to do this. Its is planned that nearly 1000 jobs production, and to recycle the spent nuclear Mox-Fuel Project will be created with PDEC. To launch Industrial production of MOX-fuel fuel. This will resolve the problem of the FRM by 2020 more than 250 workers was established for fuel supply of must be employed and trained. limited availability of resources in nuclear Unit No.4 Beloyarsk NPP with SGChE was chosen as the site BN-800 reactor facility. for PDEC because this industrial power industry, and will contribute to non- In 2017 TVEL JSC together complex has all specialists required with FSUE MCP worked on proliferation of nuclear weapons. for nuclear fuel cycle closure: for elaboration of MOX-fuel production work on reactor, for fuel production technology and attainment of and for irradiated nuclear fuel the design capacity, launch into recycling. Besides, Tomsk has the manufacture and production of fuel Within the project the Siberian Group XX absence of practical unique scientific potential, which has under the current contracts with of Chemical Enterprises (SGChE restrictions of fuel base; been in demand during the whole Rosenergoatom Concern JSC. JSC) creates a pilot-demonstration XX engineering support of non- period of research activities at PDEC. energy complex (PDEC). The main proliferation regime; By the end of 2017, 50% of XX Improvement of design solution to XX to justify selection of the combined Nuclear Fuel for Fast Rectors task of PDEC is to prove stable XX ability to compete with other large- construction of main FRM process reduce prime costs of the reactor technology for spent nuclear fuel In 2017 production of FA BN-600 operation of the full complex of scale nuclear-power technologies, buildings are completed, unique construction. reprocessing for SNF PM; with EK164 steel jacket FAs for objects that ensure closure of fuel including non-nuclear. process equipment is manufactured XX Development, production and XX for the first time in Russia to reduction of BN-600 reactor core cycle with application of fast inherent and delivered at the construction site, installation of three experimental produce powders of mixed was continued. Application of the safety reactors. The Proryv Project is PDEC involves the fabrication/ namely: FAs with MNUP fuel in the reactor uranium and plutonium oxides advanced austenite steel EK-164 will the top-priority project of ROSATOM re-fabrication module (FRM), power XX unit for carbothermic synthesis; facility BN-600 (Beloyarsk NPP) for using SHF denitration; make it possible to increase reactor in the planning horizon 2035–2040. unit with BREST-OD-300 reactor XX units for pellets pressing; justification of operation capacity of XX to set requirements to the life and to improve efficiency of fuel Closed nuclear fuel cycle — is facility, and SNF BREST-OD-300 XX high-temperature continuous RU BREST-OD-300 fuel. analytical equipment of the future utilization of power unit No. 3 of a new integrated product in the sphere reprocessing module, including furnace for production of uranium XX Starting from August the SNF PM. Beloyarsk NPP with BN-600 reactor. of nuclear power technology offering the facilities to handle high-activity plutonium fuel pellets. applications are being accepted the following unique properties: wastes from reprocessing module, from SGChE employees who want Total amount of investments in XX elimination of severe accidents; fabrication/re-fabrication modules In 2017 the project documentation to undergo training and to work at construction of PDEC objects in 2017 XX consistent reduction of and reactor facility BREST-OD-300. on power unit with BREST-OD-300 PDEC facilities. Development in made nearly RUB 2.6 bln. accumulated SNF and transition FRM is intended for production reactor facility was improved. cooperation with the specialists of to generation of RW which is of mixed nitride uranium plutonium Launch of PDEC FRM under the Seversky Institute of Technology radiation- and toxic-equivalent to fuel for start load and reload of the Federal Target Program is planned the relevant properties of uranium BREST-ОD-300 reactor. Spent mixed for 2020. raw materials (radiation-equivalent nitride uranium plutonium fuel is RW burial); transferred to the SNF processing

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Intellectual Сapital 108 109 characteristics as compared to thermal and nuclear-physical into high-purity quartz concentrate. Table 30 conventional devices (decrease of properties of low-activated structural The whole output will be delivered to Number of registered inventions, utility models, industrial designs weight and size, improvement of materials. The research results are Europe on QSIL enterprise, the world and production secrets (know-how), ea. network reliability, etc.). protected by two patents and nine leading manufacturer of articles out of “Applied superconductivity” has “know-hows”, more than 40 articles quartz. In particular, high-purity quartz Items of intellectual property 2015 2016 2017 been determined as branch-wise have been published in refereed sand, produced in Irkutsk region, will Russian Inventions 53 40 40 strategic technological direction journals. be used to manufacture quartz glass, that includes development of high- which is widely used in semiconductor Foreign Inventions 3 2 1 temperature superconducting (HTS) Quartz Сoncentrate industry for production of processors, Russian Utility Models 6 1 5 materials and HTS-based devices, In July 2017 AECC JSC and German computer memory devices, etc. including with involvement of the company QSIL GmbH signed the legal The project complies with the Foreign Utility Models 1 0 0 enterprises of TVEL Fuel Company. binding documents on establishment principles of the Uniform Industry- Russian Industrial Designs 0 0 0 of joint venture Quartz LLC for Specific Policy for development of High-Tech Steel production of high-purity quartz new businesses of ROSATOM State Foreign Industrial Designs 0 0 0 In summer 2017 the scientists concentrate. Share of QSIL GmbH Corporation, and is intended to of VNIINM JSC represented the in the project will make 60%, share address the strategic objective for Production Secrets (Know-How) 96 61 62 development result of high-tech of AECC JSC — 40%. Production development of the second industrial steel EK-181 (RUSFER-EK181) facilities will be created at AECC core due to the market launch of for the cores of nuclear and fusion JSC industrial site. Total amount of new export-oriented products. New reactors with liquid metal coolant investments in the project is estimated enterprise can hold 2,5% of the of TVEL JSC, as well as to technical with operation temperature at RUB 600 mln, including initial world market of high-purity quartz departments, development design up to 700 degrees. contributions of shareholders to the concentrate, and in future can offices, intellectual property protection Its advantages include high- authorized capital of the enterprise, increase this share to 10%. teams and patent-information temperature strength, heat and scheduled recapitalization and The start of pilot batch production departments of the Company’s radiation resistance, rapid activity funds raising. is scheduled for 2018. Launch of enterprises. decay. Application of steel will make The project implementation production line is scheduled for 2021, In 2017 there were registered 108 it possible to improve neutronics will allow creation of international initial production output will be 250 intellectual property items. of reactor cores due to decrease of industrial cooperation in vertically tons/year. The enterprise will create As of December 31, 2017 TVEL parasitic neutron loss, and will ensure integrated production chain. New 50 new jobs. Fuel Company holds 45 national reduction in expenses for RW enterprise will use hydrothermal and regional patents of foreign disposal and burial. synthesis to grow synthesized Titanium Dioxide countries (countries of the European In the course of elaboration and high-purity quartz crystals out of the In 2017 the project company “Sibirsky Union, USA, Japan, etc.) for items commercial development of steel EK- gangue quartz mined in deposits of Titan” LLC was established for the of intellectual activity. 181, VNIINM JSC created materials the Polar Urals and Irkutsk region; purposes of joint implementation knowledge bases for stress-strain, then the crystals will be reprocessed of the project on production at the Involvement industrial site of SGChE JSC of the of universities in projects import-substituting titanium dioxide, implementation which is widely applied in paint-and- VNIINM JSC carries out R&D varnish industry. The investors are in cooperation with the leading SGChE JSC and Davinchi Holding educational institutions: Company. Completion of equipment D.I. Mendeleev University of installation and start of pre-test Chemical Technology of Russia, assembly program are scheduled INTELLECTUAL created by the enterprises of TVEL I. Kant Baltic Federal University, for 2018. PROPERTY Fuel Company, are performed in National Research Nuclear University As of the end of 2017 TVEL Fuel compliance with the requirements MEPhI, National Research Tomsk Company holds 1,881 items of of Russian Federation legislation, Polytechnic University, etc. intellectual property. The objects Standard Industry Methodological Non-nuclear businesses are being protected by the law include Recommendations and local developed in innovative areas of inventions, utility models, production regulations together with “Nauka and activities. Participation of the core secrets (know-how), software for Innovatsii” (Science and Innovations) universities of ROSATOM makes electronic computing machines, JSC, the Division for Innovations it possible to engage the most databases, trademarks and Managements of ROSATOM State ambitious teams and scientific industrial designs. Corporation. research results. Assessment of the intellectual Functions of identification and property items, the system of legal protection of the items of identification and legal protection intellectual property are assigned to of intellectual property items, the Patent and Licensing Department

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Intellectual Сapital 110 111

In the area of Additive Technologies the Company cooperates with National University of Science and Technology MISiS and St. Petersburg Polytechnic University as regards R&D for creation of multipowder 40 3D printer. Currently the project is Russian inventions being implemented on production registered in 2017 of automated complexes of layer- by-layer synthesis of geometrically- complex metal parts (3D printer); the project is co-funded by the Ministry of Education. In 2017 Centrotech SPA LLC together with the team of the Ural Federal University and the Institute of 62 High Temperature Electrochemistry Production Secrets of the Ural Branch of the Russian (Know-How) Academy of Sciences elaborated the registered in 2017 working design documentation for power plants on solid oxide fuel cells 250W and 500 W. The technology of production of unit fuel element, The products under development The work with the Moscow stack, solid oxide fuel cell, held COMPUTER MODELLING in the interest of the enterprises will be applied primarily at the objects Aviation Institute is also in progress by Centrotech SPA LLC (ZEP LLC) CENTRE of ROSATOM State Corporation. of Gazprom PJSC (to power the in the sphere of development of new and developed in 2016 together The unified quality standard will be cathodic protection station, and the titanium alloys and establishment of The Computer modelling centre was with the Ural Federal University and introduced to carry out research for infrastructure facilities of the pipeline industrial production of articles made 215 the Institute of High Temperature established at VNIINM JSC in order system of Gazprom PJSC). The future of such alloys for the purposes of the RUB mln models development and verification; Electrochemistry of the Ural Branch to consolidate knowledge and to would-be customers are mobile aircraft industry. Amount of investment of the Russian Academy of Sciences preserve essential competences. activity of specialists on modelling network operators, major electric Amount of investment for R&D in for R&D in higher served the base technology for this and production and representatives distribution companies, housing and higher educational establishments educational establishments The Computer modelling centres development result. This development of the regulating authorities will also utility sector objects, settlements was RUB 215 mln in 2017. was in 2017 will make it possible to develop new is unique due to refusal of precious be coordinated. that are distant from electric power metals, which will make it possible engineering materials and types of transmission lines, etc. to reduce the price of the article at fuel both for nuclear and thermo- Establishment of the Computer The issue is being negotiated batch production, and to make use of nuclear power engineering, to modelling centre will improve the concerning engagement of D.I. the articles on the objects where no enhance capabilities of VNIINM JSC existing computing tasks of VNIINM Mendeleev University of Chemical security is required (unlike the articles Technology of Russia to production and to consolidate its competitive JSC, lead to reduction in expenses with high content of precious metals). of isotopes of light elements. performance on the Russian and for this type of services through Production of demonstration model of power plant 250W and demonstration foreign markets with breakthrough outsourcing, result in improvement model of power plant 500W is planned researches in the sphere of modern of performance and quality of works for 2018, as a continuation of the material engineering. performed by the institute. joint activity. The Computer modelling centre of VNIINM JSC will become the integrator for computer modelling

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 112 113

Table 31 Human CapitaL 91% Key indicators ∆ 2017/ 2018 Staff density Indicator 2015 2016 2017 2016, % (plan)

TVEL Fuel Company headcount 22,724 21,843 21,391 –2.1 – , % at the year-end, persons 14 Average Headcount of TVEL Fuel Company, 22,527 22,127 21,793 –1.5 22,645 Unwelcome persons turnover Candidates and Doctors of Science, 235 260 284 9.2 280 persons

Holders of MBA degree, 15 17 18 5.9 2 43 years persons Average age HR Policy of the Company is intended to ensure Employees employed in the industry for more 82 84 82 –2.4 82 steady growth of labor efficiency, the balance than 5 years, % between the interests of its employees > and the employer, rational use of professional 350 RUB mln and management capabilities in accordance Allocated The ultimate goal of these processes In March 2017, within the with the long-term development strategy for pay rise with regard to HR management is to enhance labor efficiency in TVEL FC framework of the corporate and indexation of the Company subsidiaries to match major foreign HR policy and with the competitors. purpose of preserving labor At the same time, the target staff resources, a part of staff was 21.9% figures are growing, which is due to transferred with observance HR POLICY the rapid development of general Young specialists of current labor legislation of All HR management activities, industrial activities. The production under 35 years old the Russian Federation from which are undertaken to achieve the and provision of non-nuclear services Principles of HR management ensuring SibRegionPromservis LLC goals set, are focused on the long- entail not only the development the achievement of strategic goals term personnel stability of TVEL of new markets outside NFC, but (subsidiary of SGChe JSC) Fuel Company. also the need to create substitute to Research and Production

Midterm HR Policy Development 11 high-tech industries for the released Company VAB-70 LLC. Workers Plans: qualified staff. per 1 manager In the difficult economic situation XX development and further Major part of the employees prevailing at SibRegionPromservis, improvement of safety culture; are men (65.4%)1. Average age of Caring for people Partnership Security when production efficiency XX provision of incentive tools employees of the Company is 42.6. efficiency; The employees under 35 years old enhancement and process XX development of professional 4-5 comprise 21.9% of total staff. optimization program aimed Levels of qualifications system; at its financial recovery was management XX development of the corporate launched by TVEL JSC, an culture; in production acceptable solution was found XX promotion of the employer brand. allowing to employ laid-off specialists. 75 former employees STAFF COMPOSITION of the subsidiary company of The process of production 3 subsidiary of SGChe JSC were concentration led to headcount Levels of hired by agreement of the parties optimization. Thus, the share of newly management created jobs reduced by 53.9%, in office by VAB-70 LLC, with retention and the total average headcount for of their competencies and the year 2017 decreased by 2.1%. wages. In addition to guaranteed Steady decrease in headcount transfer to a new employer, in 2015–2017 was caused by 2.2 times employees also received additional restructuring processes, centralization Average pay remuneration for their work with of management functions and in the Company is higher 1 82% of top managers SibRegionPromservis. personnel outsourcing. than average pay in Russia in TVEL Fuel Company are men.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 114 115

Diagram 20 Diagram 21 Diagram 22

Average Headcount of TVEL Fuel Company, Composition of top management in TVEL FC subsidiaries Jobs creation persons by residence in the reporting year, % in TVEL Fuel Company*1

1,000 TVEL Fuel Company hires mainly Irkutsk region 25,000 the local residents in the territories 23,124

22,645 Krasnoyarsk territory 800 22,527 22,391 22,127 of presence, and involves specialists 21,793 from other regions only if and when 20,000 Tomsk region 609 no properly qualified candidates 600 522 are available at the local labor 15,000 Sverdlovsk region market. So, due to implementation 400 329 of a new project on production Novosibirsk region 281 10,000 sites concentration at Tochmash 200 198 VPA JSC and KMZ PJSC, the Udmurt Republic 5,000 share of top management rotated Vladimir region 0 from other regions has increased 2016 2017 2018 2019 2020 0 in Vladimir region. Moscow region (plan) (plan) (plan) 2015 2016 2017 2018 2019 2020 (plan) (plan) (plan) Moscow

0 20 40 60 80 100

Local population, % Rotated from other regions * Creation of new positions at enterprises of TVEL Fuel Company within the industry, % for current and new projects. Table 32 Average headcount in key production enterprises of TVEL FC in 2017, persons

Enterprise Headcount Diagram 23 Diagram 24

Angarsk Electrolysis Chemical Complex (AECC JSC) 907 TVEL FC total headcount TVEL FC total top managers by age in 2017, headcount by age in 2017, Electrochemical Plant (PA ECP JSC) 1,938 persons persons Siberian Group of Chemical Enterprises (SGChE JSC) 3,400

Ural Electrochemical Integrated Plant (UEIP JSC) 2,137 1,936 1 Total per SSC 8,382

Machine-Building Plant (MSZ PJSC) 4,059 6,640

Novosibirsk Chemical Concentrates Plant (NCCP PJSC) 1,345 Under 30 years old 30–50 years old Chepetsky Mechanical Plant (ChMP JSC) 3,094 55 50+ Total per NFFC 8,498 Kovrov Mechanical Plant (KMZ PJSC) 972 72 Total per GCC 972

Centrotech SPA LLC 986 12,815

Bochvar Institute (VNIINM JSC) 918

Tochmash VPA JSC 1,215

Total for Research Complex 3,119

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 116 117

Table 33 SGChE JSC employs the Chemical Club “Element of the SGChE JSC has organised the Personnel Engagement, % Provision on Housing Conditions Future” was formed by TVEL 4th Science Festival “Energy of Improvement for Employees Fuel Company in February 2017. Intelligence” with more than 1,000 Enterprise 2015 2016 2017 of SGChE JSC aimed at social The project is aimed at increase guests, 70 participants, 20 master TVEL JSC 87 85 83 support of its employees. of personnel engagement in classes, 2 quests, 3 film shows Angarsk Electrolysis Chemical Complex (AECC JSC) 93 96 97 In the reporting year 18 employees the Company’s production and and countless positive emotions. improved their housing conditions technological operation processes Employees of the enterprise and their Bochvar Institute (VNIINM JSC) 83 84 85 based on chemical knowledge. with help from the enterprise, families, schoolchildren of Seversk Kovrov Mechanical Plant (KMZ PJSC) 91 89 90 and 22 employees — in 2017. In addition, the club is created as who plan to make their career in Tochmash VPA JSC 85 – – a communication tool to promote nuclear industry were invited to the UEIP JSC won the regional the formation of professional festival. The program of the festival Centrotech SPA LLC 66 64 80 stage of the Federal Contest communities of chemical engineers was rich in scientific master classes “Russian Organization of and laboratory chemists, as well Electrochemical Plant (PA ECP JSC) 92 91 93 in three areas: “The Universe”, High Social Performance” in as other specialists of TVEL JSC “Earth”, “Human”. Here one could Ural Electrochemical Integrated Plant (UEIP JSC) 78 92 98 nominations “For jobs creation enterprises — carriers of chemical take part in a family competition to Siberian Group of Chemical Enterprises (SGChE JSC) 78 66 82 and development in organizations competencies. It is important to note create Shurush-battele aircraft. of the production sector” and the importance of the Chemical Club Machine-Building Plant (MSZ PJSC) 80 80 83 “For the reduction of occupational “Element of the Future” spreading MSZ PJSC took the 4th place in Novosibirsk Chemical Concentrates Plant (NCCP PJSC) 75 85 85 injuries and occupational chemical knowledge in Russia and in Trade Jobs Best Employers rating of diseases in organizations of international communities, including the Moscow Region, according to the Chepetsky Mechanical Plant (ChMP JSC) 83 67 63 the production sector”. among students and school youth. Regional Problems Study Centre. Average on TVEL FC 83 82 83

Staff number at SGChE JSC industrial program in the Russian PERSONNEL Based on the survey results, will be preserved nuclear fuel production chain. In ENGAGEMENT the management of each enterprise The total headcount number at addition, extensive long-term works Much attention is given to personnel develops action plans aimed at SGChE JSC, as well as those on decommissioning and maintenance engagement in the industry. increasing and maintaining the level employed by TASED residents in safe condition of former facilities Personnel engagement, employees of personnel engagement. Thanks to will be 5,600 by 2021. of the radiochemical and chemical- involvement in business and success the work done, TVEL Fuel Company As of January 1, 2017, the company metallurgical plants are to be of the Company have direct effect on takes top positions in personnel had 3,515 employees. According performed by qualified personnel business performance and efficiency. engagement among the industry to the forecasts of TVEL JSC of SGChE JSC. It will take several Engagement study is conducted divisions year on year, being among Managing Company, by 2021 the decades to bring this part of the annually at enterprises of the division the “Best Employers of Russia”. total headcount at EDEC facilities of site into a safe state, and this, in its and the industry under the unified SGChE, the established industrial turn, will provide jobs for more than industrial slogan: “ROSATOM Cares enterprises and enterprises of TASED 700 people for the entire long-term About Your Opinion”. In general, Seversk will be 5,600 persons. rehabilitation period. annual surveys allow to estimate staff According to the target figures, sentiments at the enterprise, to assess 1093 employees will be engaged satisfaction with work conditions by at Proryv Project. Nearly 2.5 thousand 19 factors, and to determine the share employees will work at the enterprises of involved employees who: formed by general industrial activities XX recommend their company as of SGChE and in the structures a good employer to their relatives of TASED residents. At the same and friends; time, SGChE JSC preserves a XX strive to do the best job they can, unique technological conversion — improve production processes and the Conversion Center, which is come up with improving proposals; designed to perform the entire XX intend to keep being employed by the Company in future.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 118 119

Diagram 25 Table 34 Ratio of average pay in the subsidiaries of TVEL Fuel Company Average salary in TVEL FC to average pay in regions of operations, times* (TVEL JSC not included), RUB

Average pay in the region Region 2015 2016 2017 in the reporting year, RUB

100,000 Moscow 2.56 2.30 2.83 59,823 85,370

77,561 Moscow region 1.70 1.71 1.94 38,830

80,000 74,648 70,042

60,000 Vladimir region 1.59 1.57 1.87 22,807

Udmurt Republic 1.80 1.86 2.16 24,078 40,000 RUB Novosibirsk region 2.16 2.26 2.61 26,796 20,000 77,561 Average salary in TVEL FC Sverdlovsk region 2.33 2.51 2.77 28,959 0 (TVEL JSC not included), 2015 2016 2017 2018 which is 4% higher than Tomsk region 1.98 2.02 2.36 31,604 (plan) in the previous year Krasnoyarsk territory 2.38 2.49 2.68 34,468

Diagram 26 Irkutsk region 2.38 2.38 2.74 31,110

Average pay at TVEL FC * Including TVEL JSC. subsidiaries, RUB

MOTIVATION XX selective reconsideration of the XX there might be increase of annual KPI system for top executive AND REWARD SYSTEM employees’ personal additional premium rate in certain enterprises management and inferior 2015 AECC JSC Incentive and reward policy in incentive following the results of (increase by per cent corresponding management 2016 TVEL Fuel Company is aimed the annual assessment; to salary indexation per cent); Business performance management 2017 at maintenance of salary XX review of remuneration system and XX selective reconsideration of the system applied by TVEL Fuel ChMZ JSC 2018 competitiveness. The salary benefits efficiency in the Company’s employees’ personal additional Company is based on generating (plan) increase and indexation amounted enterprises; collection, of the incentive following the results of the of KPI list ensuring comprehensive NCCP PJSC RUB 350 mln in the reporting period. employees’ proposals for alteration annual assessment; development of division for the The average salary level in TVEL of salary disclosure documents. XX updating of local salary and Company’s top management. MSZ PJSC Fuel Company (TVEL JSC not benefits disclosure documents in Maximum preference is given to included) made RUB 77,561 which Arrangements 2018: order to improve their efficiency such spheres as nuclear, radiation, is 4% higher than in the previous year. XX payment of up to 50% of annual (reconsideration of annual premium industrial safety and ecology; MZP JSC Ratio of standard entry level wage premium in advance (in order to calculation, approaches to PAI operational efficiency; increase of of the Company to minimum wage increase the employees’ social identification following the results nuclear products and industrial SGChE JSC in some regions varies from 1 to security level due to volatile of the assessment, etc.); operation markets share, where the 1.3 times (maximum — 1.3 times in economic environment and XX elaboration and implementation Company improves its performance Novosibirsk region, minimum 1.0 rise in inflation); of measures aimed at increase of by introduction of new products. UEIP JSC in Moscow and Sverdlovsk region). XX salary indexation in all subsidiaries variable part of total remuneration of TVEL Fuel Company, except depending on personal and ECP JSC Arrangements 2017: for TVEL JSC (scheduled collective labor efficiency. XX salary indexation at all enterprises indexation % — not less than Centrotech of TVEL Fuel Company, except consumer price index); SPA LLC for TVEL JSC; XX increase of annual premium rate VPA Tochmash in certain enterprises (increase by JSC per cent corresponding to salary indexation per cent); KMZ PJSC

VNIIM JSC

0 20,000 40,000 60,000 80,000 100,000

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 120 121

Table 35 Personnel Training Diagram 27 Examples of KPI for TVEL FC Management Within HR Development and Training Average training hours Provisions, the Company’s enterprises per employee Basic KPI for TVEL JSC Basic KPI for Basic KPI for regularly provide training to enhance Top Management Vice-Presidents Directors of Subsidiaries competencies of their workers. Amount of investment training in XX Lost time injury frequency XX Cost of products manufacture XX Investment activity integrating 100 rate (LTIFR) efficiency indicator 2017 made RUB 111.4 mln. (which XX Operating efficiency is 10.3 million more than in 2016). 80 XX No INES events level 2 XX Lost time injury frequency Average training hours per each 64.9 66 and above XX Labor efficiency rate (LTIFR) employee of the Company in 2017 60 51 XX Labor efficiency XX Proceeds from sales XX Fulfilment of government contracts, made 66 hours. In the reporting year and foreign orders portfolio, investment projects 40 XX Proceeds on new products 11,430 employees of TVEL Fuel as well as on new products Company passed training. Average XX Reduction of semi-fixed costs of the Company XX Full cost of the production 20 unit sold training hours per each employee of the Company in 2017 made 66 hours. 0 Educational events contributing to 2015 2016 2017 development of skills are implemented using the resources of corporate NON-MATERIAL BENEFITS XX awards of TVEL JSC — more XX The globalization participants coaches, as well as the external FOR EMPLOYEES than 1 thous. persons. development program Global providers of training services. System of non-material benefits for Professionals aimed at client- TVEL Fuel Company enterprises the employees of TVEL Fuel Company DEVELOPMENT OF STAFF oriented approach development, regularly implement sectoral and is aimed to encourage professional CAPACITIES readiness for change, innovation divisional training programs to In September 2017, the growth, increase in efficiency and People are an important asset of and knowledge acquisition 178 enhance competencies of managers organizational and communication performance, attainment of the goals TVEL Fuel Company, which provides according to international Internal coaches and employees of enterprises. block was added to the Leader and the best final results of activities, internal stability and business standards. on improvements Forum at SGChE JSC which enhancement of the work quality modernization. Traditionally, HR XX Training program in the field of Personnel Efficiency was dedicated to safety culture and arrangement of conditions for development and training is one safety culture aimed at building Assessment enhancement in TVEL Fuel creative activity. of the top priorities of HR policy workers’ understanding of general In 2017 the Company continued Company. Its participants, Achievements of the employees of TVEL Fuel Company. principles of safety culture, 89 to successfully apply the annual specialists in communications, of the Company are marked with The development and training developing a leadership position Improvement personnel efficiency assessment HR, representatives of labor state awards, awards of ROSATOM mission is focused on creation of an in terms of safety, creating an tools trainings system1. The assessment is based protection and nuclear safety and TVEL JSC in accordance with environment for employees to achieve atmosphere of openness and trust on the employee’s compliance with services, as well as members the Uniform Industry-Specific the business goals while increasing in the team. corporate values and the required Award Policy. the level of their professionalism, level of professional and technical of succession pool program During the year 2017 in celebration corporate culture and personnel 11,430 knowledge and skills. proposed a number of projects of commemorative days and management technologies. Number The key principles of assessment aimed at safety culture anniversaries, including the 100th The purpose of HR development of employees trained are objectivity and relevance. development, “unsafe behavior” anniversary of MSZ PJSC, about program is to support business Objectivity is achieved by evaluations causes analysis and formation of 3 thous. workers and veterans priorities of ROSATOM State calibration (alignment of evaluation correct value and psychological received rewards and bonuses for Corporation. criteria for employees of different patterns focused on prioritization best performance, contribution Priority development programs 3 divisions subordinate to one superior of safety issues for each employee. to development of enterprises, at the Company’s enterprises: Leader Forums held manager) by heads of departments TVEL Fuel Company and nuclear XX Program of Succession Pool and the superior leader at round The forum was attended by industry, in particular: Formation and Development: table. Assessment of corporate values 106 people, 16 production tasks XX national awards — 46 employees; “ROSATOM Assets”, “ROSATOM is performed only in relation to the were considered. The participants XX awards of ROSATOM — nearly 900 Assets. Basic Level”, “ROSATOM 106 behavioral indicators of the employee worked out 5 directions for persons, including merit badges — Capital” and “ROSATOM Talents”. Engineers associated with his/her professional improving the safety culture: 125 workers and veterans, labor The program is aimed at increasing who mastered activities and influencing his/her motivation, communication and merit badges “Veteran of Nuclear management competencies in TRIZ tools performance. leadership in the field of safety Power and Industry” — 115 accordance with a single value culture, increasing efficiency in workers, and Anniversary Medal model, as well as involving staff “100 Years of Machine Building in key sectoral strategic projects ensuring electrical safety and Plant” of ROSATOM — more than and industry tasks. interaction with contractors. 28 1 Managers, specialists, employees and workers 1000 workers and veterans of MSZ; Process factories are subject to assessment.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 122 123

Following the results of assessment In addition, a mentorship program Partnership with Educational Critical Knowledge (CK) the recommendations were made PROFESSIONAL has been implemented in the industry Institutions is the knowledge accumulated concerning alteration of personal STANDARDS aimed at the transfer of key knowledge Recruitment of promising young by organization in specific additional incentives, choice of and skills, having following objectives: people is one of the top priorities in TVEL JSC is the member of subject areas, as well as personal training program and recruitment of XX ensuring continuity of generations HR policy of TVEL Fuel Company. the Council for professional knowledge and experience of employees to succession pool and in key technical positions; By hiring young specialists, the qualifications in the sphere of employees, obtaining priority career planning. XX preservation and transfer of key Company intends to preserve and nuclear power, which shall be depending on the specifics of In 2017, part of the staff of category knowledge and skills; strengthen its position in the sphere responsible for reviewing the the organization’s activities “Managers, specialists, employees” XX raising the professional level of science and advanced technologies in a resource-constrained were evaluated on the basis of the professional standards elaborated of employees; in the years ahead. environment. single information system “RECORD”. for the industry. XX increasing the level of motivation XX author team of SGChE JSC was Cooperation with educational In 2018-2019, it is planned to for young workers’ professional awarded 1st place Diploma “Best institutions is carried out on the basis An industry-specific working group apply the automated assessment The Fuel Division has implemented development. Development of New Production / of the communication plan on work on professional qualifications system to all the companies a systematic approach to preservation Best Solution for Reconstruction with universities and graduates; in nuclear energy complex of included into TVEL Fuel Company of critical knowledge based on TVEL Fuel Company’s corporate and Building” for reconstruction of the plan that is being continuously management system. ROSATOM was created in 2017, existing IAEA knowledge management award for Best Solution / Develop- electrolysis production of fluorine updated on an annual basis. which included employees of concepts. Within the said approach, ment was established in 2008 and of a sublimate plant; With a view of occupational TVEL FC. Over the past year, knowledge mapping has been became the most important and XX author team of ChMZ JSC and guidance for schoolchildren the 20 professional standards were carried out with the subsequent prestigious award in the Company for VNIINM JSC was awarded 1st Company’s enterprises organize coordinated in the industry in key formation of a knowledge map. talented engineers, technologists, place Diploma for organizing the excursions, meetings with young engineering and trade jobs. Mapping the knowledge of workers designers, managers who won processing of substandard specialists, information and and organizations in general allows corporate competition. uranium-containing materials. educational activities. to combine individual fragments of The awards are given to corporate knowledge kept in different places authors of enterprises of TVEL Fuel and get a general idea of knowledge Company, who have introduced In September 2017, the delegation of research conferences and invitation pattern of the organization and new technologies and design TVEL Fuel Company visited Armenia, of Armenian students to seminars employees possessing certain developments, organized new and jointly with Armenian partners knowledge. The final product of production and made achievements held by TVEL JSC. organized a number of events CK is the detailed program for the in financial and economic activities, TVEL Fuel Company of ROSATOM conservation of CK developed for enhancing corporate governance etc. aimed at developing cooperation in took part in a large-scale event organization, including both methods The following awards were scientific and educational spheres. for preserving critical knowledge and presented in 2017: During the meeting, an agreement for schoolchildren, students and skills, as well as measures required XX author team of NCCP PJSC was was reached on organization of graduates — ROSATOM Career to reduce the negative impact awarded 1st place Diploma “Best Smart Nuclear international youth Day — held at MEPhI National from their loss. Engineering and Process Solution” network community on the basis Research Nuclear University. for development of a technology for of Miru-MIR open communication processing carbonate precipitates The central event of the Career platform sponsored by TVEL JSC to A divisional professional efficiency of lithium-7 to produce a solution Day which brought together about popularize nuclear science and to contest among inspectors of TVEL of lithium-7 hydroxide; three thousand young people was Fuel Company of ROSATOM was overcome radio and technophobia. a vacancy fair. People from the Fuel held at Chepetsky Mechanical In October TVEL JSC and the Division of ROSATOM presented Plant (ChMZ) at the end of Russian-Armenian (Slavic) the information on the prospects November 2017. General tasks University (RAU, Yerevan) signed for employment at enterprises were prepared for its participants: the cooperation protocol aimed entering the management contour of 50 theoretical questions, at implementing a number of TVEL JSC and answered questions interpretation of drawing, and humanitarian projects. In particular, about traineeship. Senior students in the practical part — detail the parties agreed on implementation could apply for internship, while measurement and drawing a report of a historical and memorial program on usability and compliance with related to the joint contribution of graduates filed their CVs. Young the drawing. The experts of the the peoples of two countries to people were invited to participate contest summed up the results — the implementation of the Soviet in an experiment and apply their representatives of MSZ PJSC nuclear project, the participation knowledge in building an atomic and ChMZ JSC became the best of young specialists from the Fuel reactor, answer quiz questions inspectors of the Fuel Division. Division of ROSATOM in RAU and cross-word puzzles.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 124 125

In 2017 the enterprises of the XX non-state pension benefits; Table 36 Company offered practical training to In March 2017, the First XX voluntary health and industrial Outcomes of implementation of major corporate social programs in 2017 554 students of higher educational Strategic Session of the Joint injuries insurance; institutions and vocational secondary Youth Council was held with XX assistance in housing programs; Corporate Funds allocated under the program Highlights schools, 32 of them were employed participation of active members XX sanitary and resort treatment social program in the reporting year, RUB mln by the end 2017 by TVEL Fuel Company. In 2018 the of youth associations of the and recreation of employees Voluntary health insurance 180.4 99% of TVEL FC employees are insured Company expects 477 students to Management Company and all its and their children; (VHI) under VHI policy* take their practical training. subsidiaries. The young leaders XX catering; Accident and health 10.2 89% of TVEL FC employees During the reporting period the forum organized by the initiative XX assistance to non-working Company employed 83 graduates pensioners; insurance are covered by accident of the Management Company and health insurance. of higher educational institutions XX organization of sports allowed to form a strategic vision and vocational secondary schools, and cultural events; of the Company’s image at the turn Sanitary and resort treatment, 158.2 3,378 employees got vouchers 17 of whom took target preparation XX benefits to employees in difficult recreation of children to sanitary and rehabilitation resorts classes for employment by TVEL of 2030–2050 in line with the world situations. in 2017, where 2,130 persons Fuel Company. Diploma grade point trends in development of nuclear work in harmful conditions, and 1,743 children. average of employed graduates industry and high-tech sphere. TVEL FC social programs represent Maximum amount of each voucher was over 4.2. Per cent of graduates a strong motivating factor. Total Junior Factory Quest Training in 2017 was RUB 56.7 thous. from core universities of ROSATOM amount spent by the Company on for a 21-days treatment course developed at UEIP JSC entered is over 40%. its social programs in 2017 made the TOP-3 of best HR practices RUB 1,320.7 mln, or RUB 60.6 thous. Assistance in improvement 92.3 1,011 employees improved UNIFIED YOUTH of ROSATOM State Corporation. per worker. of housing conditions their housing conditions under the program in 2017 and 568 out Quest Training contains elements POLICY of them were young specialists The youth as the most active part of vocational guidance of up to 35 years old of the staff has always been the schoolchildren, increases Diagram 28 indicator of changes and driver of students’ interest in ROSATOM Benefits to employees 61.2 The amount of benefit does not depend the Company’s development. Expenses of FC TVEL in difficult situations on the position, the types and criteria of enterprises, introduces the values benefits provision are unified In December 2016 TVEL Fuel of ROSATOM State Corporation, on social programs, RUB mln Company approved the Concept the principles of Lean Production Sports and cultural 141.2** The enterprises of TVEL FC held of the Unified Youth Policy and events more than 850 corporate, sports and and RPS tools. determined its priorities: children’s events in 2017. Total number XX promotion of the ROSATOM of participants — over 55 thous. of workers and members of their families strategy and Values, strategic 1,500 1,346.0 1,340.5 1,320.7 objectives of TVEL Fuel Company; Assistance to non-working 507.9 There are over 39 thous. non- XX strengthening of business SOCIAL PROGRAMS pensioners working pensioners registered in the 1,000 reputation of TVEL JSC; Corporate social programs of voluntary organizations (personnel service, XX implementation of social ideology. medical insurance, insurance against veterans’ council, trade unions) of TVEL Fuel Company. 1,106 pensioners got accidents and diseases operate at the 500 vouchers to sanitary resorts The Unified Youth Policy supposes enterprises of TVEL JSC to provide participation of young specialists additional extended coverage to 0 Non-state pension 131.2 By the end of the reporting year in historical work, development of employees. The said programs have provision 18,6% of TVEL FC workers 2015 2016 2017 corporate science, establishment been approved by industry trade were involved in the non-state of new production units in order to unions and implemented in line with pension provision program; pension accruals were accumulated provide the flow of workforce into the Uniform Industry-Specific Policy Diagram 29 at Atomgarant Non-State the cities of presence, increase of ROSATOM and its organizations. Pension Fund Expenses of FC TVEL of personnel engagement, in All operating collective agreements for social programs per employee, implementation of the strategic of TVEL Fuel Company contain the RUB thous. Total 1,282.6 – initiatives of TVEL JSC “Social provisions dealing with occupational Responsibility”, “Environmental safety and health issues. Responsibility”, etc. TVEL Fuel Company has developed corporate social programs in the 60.6 60.8

following areas: 60 59.0

50 * New employees are included in the VHI program after successful completion of probationary period, thus at the moment less than 100% of the employees can be covered by the VHI policy. 2015 2016 2017 ** Taking into account the funds allocated to primary trade union organizations.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 126 127

INTERACTION WITH OCCUPATIONAL HEALTH in a safe manner. In 2017 these LTIFR ratio TRADE UNIONS AND SAFETY positions were also a priority. of TVEL Fuel Company Every employee has the right to About 76.8 thousand SFIs join a trade union organization. Occupational Health submitted in 2017 were focused on in 2017 was 0.06 Primary trade unions function and Safety Management improving the safety culture. against ROSATOM in all enterprises of TVEL Fuel System The Company spent grand total1 Company. The management of the The main directions, directives and of RUB 1.9 bln or RUB 64.9 thous. per State Corporation’s Company and ROSATOM support commitments in the sphere of health each employee on labor protection planned ratio no their employees’ membership in and safety of TVEL Fuel Company’s arrangements in 2017. trade union organization. Share of workers are recorded in TVEL JSC Accident frequency rate (determines more than 0.3 employees being the members of Health and Labor Protection Policy. the number of casualties per 1,000 trade unions reaches 98% in some System-based application of the of workers) FR in 2017 was 0.1, subsidiaries. guiding principles of the Policy, injuries were recorded only at three There were also accidents in contract Within the framework of social the uniform methodology for the enterprises. LTIFR (Lost Time Injury organizations that occurred on the partnership development program, identification and assessment Frequency Rate, 1 mln. man/hour site of UEIP JSC: one severe injury the management of TVEL JSC of occupational risks allows the decreased and was 0.06 (0.09 in (Corvette LLC) and one fatal casualty regularly holds quarterly joint Company to reduce the impact of 2016). However, the severity of injuries (Stimul-SN DPC LLC)2. The first meetings with the Russian Trade harmful and hazardous production has increased. In 2017, there were occurred due to violation of safety Union of Nuclear Energy and Industry factors in the workplace, to allocate two death cases — at SGChE JSC requirements during vehicle operation, Workers (RUNPIW) and the chairmen targeted funds to solve the most and KMZ PJSC, and one severe injury the second one — due to the non-use of primary trade union organizations important labor protection problems. at ChMP JSC. The cause of injuries at of personal protection equipment by of TVEL Fuel Company. Participants Priority goals and objectives SChC JSC and ChMP JSC was poor the injured person. of those meetings discuss the issues aimed at reducing occupational organization of work, at KMZ PJSC Following the results of the strategic related to the activities of TVEL risks make an integral part of the reason was violation of labor session 2017 with participation of Fuel Company and development the planning process; they are discipline by the injured person. technical directors of the companies, prospects. Besides, 4 meetings of included in Occupational Health an analysis was made of fatal and working groups were held jointly and Safety Objective Achievement severe accidents occurred at TVEL with RUNPIW in 2017. Program. Goals are updated Fuel Company enterprises over the annually and assume the special past 10 years, and also typical causes assessment and the improvement were identified that result in violation of working conditions, reducing of labor protection requirements injuries, increasing awareness and and accidents, hazardous areas competence to perform job tasks 1 Including CFR 3 and CFR 4. and production conversions were specified, lists of possible emergency situations were prepared, and Scheme 7 solutions for localizing possible Occupational Health and Safety Policy Local Occupational Health and Safety incidents were defined. of TVEL JSC regulations Management in TVEL The Comprehensive Action Plan Fuel Company was implemented in 2017 to prevent Health and Safety Management System Annual meetings of accidents, including severe and HSMS of TVEL JSC technical directors and fatal ones at TVEL Fuel Company Distribution of responsibilities and authority, managers for nuclear enterprises, including subsidiaries as well as tasks related to health and safety and radiation safety, management, across all levels of the community occupational safety and and contractors operating on the environmental protection territories of enterprises. Video Program for the achievement of goals and systems to monitor technological accomplishment of tasks related to occupational Occupational Safety processes and prevent injuries were health and safety and Security Tripartite Assessment of risks and risk management control Committees in the installed at hazardous industrial enterprises sectors of enterprises. General combined Action Plan for the Prevention of Accidents Action plans to improve working conditions and on health and safety management in the enterprises

Training & inspections

2 All injured workers were men. Enterprises and Contracting Average Industrial Injuries Frequency Rate their subsidiaries organizations by contractors is not calculated due to the absence of recording system.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Human Сapital 128 129

Table 37 In 2017, the Department for Dynamics of the Indicators on Occupational Health Nuclear, Radiation, Industrial and and Industrial Safety in TVEL FC* Environmental Safety of TVEL JSC together with the Inspectorate Показатель 2015 2016 2017 for Control over Safety of Nuclear and Radiation Hazard Average Industrial Injuries Frequency Rate (IIFR) 0.23 0.16 0.1 Facilities of TVEL JSC carried Injury Rate (IR) 0.03 0.02 0.01 out 15 inspections, including 5 unscheduled inspections by the Occupational Disease Rate (ODR) 0.00 0.00 0.02 orders of the TVEL JSC management. Absentee Rate (AR) 1.88 2.65 2.55 The inspections revealed 878 violations (676 violations were Lost Day Rate (LDR) 1.90 0.40 0.58 revealed in 2016).

* Data on CFR-4 contour. Deviation ratio (DR) for 2015 and 2016 was revised due to calculations of planned worked hours, and not actually worked hours. Injury Rate, Occupational Diseases Rate and Lost Days Rate were calculated using a 200,000 ratio. Lost Days Rate was calculated excluding fatal accidents. In 2017 the enterprises of TVEL Fuel Company: XX did not register any INES No emergencies at hazardous No violations of safety parameters available (individuals exposed to the events at level 2 and above; facilities or mass accidents occurred or limits of the effective and equivalent effective dose of 100+ mSv and more XX did not exceed limits during the reporting period. doses set by the nuclear and radiation over a period of 5 successive years, of annual effective radiation Each organization of TVEL safety regulations were registered or individuals exposed to annual doses of the personnel; Fuel Company having hazardous at the subsidiaries of the Company effective dose of 50+mSv production facilities, implemented in 2017. and more). XX had no Group A personnel measures to ensure industrial safety, All production enterprises of the exposed to effective radiation which allowed to reduce hazardous Company operate within the approved dose 100 mSv and above over chemicals and to lower the hazard effective dose limits applicable to the any successive 5 years. class of production facilities. personnel, no Group A personnel is

Diagram 30 Diagram 33 Diagram 31 Diagram 32 Average Industrial Group A personnel distribution Injuries Frequency Rate Industrial injuries at TVEL FC enterprises, Average Annual and Maximum Effective Dose by individual irradiation dose in TVEL FC subsidiaries* persons** in 2015-2016, mSv in 2017, persons

8 286 0.1 Average annual Maximum effective dose 1,506 0.08 7 2 0.08 effective dose, mSv for personnel, mSv 6 0.06 5 5 1.40 20 0.04 1.35 16.09

0.03 0.03 4 8 1.35 15.4 0.02 15

3 6 1.30 1.27

4 11.96 0 5 5 1 1.25 10 1,275

2 1.21 3 3 3 1.20 1 2 5 1.15 0 1 5,595 1.10 0 ChMZ JSC MSZ PJSC 2015 2015 2015 2016 2016 2016 2017 2017 2017 SGChE JSC SGChE JSC 2015 2016 2017 2015 2016 2017 (Tomsk region) (Tomsk (Vladimir region) Number of injuries, total Other injuries (Udmurt Republic) Fatal injuries Men Less than 1 mSv Severe injuries Women 1–2 mSv 2–5 mSv * At remaining enterprises of TVEL FC, the rate is equal to 0. ** Data for 2015-2016 are given on CFR-4 contour. 5–20 mSv

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS 130 131

Diagram 34 TVEL JSC won the All-Russian Structure Contest “Russian Business Leaders”: of Revealed Violations, ea Dynamics and Responsibility–2017” Social Capital in nomination “For achievements in the 42 field of occupational safety and 37 health of workers” 144 17

42 2015 The Company developed strategic initiatives 87 and target projects on social and economic development of the regions/territories of presence 163 and ensuring their social stability. 100 The “TVEL JSC Program for Regional Work and 186 Social Projects” is being implemented, systematizing the experience in this area 87 2016 For the purposes of prevention and SOCIAL PARTNERSHIP IN THE the concept of the territories’ 20 mitigation of the impact of hazardous TERRITORIES OF PRESENCE development, the growth of regional and harmful production factors the Achievement of strategic objectives taxes and maintenance of social 43 workers in harmful and hazardous by TVEL Fuel Company is impossible and economic stability; working environments are provided without social accord in the territories XX enhancement of social programs 47 193 with special and properly certified of presence or compliance with social efficiency and social partnership free clothing, footwear and individual and environmental acceptability development. 69 protection means. Average cost of requirements. Social strain in regions 51 individual protection equipment per and in territories of presence may cause Complaints and Appeals Handling each worker exposed to hazardous or reputation damage to TVEL JSC which Complaints and appeals handling is 41 harmful working environments in 2017 has the image of a reliable supplier of performed in conformity with the Federal 341 amounted to RUB 14.2 thous. nuclear fuel and uranium enrichment Law “On the procedure of handling 51 services, and therefore may cause re- appeals filed by citizens of the Russian orientation by foreign partners towards Federation” No. 59-FZ d/d May 2, 2006. 2017 the Company’s competitors (see also Feedback is mandatory, all appeals Risk Management Section). and responses are recorded. 108 The Company developed strategic Appeals are lodged directly to TVEL initiatives and target projects on social JSC, and received from the ROSATOM and economic development of the hotline and from the state authorities. regions/territories of presence and To establish direct communication ensuring their social stability. The “TVEL “Employee-President of TVEL JSC”, 217 JSC Program for Regional Work and the so called “post boxes” were installed Social Projects” is being implemented, in all subsidiaries of the Company, thus Labor protection systematizing the experience in this area any employee may address the top Industrial safety and including three groups of projects: management of TVEL Fuel Company Radiation safety XX formation and preservation of social confidentially. Besides, one can Environmental safety accord environment in the territories of address directly the President of TVEL Fire safety presence of TVEL Fuel Company; JSC on Company’s official website or Nuclear safety XX cooperation with local and regional intercorporate intranet portal. Other violations public authorities with respect to

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 132 133

TVEL JSC is a member Diagram 35 of All-Russian Industrial Results of appeals handling in 2017, % Association of Employers “Association of the Employers of the Nuclear Other issues (corruption, material 28.3 assistance, etc.) Industry, Energy and 28.3 Science of Russia” (President of the Social issues 7.5 (incl. social benefits) Company is a member 7.5 of the Board), and National Association Production issues 5.7 of Procurement 5.7 Institutes (NAPI) Issues of optimization and 58.5 improvement of enterprises structure / labor relations 58.5

0 20 40 60

Reviewed on time and explained Obtained

Diagram 36 Table 38 Financing of the Program for Social and Economic Development Gross tax liabilities of TVEL of the cities of TVEL Fuel Company’s presence, 2017 Fuel Company, RUB mln

City Scope of funding, Events RUB mln Agreements on cooperation XX the terms of co-funding of with the regions Entrepreneurial Development and CATU 300 XX Construction of a dwelling house for young specialists, a school, Novouralsk an exhibition and marketing center of the NCED In 2012 TVEL JSC initiated the Supporting Fund; drawing up and signing of Agreements XX the terms of joint participation 30,000 XX Reconstruction of a skating pavilion on Cooperation between ROSATOM in establishment of Physical and 25,852 XX Modernization and repair of social facilities 25,129 and public authorities of the territorial Mathematical Lyceums. 25,000 24,922

XX Major repair of “Samotsvety” Children’s Resting Camp buildings entities of the Russian Federation. 22,248 20,177 Presently there are agreements Funds are allocated under the 20,000 XX Acquisition of road machinery between ROSATOM and Sverdlovsk initiative budgeting principle: residents XX Courtyard areas improvement, including sports and children’s region, Irkutsk region, Tomsk region, hold meetings, take decisions on 15,000 playgrounds etc. Krasnoyarsk territory and the further improvements, and inform 14,882

CATU 30 XX Activities aimed at business support and promotion Udmurt Republic. public authorities of their initiatives. 10,000 Seversk (the funds have been outlined and will be allocated to Managing Annually under the concluded TVEL Fuel Company is a major company after TASED creation) agreements, local government bodies, taxpayer in the budgets of various 5,000 regional government agencies and regions of the Russian Federation. Glazov 234.7 XX Construction of an ice hall TVEL Fuel Company develop and Gross tax liabilities (actually paid) 0 XX Construction of a gym hall and workshops for Physics implement joint program of social made RUB 14.9 billion in 20171. and Mathematics Lyceum 2015 2016 2017 and economic development of XX City’s sports clubs supporting etc. cities of presence of the Company’s enterprises. Angarsk 53 XX Continuation of construction works of a kindergarten for 220 children Accrued (excl.VAT) These agreements determine Actually paid (excl. VAT) XX Improvement of municipal and courtyard areas, the following key aspects: XX Major repair of “Lesnik” People’s Hall XX co-financing of programs for social 1 Besides, VAT paid by TVEL Fuel Company made RUB and economic development of 9.3 billion. Thus, the total actually paid tax deductions TOTAL 617.7 (including profits tax for consolidated taxpayers group) nuclear cities; amounted to RUB 24.1 billion.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 134 135

Public dialogue forums A III Civil dialogue forum “The way In the course of the dialogue, Table 39 In recent years public organizations to a successful future through civil a package of socially significant Working-age population employed play an increasingly important role agreement” was held in CATU civil initiatives aimed at further by subsidiaries of TVEL FC in country’s and urban community’s Novouralsk organised by TVEL JSC development of Novouralsk industrial social life. Social partnership and UEIP JSC. The Duma deputies site and CATU Novouralsk has been City (enterprise) Region share of working-age policy makes it possible to address and members of the Public Chamber developed. Participants discussed population employed by the most complicated issues by of Novouralsk urban district, honorary consolidation of relations between subsidiaries of TVEL FC negotiations, dialogue, search of citizens of the city, representatives of government, business and the general Angarsk (AECC JSC) Irkutsk region 0.73% a balance of interests of different the Public Council of Rosatom SC, public, formation of an adequate population groups. The idea of the Veterans Council of Novouralsk, understanding of the most important Vladimir (Tochmash VPA JSC) 0.63% Vladimir region social partnership is to reach trade-union and public organizations and significant for population issues Kovrov (KMZ PJSC) 1.3% the compromise. That’s why in of the NUD, TVEL JSC and UEIP of the city’s social and economic life. 2017 TVEL Fuel Company carried JSC, the expert and journalistic In particular, it was proposed Glazov (ChMP JSC) Udmurt Republic 6.1% on the tradition of public municipal communities took an active part to organize a project office for Zelenogorsk (PA ECP JSC) Krasnoyarsk territory 6.0% dialogue forums. in the dialogue forum. municipal investment projects The purpose of those events was The dialogue forum had five registration and support on the basis Novouralsk (UEIP JSC) Sverdlovsk region 4.8% to reduce social strain, to create the thematic discussion centers: of Entrepreneurial Supporting Fund Seversk (SGChE JSC) Tomsk region 5.2% platform for consolidation of sound XX Implementation of ROSATOM in CATU Novouralsk, and to delegate social force, to strengthen relations and the Fuel Division projects; to the Fund the powers to promote Elektrostal (MSZ PJSC) Moscow region 4.6% between different participants of XX Lean City — Lean Polyclinic; within the framework of intermunicipal social processes, and to reach XX Business platform; cooperation Novouralsk businesses a new level in the work of non- XX Grant making; as well as the whole territory with its commercial organizations. XX Clean City — Safe World. competitive advantages and favorable business conditions, in the region and beyond. There was another proposal to Table 40 develop with a financial backing a Highlights of Dialogue Forums Holding municipal environmental program in 2018, to create a Novouralsk City Number of Date Number of city public municipal center for environmental participants organizations — participants information — an interface for of the Dialogues Forum environmental education of Glazov 80 27.04.2017 10 the population. The dialogue forum formalized all Zelenogorsk 700 13.05.2017 30 ideas in a memorandum, it became Novouralsk 170 30.08.2017 9 the next stage in urban environment consolidation in solving problems of Seversk 350 24.06.2016 7 social and economic development of Novouralsk. The delegates if the Third Civil dialogue forum decided to create a dialogue forum community on social media as an official communication platform of municipal community. The dialogue forum in Glazov discussed the municipal infrastructure and urban improvement, as well as social assistance, including the implementation of joint social initiatives of TVEL JSC and local self-government bodies. The agenda of the forum in Zelenogorsk was business-oriented, business-climate issues were discussed, including the establishment of TASED and social assistance. The main topic of dialogue forums in Seversk and Novouralsk was environmental safety.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 136 137

TASED creation Table 41 Establishment of TASED in CATU TASED (territory of the advanced The projected effect of TASED creation is aimed at creation of new jobs, social and economic development) increase of investment attractiveness is the part of a territorial entity City Zelenogorsk Seversk Novouralsk Glazov of CATU and level of development Number of new jobs, including 466 1,490 2,715 913 as compared to the average level of of the Russian Federation social and economic development of with the special legal regime XX Under the project of ROSATOM 242 651 973 0 the entities of the Russian Federation. for entrepreneurial and other and TVEL Fuel Company The declared projects assume activities XX Under CATU projects 224 839 1,742 913 creation of more than 5.5 thousand jobs, the investments will amount to Amount of investment, RUB mln, including 2,458 11,811 19,427 6,981 more than RUB 40 billion. The third XX Under the project of ROSATOM 1,340 4,795 3,598 6,981 part of the declared projects are and TVEL Fuel Company the projects of ROSATOM and TVEL Fuel Company. XX Under CATU projects 1,118 7,016 15,829 0

TO CARRY OUT 2016 Plans for preventive measures for PREFERENCES TO TASED 5. Land tax THE SAID COMMISSIONS, establishment of TASED in CATU RESIDENTS XX Exemption during 3 years. The concepts of TASED creation were ROSATOM AND of TVEL Fuel company had been XX Organizations-residents of TASED considered at at the level of territorial TVEL JSC: prepared and implemented before regarding land plots located entity of the Russian Federation. 1. Value-added tax the release of RF Government in TASED territories. 2014 XX Declarative order of tax refund. Concepts were sent to the Ministry Regulations. XX Tax rate for the tax to the budgets XX Credit (refund) of tax declared Established work teams of Economic Development of the of Russian constituent entities: up as recoverable in tax return, in subsidiaries of TVEL FC Russian Federation and to the to 5% during 5 tax periods starting until the completion of and TVEL JSC Ministry of Finance of the Russian 2018 (planned) from the tax period when first in-house tax audit. Federation. profit was received from activities Drew up CATU passports Formation of TASED carried out in the implementation for CATU Integrated ROSATOM working team on issues of Managing Company: 2. Corporate income tax of agreements for TASED and Development Programs. TASED property in CATU was formed. XX Tax rate for federal budget tax: 0% XX formation of property complex, cannot be less than 10% during during 5 tax periods, starting from CATU Integrated Development Proposals (applications) for TASED XX formation of subsidiary the following 5 tax periods. the tax period in which the first Programs (IDP) were developed creation were sent to authorized managing companies. profit was received. 6. Mineral Extraction Tax and approved by local and federal executive bodies / the Ministry Creation of TASED XX Within 120 tax periods (from the regional authorities, of Economic Development of the in nuclear industry CATU: 3. Corporate property tax beginning of corporate income and submitted for inspection Russian Federation: XX Exemption during 5 years tax rate period in accordance with and approval to the XX issue of the RF Government XX CATU Seversk (July 2016), XX Organizations having the TASED Article 284.4 of the Tax Code of Government of RF. Regulations, XX CATU Zelenogorsk (August 2016), resident status. the Russian Federation). XX conclusion of agreements XX CATU Novouralsk (August 2016) Coefficient characterizing the between the Ministry of Economic 4. Rates of insurance for tased territory of mining (CTM 1) 2015 The concept of TASED in Glazov was Development, the government residents is assumed to be equal to: approved at the level of territorial of a constituent entity of Basing on EDP working teams XX Pension Fund of the Russian XX 0 — first 24 tax periods entity of the Russian Federation. the Russian Federation, Federation: 6.0% XX 0.2 — from 25 till 48 tax periods with the involvement of developers municipal authority). formed the concept of the territory XX Social Insurance Fund of the XX 0.4 — from 49 till 72 tax periods of advanced social and economic Registration of first residents: Russian Federation: 1.5% XX 0.6 — from 73 till 96 tax periods 2017 development in nuclear XX Federal Statutory Health XX 0.8 — from 97 till 120 tax periods XX formation of marketing strategy. industry CATU. CATU-based TASED Managing Insurance Fund: 0.1% XX 1 — from 121 tax period Company ATOM-TOR was established XX TOTAL: 7.6% and further in territories of ROSATOM facilities.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 138 139

SOCIAL AND CHARITABLE TVEL Fuel Company spent Table 42 ACTIVITY RUB 286.9 million in 2017 on Funds allocated for charity and social projects in 2017 TVEL Fuel Company’s contribution to social and charitable projects to social and economic development of develop the territories of presence № Major areas amount, RUB mln territories of presence implies both of its enterprises, Out of this amount . 1 Installation of outdoor fitness and Work Out complexes 20.0 286 9 participation in the regional and local RUB 119.4 million were funded by RUB million budgets income base, and realization TVEL JSC, and RUB 167.5 million — 2 “Lean Polyclinic” project promotion 47.3 TVEL Fuel Company of comprehensive social and charity by TVEL JSC subsidiaries. spent RUB 286.9 million 3 Measures taken to improve living conditions of medical community (CATU Novouralsk) 20.0 programs. in 2017 on social and Since 2012 the Charity Council Small and Medium Enterprises 4 Support to the information centers of nuclear industry 29.0 charitable projects has been working within TVEL JSC; Support and Development to develop the territories 5 Creation of school technoparks 4.0 its functions include the determining Creation of new jobs and promotion of presence of its of purposes and priority areas of of business environment in the cities enterprises, out of this 6 Provision of gratuitous assistance in organizing and holding sports events 7.5 charitable activity, approval of the of presence are priority directions for nuclear industry workers amount RUB 119.4 million budget and charity events, efficiency of charitable activities for TVEL Fuel were funded by TVEL JSC, 7 AtomClasses opening and support 6.0 assessment of the charitable activity Company for the last five years. and RUB 167.5 million — of TVEL FC, etc. For example, “Businessman of 8 Participation and holding of the contest “Businessman of the Year” 1.5 by TVEL JSC subsidiaries In 2017, the Council held 13 the Year” contests are held annually 9 Organization and holding of social projects contest 8.6 meetings. sponsored by TVEL Fuel Company The principles of charitable activity: to encourage the most effectively 10 Activities on organization and establishment of TASED in cities of CATU and Glazov, 63.1 XX support of charitable programs developing small and midsized as well as activities aimed to damp social risks in the cities of the Company’s enterprises presence and projects in the cities of the business entities. 11 Gratuitous aid to veteran organizations, orphanages, disabled persons, retirees, persons in hardship 10.3 Company’s enterprises presence In 2013, the Entrepreneurial (social projects contests); Development and Supporting Funds 12 Organization and holding of municipal and regional social and cultural events, 19.3 XX backing-up common values were organized in the territories of gratuitous aid to cultural institutions, patriotic education projects support (including support of Suvorov Military Schools) (promotion of business the Company’s presence in terms environment, “Entrepreneur of the of co-funding with local authorities 13 Support of projects on the erection of a monument to centrifuge creators in CATU Novouralsk 11.0 Year” contests, creation of new and government bodies of the RF and pioneer constructors of Angarsk jobs, development of educational, constituent entities. The Funds issue 14 Gratuitous aid to amateur, children’s and mass sports 6.8 health, culture and sports loans, grants and subsidies to small infrastructure); and medium-sized business entities 15 Activities aimed at urban improvement in the cities of the Company’s enterprises presence 1.6 XX co-funding of charitable programs (SMBs) for the creation of new jobs, 16 Supporting educational projects, including activities aimed at development of children’s research 10.4 jointly with the local authorities the development of new industries, and technical creativity (robotechnics) and central government bodies of participation in exhibitions and fairs the Russian Federation constituent and business missions. 17 Other activities aimed at developing the cities of the enterprises’ presence, raising the living 20.5 standards of the population, creating an attractive social environment (environmental measures, entities. Due to the funds more than 1.8 support of the parishes of the ROC etc.) thous. jobs were created in 2013– 2017 in Glazov, CATU Zelenogorsk, Total 286.9 Novouralsk, Seversk. Scheme 8 Operating pattern of Entrepreneurship Support and Development Funds

Constituent entity of the TVEL JSC Local authorities Extra-budgetary funds Russian Federation Table 43 Performance of Entrepreneurship Development Funds in 2013–2017

Fund City Number of SMBs projects Number of created jobs that received financial support

Glazov 332 620

Zelenogorsk 22 145 Microloans Grants Subsidies Novouralsk 252 815 (including self-employed)

Seversk 92 269

Small business Total 698 1,849 Loan redemption

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 140 141

Support of Schoolchildren Physics and Mathematics Table 44 Lyceums Performance of AtomClasses in 2016–2017 academic year AtomClasses One of the primary areas of TVEL TVEL Fuel Company sponsors so Fuel Company’s charitable activity is City Participation of Participation of schoolchildren in Number of top places in called “AtomClasses”, operating in support of Physics and Mathematics schoolchildren in contests project and educational events, contests and academic the cities of the Company’s presence Lyceums for training of future skilled and academic competitions, occupational guidance, number competitions number of events of events (Angarsk, Glazov, Zelenogorsk, specialists for the nuclear industry. Kovrov, Novouralsk, Seversk, This project is designed to create Seversk 11 – 21 Elektrostal). The AtomClasses are conditions for children’s self- The Coordination Board specialized classes in best schools expression, to reveal and support Zelenogorsk 16 – 40 of the cities with advanced teaching talented schoolchildren, bring up approved the extended Novouralsk 7 2 36 education standard for of physics and mathematics. the prospective scientists. Besides, The specific feature of such classes the project provides for upgrading of Glazov 16 – 51 “School Technopark” is the profound study of nuclear teachers’ qualifications project, a showcase physics and nuclear technologies. The project is being implemented Kovrov 13 16 26 of children’s and youth The important part of the project in four cities: CATU in Seversk, Angarsk 21 6 71 design and engineering is procurement of the advanced Zelenogorsk, Novouralsk and laboratory equipment for teachers Glazov in terms of co-funding with Elektrostal 14 10 9 developments was to demonstrate innovative physical local authorities and government held during the presentations, and for students of bodies of the Russian Federation “ATOMEXPO’2017” AtomClasses to have their training constituent entities. International Forum laboratory courses and to carry out research works. Such advanced The Coordination Board for problems in favour of the nuclear in Moscow, a contest training will help the students to Physics and Mathematics Lyceums industry. “School Technopark succeed at academic competitions, development coordinates their work 24 multi-discipline laboratories were Brand” was organized contests, school children’s academic and serves as a discussion platform created under the project, mainly in and held in 2017 achievements festivals. Further on, the for teaching staff and managers robotics and computer modelling. The AtomClasses graduates will be able of TVEL Fuel Company. Meeting project was implemented as an open to continue their education in relevant of an on-site and off-site national space project, students of all and any technical universities. training conference for Physics and educational institutions of the city can To implement the project RUB Mathematics Lyceums is held on work in the laboratories. The network 6 million were allocated in 2017. a quarterly basis, where teachers structure of the project allows the In 2018 it is planned to continue discuss essential problems of specialists from different laboratories the project financing at the same education in the sphere of physics and different cities to exchange 2017 level. and mathematics and possible ways information, there’s an Internet to solve them in an actual teaching portal. The projects development practice. in the Technopark is supervised by RUB 2 million were provided for tutors from enterprises of TVEL Fuel charity budgeting of this project for Company and universities (MEPhI, 2018 by TVEL JSC. Tomsk State University, etc.). SGChE JSC was the partner of the of knowledge in various fields of In summer 2017, the Coordination school contest in Chemical Analysis chemistry and chemical technologies. School Technoparks Board of Physics and Mathematics SGChE JSC became the partner of Schoolchildren had a unique chance In continuation and development of lyceums of the cities of the Company an open municipal contest held on to show their skills and abilities in the existing project aimed at support presence approved the industry the base of the General Education three main areas of competence: of Physics and Mathematics Lyceums, specific standard of extended School No. 197 in CATU Seversk “Laboratory of Chemical Analysis”, TVEL Fuel Company in 2016 launched education for “School Technopark” with the international Junior Skills “Engineering Design” and “Turning the project on creation of polyvariant students based on a module- elements. work on CNC machines”. education environment, “School competence approach. It is a set Technopark” in CATU Zelenogorsk, of requirements that are mandatory The partnership project of SGChE SGChE JSC supervised the Novouralsk, Seversk and Glazov. for implementing a networked JSC in Seversk became a tangible “Chemical Analysis” competence Establishment of the centres for educational program which were embodiment of the recommendations area, and helped to build up innovative technical creative work will established: developed by the Chemical Club chemical bases required for proper contribute to retention in Russia of XX to the results of mastering the of ROSATOM TVEL Fuel Company and fascinating lab sessions and motivated staff with a taste for design, educational program; at its first meeting “Element of the experiments. inventive activity, and to involvement XX to educational program structure; Future” that is to become a carrier of talented school age youth in XX to terms of educational program solution of design and engineering implementation.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 142 143

The standard has been In August 2017, the Governor Healthy Lifestyle The main directions of the developed with due regard to the of Tomsk region, S. Zhvachkin, project in 2017: requirements of ROSATOM and attended the opening of the School Social project “My Yard. XX installation of Work Out facilities; TVEL JSC, the specific nature Technopark in CATU Seversk. My House. My Family” XX arrangement of courtyard trainers of general education institutions In 2018, the Company plans In 2011 the project “My Yard. (instructors) institute who would involved in the implementation of to continue funding the project, My House. My Family” was train children and youth during extended education on the basis organizing and holding design and initiated. This project is the part the season free of charge; of School Technoparks. development contests, purchasing of strategic social initiative of XX organization and holding of district The project won widespread additional equipment, and TVEL JSC for development of the and municipal Work Out festivals; support of regional authorities. implementing other actions. cities of presence and creation of XX involvement of official organizations comfortable living conditions. (Work Out Federation) and major and popular local communities TVEL JSC and Rossotrudnichestvo The two schools signed a protocol The School Technopark of CATU in holding Work Out festivals. launched a partnership project on cooperation for a period of eight Seversk was named as one of between the schools of Russia and years with an option to extend it. the best educational practices Places for sport areas were Portugal The parties agreed on mutual visits, in Russia at the meeting held in chosen by local authorities with exchanging academic knowledge November 2017 on the basis of the due consideration to the public The project involves schools with and best educational practices, on Education Department of Moscow opinion, within participatory in-depth study of physics, holding online scientific conferences under the Ministry of Education of budgeting and subject to location mathematics and technical and joint research. the Russian Federation for heads of previously installed playgrounds. disciplines. Russia is represented of educational authorities of 64 The so-called “Yard Days” were in the project by Gymnasium The project of cooperation between cities of the Russian Federation. held after installation and opening No. 21 of Elektrostal, Moscow Russian and Portuguese schools of playgrounds. TVEL Fuel Company region (participant in the ROSATOM is implemented on the basis of spent RUB 20 mln in 2017 on School project with an AtomClass “Miru-MIR” (Smart Nuclear) open this project. established), Portugal — by the communication platform, sponsored school Sebasti o e Silva — by TVEL JSC to popularize nuclear Liceu de Oeiras, the district of science, energy and industry, Lisbon, known in Europe due establish links and develop to the victories of its students cooperation between scientific, in international competitions public and educational organizations and contests of R&D projects. in partnership with the leading Russian and foreign enterprises.

Table 46 Work Out facilities set in 2017

City Number Number Number of work Number The number of work out of working out facilities of trainings of cultural events held facilities trainers with trainings conducted (“Work Out Festivals”, in 2017 (instructors) conducted by trainers “Yard Days”) by trainers/ Table 45 instructors Key indicators of School Technopark project Seversk 10 15 50 250 40

Zelenogorsk 1 8 24 48 25 City Number of Number of Number of Number of schoolchildren R&D works of technical participants Novouralsk 2 12 16 956 31 involved in schoolchildren educational in research and educational programs implemented under programs under technology contests/ Glazov 3 – – – 24 of technoparks the project the project share of winners and awardees (citywide) Kovrov 8 10 8 349 2

Seversk 3,048 130 4 734/123 Angarsk 4 26 26 3,796 5

Zelenogorsk 1,453 42 27 470/77 Elektrostal 2 – – – –

Novouralsk 400 83 21 180/120 Vladimir 7 – – – –

Glazov 458 190 5 151/34 Total 37 71 124 5,399 127

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Social Сapital 144 145

Plans 2018: The main tasks of the project are to reformat Table 47 XX to proceed with installation of work the logistics of medical facilities’ processes, Financing of the Lean Polyclinic project in the territory out and street fitness facilities; both for adults and children, to optimize of TVEL Fuel Company enterprises presence in 2017 XX to organize and hold district, municipal and interregional work the work at front desks and to shorten Territory CATU CATU CATU Glazov out festivals; the patient’s polyclinic time Novouralsk Seversk Zelenogorsk XX to involve official organizations Amount of project financing from the budget 5 5 5 7.3 (Work Out Federation) and major of TVEL FC, RUB mln. popular communities in holding work out festivals in the territories XX introduction of an E-queue; institutions. Gained knowledge and Amount of project financing from the budget 8.9 2.5 4.9 9 of TVEL FC subsidiaries, RUB mln. of presence of TVEL Fuel Company; XX improvement of occupational skills were reinforced by medical staff XX to form local youth communities ergonomics of medical staff; at “Process Factory” of TVEL Fuel Amount of project co-financing from the budgets 10 1 0.16 1 on the basis of out-of-door sports XX doctors are exempted from work Company organizations. The fulfilment of medical institutions, RUB mln. grounds in the cities of presence. unnatural for them, including of the training course tasks is intended paper work; to familiarize health workers with basic “Lean Polyclinic” project XX patients’ flows are split up into concepts, tools of lean production and In the sphere of health, TVEL JSC assists healthy visitors who need just to form, regardless of age and status, Stakeholders engagement events in improving the efficiency of medical certificates and periodic screening, a new look at the effectiveness of during the preparation of the institutions, improving living conditions of and sufferers, including patients processes, especially in conditions of Report 2017 medical workers, acquisition of modern with a viral infection; increasing consumers’ requirements While preparing the Report the equipment and support of health XX logistics changes in terms of for medical services quality. principles of Standard AA1000APS 4.9 facilities in the cities of presence. vaccination, periodic screening, RPS specialists of TVEL Fuel were adhered to, in particular, the STAKEHOLDER ENGAGEMENT Since 2017 TVEL JSC together with health survey, pharmaceutical Company defined for each medical compliance of the information RUB million TVEL FC always applies the principles ROSATOM and the Ministry of Health benefits. institution the range of tasks and published with the requests of allocated PA ECP JSC of transparency,1 and constantly of the Russian Federation has been Another direction of the project a set of targets forming the project stakeholders involved was ensured. in Zelenogorsk for interacts with stakeholders, participating in implementation of is provision of housing for medical design passport. During the project Two dialogues with stakeholders improvement of systematizes, analyses and takes a large-scale project “Lean Polyclinic”. workers. implementation, the Company (live and off-site dialogues) were the polyclinic building into consideration their requests. The project is aimed at enhancement The volume of project funding purchases the equipment, changed conducted to implement this principle, “Clinical Hospital No. 42” This approach allows to respond of operating efficiency of medical from all sources in 2017 was internal organizational processes, as well as public consultations on quickly to potential risks related with and preventive institutions and the about RUB 60 million. optimized the logistics, which resulted draft Report. stakeholders relations, in particular level of access to health care for the Training of medical staff included in gradual changing of the image of Participants of these dialogues with those of social and reputation population of Glazov, Zelenogorsk, familiarization with ROSATOM a medical institution as a more client- were the representatives of ROSATOM nature. Novouralsk, Seversk.Under the project, production system, including an oriented one. State Corporation, industry partner System of relationships with each the work of front desks in medical insight into the basic principles of In 2018, it is planned to continue organizations, subsidiaries, group of stakeholders influences institutions is being improved introducing lean production, the history of the the project realization in children’s environmental, public, trade union and will influence the operations of modern standards of communication, development of the production polyclinics and take measures to organizations, higher educational TVEL Fuel Company, that’s why due informational support and build-up of system in the nuclear industry and provide housing for medical workers. institutions, local governmental consideration of their interests in an accessible environment for people prerequisites for RPS introduction authorities, mass media, planning and in the course of daily with limited mobility: in budget-funded organizations and consultants and auditors. operations is the most important condition of sustainable development. Analysis of the key events, major Magic Christmas Tree charitable In Zelenogorsk, PA ECP JSC call center provided the opportunity situations. Due to that the number financial and production outcomes action was held at the end allocated more than RUB 4.9 million for patients to get prompt answers to of patient complaints decreased. and the Company’s performance of December 2017. for improvement of the polyclinic questions of interest. Besides, in 2017 TVEL Fuel Company in the sphere of sustainable Employees of TVEL JSC made building “Clinical Hospital No. 42” Besides, medical institutions in allocated RUB 20 million for purchase development demonstrates that social donations for more than RUB 50 and acquisition of new equipment, Novouralsk were also reorganized. of apartments for medical specialists capital is among the major sources of thousand to continue therapy of and involved its specialists to teach The municipal polyclinic No. 3 now of the Central Medical Sanitary business stability. a four-year-old daughter of one medical staff the principles of has a renovated entrance, porch, Department No. 31 in Novouralsk. Company's view on sustainable of AECC JSC employees. ROSATOM production system. parking was arranged, workplaces of development is shown in Annual According to an independent The Christmas tree was decorated In Novouralsk, UEIP JSC specialists all therapists and district nurses were Report of TVEL JSC for 2014: study, the patient satisfaction in with toys made by the children shared their experience in equipped with PCs, patient sessions www.tvel2014.ru/ru/section_3/ the city’s polyclinics of Novouralsk of JSC TVEL employees. Every implementing the RPS, helped increased. Due to the measures taken, #section_3_2. grew from 39 to 73%, waiting in employee who made a donation to organize properly the work of health survey time cut to a third. In queue decreased from 20 minutes could take home any decoration municipal polyclinics. Optimization polyclinic No. 1, the front desk is to 5 minutes. from the magic Christmas tree. of the processes allowed to reduce being renovated, all registrars were 1 Taking into account the objective industry-specific the waiting time in front-desk queue, trained in the prevention of conflict limitations.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS 146 147

Diagram 37 In November 2017 TVEL JSC organized an off-site dialogue on TVEL Fuel Company’s Stakeholders Rank Chart the concept of Annual Report 2017. Natural Capital The Report concept developed by the Company with account of the proposals ROSATOM from the Stakeholders Commission Ecological was presented; the participants gave community 3.0 TVEL subsidiaries recommendations which allowed to 2.5 finalize and refine the concept of the Mass media Consumers Report. 2.0 In the course of the dialogue held 1.5 on February 16, 2018, participants State discussed the issues of preparation of supervision 1.0 Universities bodies TVEL JSC Public Annual Report 2017, 0.5 summarized some outcomes 2017, TVEL Fuel Company regularly takes part 0 presented the priority issues to be disclosed in the Report: in national and regional environmental events, Personnel Partners “Improvement of Efficiency proving high social responsibility in environment and Sustainable Development of ROSATOM TVEL Fuel Company”. protection and preservation of the country’s Federal and The draft annual report of TVEL natural wealth. The Company works consistently regional Suppliers and JSC 2017, which was prepared in on reduction of adverse environmental government bodies contractors accordance with recommendations of the stakeholders given in the course effects of its operation Competitors of the dialogues, was presented during the public consultations on April 25, Local government bodies Public Scientific and expert 2018. Following the event the proposals organizations community were made by the stakeholders ECOLOGICAL POLICY on the information to be disclosed 2017 was declared the Year of Index of impact of stakeholders on TVEL FC in the Report. Ecology in Russia. The key thematic Index of impact of stakeholders on TVEL FC on stakeholders goal of the Year of Ecology is to draw attention to issues of concern in the environmental sphere and improve the country’s ecological security. In 2017, environmentally significant enterprises of TVEL among State-Owned Companies” Fuel Company implemented the in the rating “Corporate Trans- The table specifying the stakeholders’ comments Action Plan in the Year of Ecology, parency of the Largest Russian is given in an interactive version of the Report. including organizational, R&D, The minutes of the dialogues are available at: Companies — 2017” of the Russian educational and industrial-specific tvel.ru/wps/wcm/connect/tvel/tvelsite/ Regional Network on Integrated finance/annual_report/dialog/ events aimed at improvement of Reporting. environmental protection at TVEL XX 2nd place in general rating of JSC and environmentally significant industry-specific contest of annual organizations of TVEL Fuel Company. public reporting of ROSATOM. During the Year of Ecology the XX Platinum winner in the International enterprises of TVEL Fuel Company Competition MarCom Awards 2017 also focused on implementation TVEL JSC ANNUAL REPORT (USA) in category Annual Report of a large number of technological 2016 AWARDS (Print Media | Print Creativity) PA ECP JSC territory of presence, Krasnoyarsk territory efforts to improve production, XX Prizewinner in the nomination XX Silver title in international introduce innovative technologies “The Best Report on Corporate award “LACP 2017 Spotlight for atmospheric and water discharge Social Responsibility and Sustaina- Awards Global Communications treatment, waste management. ble Development” of the XX annual Competition” in category “Print: The main environmental goal of contest of annual public reporting Annual Report. Companies TVEL Fuel Company is promotion of the Moscow stock exchange. with a Turnover USD 1–10 bln”, of ecological, nuclear and radiation XX Top position and the title “Leader and is in TOP-100 world’s best safety, implementation of the of Corporate Transparency annual reports. Company’s strategic objective

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 148 149 to provide social and ecological Diagram 38 in the development of scientific (AECC JSC, PA ECP JSC, suitability. XX NCCP PJSC became the winner XX ChMZ JSC became the winner of and technical reference books on SGChE JSC, NCCP PJSC, Amount of financing for energy TVEL Fuel Company maintains of All-Russian Contest “Russian the Ecological Responsibility-2017 the best available technologies; UEIP JSC, ChMP JSC, MSZ saving and efficiency improvement the Integrated Management Business Leaders: Dynamics contest in nomination “Sponsor these reference book are used PJSC) issue and publish on program, RUB mln* System, where a Corporate and Responsibility — 2017” and Charity Support”, and won at the enterprises included into websites the annual public Environmental Management System in nomination “For Ecological the prize of the Republican the management system of reports on environmental safety is a constituent. Responsibility”. contest under the annual national TVEL Fuel Company. to inform the stakeholders, System-based application of the XX NCCP PJSC was acknowledged campaign “Environmental Hazards 1,000 Environmentally important partners, local government guiding principles of Ecological the winner of Novosibirsk Protection Days”. subsidiaries of TVEL Fuel Company bodies, and the public. Policy, the unified methodology of EcoProm-2017 contest in XX The project “Ecological Safety 800 771 environmental aspect identification nomination “Production Ecology”. in Handling Solid Radioactive and environmental risks and XX Following the results 2016 PA ECP Waste”, presented by UEIP JSC, 600 opportunities evaluation allows to JSC became the winner in special became the finalist of the National

400 349 allocate funds to solve the most nomination “Environmentally Crystal Compass Award in the 314 important problems, thus improving Exemplary Enterprise of the Fuel nomination “Best Environmental 200 performance in the field of ecology. Company” of ROSATOM’s contest Project of Industrial Enterprises Priority goals and objectives aimed at “Environmentally Exemplary and Business”. 0 reducing environmental risks are an Enterprise of the Nuclear Industry” XX For the initiative and significant 2016 2017 2018 integral part of the planning process; (The results of the contest were contribution to the environmental * The targeted growth of financing is explained by they are included in TVEL Fuel announced in the late 2017). protection and participation in participation of each and every enterprise of TVEL Company’s Environmental Objective XX UEIP JSC won municipal National Environmental Volunteer Fuel Company in the Program events since 2017. ENVIRONMENTAL IMPACT1 TVEL Fuel Company is one of the Achievement Program and Ecological ecological contest Green Owl- Clean-Up Day “Green Spring 2017” The facilities of enterprises of leaders in introduction of automated Policy Implementation Plan. 2017 in nomination “The Leader TVEL Fuel Company was awarded TVEL Fuel Company are generally systems for accounting of energy TVEL Fuel Company activity aimed in Environmental Compliance in the diploma of V.I. Vernadsky Non- classified as the II category resources and methods to improve at reduction of adverse environmental Novouralsk Municipal District”. Governmental Environmental Fund. objects causing moderate adverse energy efficiency in the nuclear impact of the enterprises is Diagram 39 environmental impact2. industry, including processes of characterized by branch specificity However, there are four objects energy inspections, formation of and carried out in two directions: Reduction of energy consumption of the I category (metallurgical long-term investment, organizational XX Removal of the environmental at TVEL FC enterprises in 2017 production) at ChMP JSC where and technical programs and specific “heritage” of the first nuclear (as compared to 2015) continuous monitoring of their activities for energy efficiency. The project, created as a result of in monetary terms, % XX The project “Clean City — XX Under the project, on the environmental impact is maintained. Company’s enterprises are involved execution of the military state Safe World” is implemented to basis of School Technoparks No excess of the specified standards in Energy Saving and Efficiency programs on enterprises included strengthen the image of TVEL the students of Physics and was registered in 2017. Improvement Program (further “the into the management system Fuel Company of ROSATOM as Mathematics Lyceums in the Program”) since 2011. The Program of the Company, which implies a socially and environmentally territories of presence of PA ECP was approved subject to the results of

execution of large scale works 8.4 Energy Saving and Efficiency responsible company. The JSC, SGChE JSC, UEIP JSC, 10 energy and thermovisional inspections connected with decommissioning Improvement Program project promotes environmental ChMZ JSC and supervised by held at the Company’s organizations. of the nuclear industry facilities The project on energy consumption responsibility of personnel and is TVEL Fuel Company, designed 5.79 The representatives of TUV and rehabilitation of the reduction and energy efficiency aimed at environmental education the robots for environmental 5 5 International Certification LLCA contaminated territories. and development of social activity quality monitoring. improvement of industrial 3 carried out regular witness audit XX Reduction of the impact companies of ROSATOM is of great of the residents in the regions XX In 2017, TVEL Fuel Company of Energy Management Corporate by the enterprises on the importance for the nuclear industry of presence of the Fuel Division won V.I. Vernadsky National System (EMCS) at TVEL JSC and environment connected with competitiveness recovery. of ROSATOM State Corporation, Environmental Award 0 its subsidiaries. No deviations and current production operations. as far as environmental for the project 2016 2017 discrepancies were revealed. In 2017, Ecological management system protection is concerned. “Clean City — Safe World”. the Company’s enterprises were also in being developed in this Plan Actual audited by the auditors of TVEL JSC. direction with implementation The Program has established of modern resource saving target values for reduction of energy production technologies, routine consumption (as compared to the environmental protection actions reference year 2015) in monetary and continuous environmental The enterprises of TVEL Fuel of the enterprises’ presence. Special terms. In 2017 the target indicator of quality monitoring. Company make regular efforts to attention is paid to environmental energy resources consumption was improve the existing and introduce the safety during improvement of the 5%. As a result of the implemented In accordance with the above advanced environmental technologies existing nuclear fuel production 1 The Report contains consolidated data on TVEL Fuel Company, and in certain cases, where necessary, activities this value was achieved and directions, enterprises of TVEL Fuel and technologies for monitoring technologies. discloses the data on each separate company. even surpassed. Company formulate annual plans of adverse impact on the environment, Employees of TVEL JSC and its 2 According to the Clause 1 of the Article 4.2 of the In 2017, the energy consumption environment protection measures. staff and population of the regions subsidiaries take an active part Federal Law No. 7-FZ “On Environmental Protection” d/d January 10, 2002. by the Company’s enterprises was

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 150 151

Table 48 Diagram 42 Results 2017: Dynamics of energy saving by the enterprises of TVEL FC under comparable XX Creation of the circulating water Heat energy consumption, thous. Gcal conditions as compared to 2015, on an accrual basis as a result of efforts supply system on the base of to reduce energy consumption and energy efficiency increase existing hydrotechnical structures of AECC JSC: Indicator 2016 2017 2018 (plan) replacement of energy-intensive 2,400 Total amount of saved electric power, mln kWh 118.4 171.53 181.493 pump 12 NDS TOU-4 of building 2,300 2,301 803 with less powerful pump D500 Total amount of heat energy, thous. Gcal 206.9 268.8 280.97 made it possible to save annually

Total amount of electric power and heat energy, thous. GJ 1,291.7 1,742.9 1,829.7 2,200 2,192 489.9 thous. kWh;

2,135 Under comparable pre-test assembly of NK-2 (fixed 2,100 conditions 2,073 cascade) without OK-2 (refining 2,060 cascade) made it possible to save Actual consumption Diagram 40 2,000 annually 576 thous. kWh; XX Optimization of industrial water and Total amount of energy saved by efforts to reduce energy 1,900 air supply system of PA ECP JSC; consumption and improve energy efficiency, in money terms 2016 2017 2018 (plan) XX Modernization of refrigeration under comparable conditions, RUB mln supply and conditioning system of reduced by 5.67%, heat energy — Diagram 43 PA ECP JSC: refrigeration supply by 11.5% as compared to the scheme of building 901 was Electric power and heat energy consumption reference values of 2015 under upgraded with two new refrigerating by TVEL FC enterprises in money terms under comparable 800 comparable conditions1. The reduction machines that are more energy- conditions, RUB mln in energy resources consumption efficient by 20% than the machines 600 (as compared to 2015) in monetary in operation; 10 of 16 refrigerating terms was 8.4% (RUB 834 mln). 10,000 machines were updated; energy 270.2 400 292.4 consumption of refrigerating

236.7 Electric power Change in the structure of fuel 8,000 machines was reduced by 31%. 200 Thermal energy consumption in 2017 was caused 6,000 2,201.3 2,166.6 2,144.4 Besides, enhanced management

367.5 378.3 by the use of gas instead of goal and automation system was 0 257.6 by HPP at SGChE JSC. Estimated 4,000 introduced; it enables management 2016 2017 2018 (plan) consumption in 2018 is stipulated by Electric power of equipment refrigeration process 2,000 the fact that starting from January 1, Thermal energy almost without human involvement. 6,055.9 5,936.9 5,926.1 2018 all HPPs of TVEL Fuel Company 0 Total economic benefit of these Diagram 41 were excluded from the perimeter 2016 2017 2018 (plan) activities will amount to at least of the Company. RUB 3 mln per annum; Electric energy consumption, mln kW*h XX Modernization of general and gas- Diagram 44 cleaning ventilation systems of Primary energy sources consumption*, PA ECP JSC; mln GJ XX Reconstruction of sanitary sewer 2,960 system of NCCP PJSC ensured

2,940 2,938 meeting the target values of water 2,920 30

2,908 consumption and runoff from — 2,900 0.25 29.6% in 2016 to 5.5% in 2017 0.262 2,880 2,872 25 as compared to 2015. Following

2,860 2,853 2,843 Under comparable the results 2017, as compared to 20 7.53 2,840 conditions 2016, the funds in the amount of 2,820 Mineral oil Actual consumption 15 RUB 23.84 million were saved by 2,800 Gas preventing penetration of ground 21.189 2,780 10 Coal water, defrost water and rain water

2016 2017 2018 (plan) 20.71 to bitumen compound storage 5 facility, as well as by reduction of 0 0.26 0 charges for excess of threshold 0 4.193 limit value; 1 Calculation of saving is carried out in accordance with 2016 2017 2018 (plan) XX Decentralization of air supply the approved by the order of ROSATOM methods for calculation of cost saving gained from reduced energy system of SGChE JSC; consumption, and own methods for the enterprises * Including generation of electricity and thermal energy by HPPs at TVEL Fuel Company’s subsidiaries. of TVEL Fuel Company, approved by TVEL JSC and In 2017, HPPs at ChMZ JSC and UEIP JSC were taken over by OTEK JSC; in 2018, HPPs at coordinated with ROSATOM State Corporation. SGChE JSC will also be taken over. In 2017, OTEK JSC was procuring coal for HPP at SGChE JSC.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 152 153

XX Decommissioning of Technological XX Modernization of general lighting Table 50 In December 2017, the author team Control Objects No. 7 and 8, which network (including replacement of Share of used waste produced consisting of employees of UEIP made it possible to save electric lamps with LEDs) at ChMP JSC; over a year, % JSC — Klyushin A.A., Lobov A.G., power and deaerated water at XX Installation of circulating pumps Fukalov A.I., Khramov V.V. — was SGChE JSC; in heating systems of buildings at Enterprise 2015 2016 2017 given the Corporate Award in XX Extension of temperature range Centrotech SPA LLC. ChMP JSC 32% 135% 11% for operational parameters of gas nomination “Best Engineering and Process Solution” for the project centrifuges in summer time, and, Use and Processing of Materials NCCP PJSC 1% 0% 0% consequently, change in operating “Technical Upgrading of Supervisory The quantity of materials necessary MSZ PJSC 66% 56% 55% Industrial and Consumer mode of refrigeration equipment of Control System of Building 3001, for the manufacture of products Shop 53”. The project authors were Waste Disposal building 34 of SGChE JSC; at enterprises of the Company AECC JSC 1% 1% 2% awarded the 3rd class diplomas. In 2017, the total amount of industrial XX Change in heating scheme of is determined by the production and consumer waste of the Company reactor plant and radiochemical program. Tochmash VPA JSC 1% 1% 1% Due to their great expertise the team was decreased by 76.5% as plant (relocation of pump station Enterprises of separation- members managed to minimize Total for TVEL FC 2.57% 5.80% 7.17% compared to the level of 2016 and of Fire Pumphouse of building 475 sublimation complex use uranium costs and to reduce capital expenses made around 41.6 thous. tons. beyond the area of reactor plant of and synthetic materials for products by RUB 166.9 million (survey and Main reasons of waste formation site 11 of SGChE JSC); manufacturing. Enterprises of design — RUB 13 mln, construction Diagram 45 decrease in 2017: XX Reduction of costs for dilution of and installation — RUB 55.5 mln, fabrication block use raw materials XX Reduction of hazard class 5 (slightly condensed water with domestic represented by enriched uranium Waste Generation and Recycling, tons* equipment — RUB 80.2 mln, pre- hazardous) waste (ashes and slag) and drinking water at SGChE JSC; product. Synthetic materials, ferrous commissioning — RUB 18.2 mln) generation due to reduction of coal XX The system of frequency-controlled and operational expenses by and non-ferrous metals are basically Transferred to outside organizations burning by HPP (Seversk Branch of drives of equipment cooling pumps RUB 108.2 thous. per annum. used in the manufacture of gas for use OTEK JSC) and reorganization of of Technological Control Objects centrifuges. 13,044 2017 waste calculation1. No. 64 and 65 of UEIP JSC was All raw materials used by TVEL Fuel 41,572 Generated in the Company XX Reduction of generated at UEIP made automatic. The application Company enterprises are purchased. JSC waste and scrap containing of this system results in electrical Plans 2018: No renewable materials are used in 10,045 uncontaminated ferrous metals due energy saving for at least 3 mln kWh XX Modernization of heating system production. Examples of the used 2016 to the fact that there was no need per annum. at AECC JSC; materials are shown in Table below. 176,562 for replacement of the existing XX Structure 715 at ChMP JSC XX Optimization of industrial pump 18,682 process equipment. became weather-resistant. Due to station (installation of low-pressure 2015 stained-glass glazing of the building impeller) at PA ECP JSC; 210,053 In technological processes of the in 2017, nearly RUB 4 million were XX Replacement of refrigerating enterprises of TVEL Fuel Company saved, or RUB 8 million on an machines at UEIP JSC; 0 50,000 100,000 150,000 200,000 250,000 the produced waste could not be annual basis. XX Completion of decentralization of reused during manufacture of the key XX The power transformers at MSZ the compressed air supply system * Information is provided according to the new form No. 2-TP (waste) approved by the ROSSTAT Order products. Non-production waste of PJSC were replaced. at MSZ PJSC; No. 529 “On Approval of Statistical Tools for Organization of Federal Statistical Monitoring of Industrial and Consumer Waste by the Federal Service for Environmental Control” d/d August 10, 2017. hazard class 5 (slightly hazardous) was used in 2017 by MSZ PJSC and ChMP JSC (55% and 11% Diagram 46 respectively).

Structure of waste generation at TVEL FC enterprises, % Table 49 Use of materials for main production by TVEL FC Enterprises*, tons 100 4.28 2.58 Material 2015 2016 2017 12.43 90 2.96 3.26 Sulfuric acid 1,171 713 735 80 70 Technical sulfuric acid (oleum) 12,005.2 12,247.2 12,664.87 Others 60 KMZ PJSC Nitric acid 11,859.6 18,584.7 22,494.6 50 86.99 85.93 12.07 UEIP JSC Hydrochloric acid 7,260.6 5,649.0 7,093.1 40 PA ECP JSC 30 Ferrous metals 2,385.0 2,112.0 2,358.5 MSZ PJSC 1 In 1st–3rd quarters of 2017 SGChE JSC accounted 20 38.87 ChMZ JSC for all wastes generated in the process of production Non-ferrous metals 786.2 834.9 846.1 10 SGChE JSC economic activity of HPP at OTEK JSC; since the fourth quarter of 2017 HPP at OTEK JSC began to account for 0 the generated waste independently. * Data was retrospectively adjusted due to the changed approach to data collection of the companies included in management system of TVEL Fuel Company. 2015 2016 2017

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 154 155

Table 51 Waste generated at TVEL FC enterprises by hazard classes, thous. tons

Indicator 2015 2016 2017 ∆ 2017/2016, %

Total waste, including: 210.1 176.6 41.6 –76.5%

Hazard Class I 0.21 0.09 0.04 –56%

Hazard Class II 4.08 0.05 0.02 –59%

Hazard Class III 0.49 0.43 0.49 14%

Hazard Class IV 10.80 8.92 9.36 5%

Hazard Class V 194.47 167.1 31.7 –81%

The bulk of waste (76%) was Diagram 47 represented by Hazard Class V Water consumption in 2015–2017*, mln m3 (slightly hazardous) waste, such as ash slag resulting from solid fuel burning at the HPPs (Seversk 1 branch of OTEK JSC ). Ash and 500 slag were dumped at HPP. The bulk 433,6 416,2 401,6 393,9 of other wastes was delivered to 400 373,9 specialized organizations. 318,9 300 256,3 254,2 239,7 Water Consumption and Water AECC JSC territory of presence, Irkutsk region, lake Baikal Disposal 200 In 2017 withdrawal of water by 100 51,9 48,2 the enterprises of the Company 45,4 The main source of water decreased by 4% to 402 mln m3 0 withdrawal is represented by natural as compared to the previous year, 2015 2016 2017 sources 94% (379 mln m3). Water is water consumption for own needs Water withdrawal Water consumption for own needs being withdrawn by the enterprises decreased by 15% to 319 mln of TVEL Fuel Company from natural m3. Thus, 319 mln m3 of water Circulating water Reused water sources in accordance with the were disposed by the Company’s * Actual consumption method is mainly used in calculation of water consumption indicators at the Company’s set standards. Water withdrawal In 2017, the volume of return enterprises (55.2% of the standard). enterprises. from public and other water supply water was 240 mln m3. The share of All water was disposed into natural Withdrawal systems was 23 mln m3 in 2017. return water of the total amount of water bodies. of water In 2017, the standard of water withdrawn water was 60%, the share Reasons for decrease in volumes Diagram 48 by the Company’s withdrawal was set at 709 mln m3, the of reused water of the total volume of water withdrawal and consumption: enterprises Water disposal by enterprises of TVEL FC in 2015–2017, mln m3 actual volume of withdrawal was 57% of withdrawn water was 11%. Water XX transfer of industrial water intake decreased by of the set standard. consumption in the systems of return of ChMP JSC to the HPP at water decreased by 6%. Glazov Branch of OTEK JSC; In 2017, the volume of disposal XX measures aimed at water 4% of polluted waste water by the consumption reduction 9.5 2015 Polluted water Company’s enterprises decreased by by AECC JSC; 2016 In 2017, the storm water treatment volume 9.6 1%, which is directly connected to XX transfer of property complexes plant system VEKSA-80M was 2017 decrease in water withdrawal. of HPPs at SGChE JSC, UEIP JSC 10.4 put into operation at NCCP JSC. Water Difference in percent decrease as and ChMP JSC to the branches consumption This complex makes it possible compared to 2016 of water withdrawal of OTEK JSC. 318.5 to enhance efficiency of waste for own needs Disposed volume and polluted waste water water cleaning from suspended decreased by water volume 319.1 volume is conditioned by the fact that particles and petroleum products. some TVEL Fuel Company enterprises 338.4 accept waste water from outside organizations. 1 From the first to the third quarter of 2017 SGChE JSC 15% accounted for the waste. 0 50 100 150 200 250 300 350 400

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 156 157

Diagram 49 It should be noted that this HPP Diagram 51 TVEL Fuel Company enterprises set supply heat and electricity to the the standards of admissible impact Emissions of ozone-depleting Emission of specific pollutants, settlements within the range of the on the environment that ensure the substances, tons thous. tons* enterprise location. At ChMP JSC the environmental quality preservation. emissions are caused by technological Strict compliance with the standards Pollutant Emissions processes of chemical metallurgical Relative Impact of TVEL of admissible impact on the 6 In 2017, total pollutant emissions into production. Fuel Company Enterprises environment by the enterprises

300 4.9

5 4.7

259.3 259.1 the atmosphere by the Company’s Reduction of emissions of ozone- on the Environment in the ensures the absence of threats to 4.0 249.2 250 enterprises amounted to 3.8 thousand depleting substances by 4% is 4 3.5 Regions of Presence animals and plants inhabiting the 200 tons (7% of the set standard). stipulated by: 3 The enterprises included in the areas adjacent to the Company’s Reduction of emissions by 74% XX replacement by AECC JSC of management system of TVEL Fuel enterprises.

2 1.5 150 as compared to 2016 is explained by: refrigerating machines using Company are located on lands The impact of the major part 1 100 XX reduction of burned coal fuel at HPP ozone-depleting substances 0.4 that are owned by the enterprises, of the Company’s enterprises on 0 (Seversk Branch of OTEK JSC)1; as refrigerants; as well as on lands that are used the environment of the regions of 50 XX transfer of property complexes of XX transfer of refrigeration supply 2015 2016 2017 on a leasehold basis and are presence is in general less than 0 HPPs at UEIP JSC and ChMP JSC equipment of industrial water Nitrogen oxide emissions (NOx) owned by the Russian Federation. 5% of the total impact of industrial 2015 2016 2017 to OTEK JSC; supply shop to Novouralsk Industrial sites of the enterprises and facilities on the environment of the Sulphur oxide emissins (SOx) XX production area optimization Branch of OTEK JSC. adjacent territories are not referred corresponding regions. This level and dismantling of equipment * Determined by computational method along with to the territories with high valued of exposure corresponds to the at Tochmash VPA JSC. Decrease in nitrogen and sulphur instrumental verification. biodiversity, they are not inhabited following indicators: oxide emissions by 68% and 89%, by animals and plants included in XX AECC JSC (3.3% of waste water Diagram 50 Among the enterprises of TVEL correspondingly is stipulated by the IUCN (International Union for discharge in Irkutsk region); Fuel Company the largest volumes of overall emissions decrease in TVEL Conservation of Nature and Natural XX PA ECP JSC (4.9% of waste water Total pollutant emissions, thous. Diagram 52 emissions were reported at SGChE Fuel Company. In 2017, emissions Resources) Red List and the national discharge in Krasnoyarsk territory); tons JSC and ChMP JSC. At SGChE JSC of solid substances amounted to Carbon dioxide equivalent list of protected species. XX SGChE JSC (0.5% of total the large portion of waste is caused by 0.738 thous. tons, and volatile organic greenhouse gas emissions, The Russian environmental discharge in Tomsk region). the HPP at Seversk Branch of OTEK compounds — 0.502 thous. tons. thous. tons* legislation sets the standards 20 JSC (during the first three quarters of In 2017, greenhouse gas emission of admissible impact on the The 5% level was exceeded by 18 2017 it enjoyed the Authorization for intensity amounted to 5.11 tons/ environment to provide compliance SGChE JSC (56.4% of withdrawn 16 16.4 Pollutants Emissions of SGChE JSC). RUB mln of revenue (in 2016 — with the environmental quality water, 73.7% of the total discharge 14.4 14 5.12 tons/RUB mln). The emissions 923.0 standards. The enterprises, in of waste water in Tomsk region). 12 from technological processes form 922.93 their turn, follow the standards The share of impact of the rest of 1 During the first three quarters 2017, HPP at Seversk 922.9 10 the bulk of greenhouse gas emissions 922.86 of admissible impact of the TVEL FC enterprises in the total 8 Branch of OTEK JSC enjoyed the authorization for pollutants emissions of SGChE JSC. at TVEL Fuel Company. 922.8 environment, and, thus, they do not impact of economic activities on 6 922.7 create threats to animals and plants the environment in the regions of 4 3.8 2 922.63 inhabiting the areas adjacent to the presence is insignificant. 922.6 0 enterprises of TVEL Fuel Company. 922.5 Taking into account the fact that EXPENSES RELATED TO 2015 2016 2017 industrial sites of the enterprises do ENVIRONMENT PROTECTION 922.4 not affect the territories with high In 2017, operating expenses of the 2015 2016 2017 valued biodiversity, there is no impact Company enterprises for environment of activity, products and services on protection amounted to RUB 2,207 * The carbon dioxide emissions were taken into consideration to determine greenhouse gases endangered and valuable species. million. Target funds, that were emissions, because carbon oxide emitted into the atmosphere from anthropogenic sources In accordance with the Russian allocated in the framework of the is oxidized to carbon dioxide. The indicators Federation nature protection laws investment and project activities were determined by computational method and recalculated in accordance with the Methodological of TVEL Fuel Company and Guidelines used to Quantify the Greenhouse ROSATOM State Corporation, were Gas Emissions by Organizations that Carry out Economic and Other Activities in the Russian used to finance both technical and Federation, approved by the Order No. 300 of the No emergencies and organizational arrangements. Ministry of Natural Resources d/d June 30, 2015, namely: incidents resulting in The share of expenses is related to Formula No. 2 of the Methodological guidelines was used in computation. negative environmental the activities for environment radiation The amount of CO2 emissions was calculated by safety assurance (RUB 848 mln). conversion from CO (multiplied by factor1.57). impact occurred in 2017 Emissions of CH4 (methane) of UEIP JSC Considerable expenses are related and emissions of perfluoromethane (freon at the enterprises of to collection and treatment of waste 14) of ChMZ JSC, subject to GWP specified in the Appendix No. 3 of the Methodological TVEL Fuel Company water (RUB 480 mln). Guidelines, were also taken into account in calculating the total amount of greenhouse gas emissions at TVEL FC.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 158 159

Table 52 Service of the Russian Federation, Expenses of TVEL FC related to environment protection, RUB mln the radiation situation at the The main program documents Company’s enterprises, within providing for realization of Expenditure items 2015 2016 2017 their sanitary protection areas and activities in the area of NRS control areas (areas of professional are as follows: Radiation safety assurance 817 726 848 NUCLEAR AND RADIATION responsibility) is estimated XX “Fundamentals of State Policy Waste water collection and treatment 512 473 480 SAFETY as satisfactory. in the Sphere of Nuclear and Activities of TVEL Fuel Company Radiation Safety of the Russian Atmosphere air protection and prevention of climate change 283 219 209 are carried out in accordance with Federal Target Program “Nuclear Federation up to 2025” Waste disposal 172 135 121 the laws of the Russian Federation and Radiation Safety Assurance XX Federal Target Program pertaining to the use of nuclear for 2016–2020 and up to 2030” “Nuclear and Radiation Protection and rehabilitation of lands, surface and ground water 61 51 56 power with due account to IAEA Within the strategic initiative Safety Assurance for Other activities in the sphere of environment protection 474 502 492 requirements. “Environmental Responsibility” of 2016–2020 and up to 2030” Assurance of nuclear and TVEL Fuel Company, the works are Total 2,318 2,106 2,207 radiation safety (NRS) of facilities ongoing for liquidation of “nuclear of the Company enterprises, heritage”, including rehabilitation radionuclides territories will be prevention and exclusion of any of contaminated areas. rehabilitated. This will significantly The share of environment protection Diagram 53 Diagram 54 possibility of inadmissible exposure Since 2016 there is a new Federal reduce the cost of products expenses of TVEL Fuel Company of the personnel, population and Target Program “Nuclear and Environment protection costs Structure of payments for negative manufactured by enterprises of TVEL falls on SGChE JSC, UEIP JSC environment to radiation are the key Radiation Safety Assurance for outlay of TVEL FC in 2017, % environmental impact, RUB mln Fuel Company due to reduction of and ChMP JSC. priorities of environmental policy of 2016–2020 and up to 2030” contaminated areas and subsequent In 2017, total amount of payments TVEL Fuel Company. (FTP NRS-2, website: production compaction. Significant for negative impact on the environment Lists of nuclear hazardous sections фцп-ярб2030.рф). means spent annually for safe increased by 69.6% as compared are elaborated for all nuclear- FTP NRS-2 includes 17 events Discharges maintenance of NRHF of TVEL Fuel to the previous year and amounted hazardous facilities of the Company, of TVEL Fuel Company to the total Emissions Company will also be preserved. to RUB 11.2 mln. 22 38 40 there are conclusions on the nuclear amount RUB 38.9 billion, including Wastes In the reporting year, there were 35 safety issued by the Department RUB 35.3 billion out of the federal no non-financial fines and penalties of Nuclear Safety of IPPE RF SSC budget. The said arrangements will be for negative environmental impact 30 FSUE. All nuclear hazardous sections performed at facilities of SGChE JSC, of enterprises included in the 3 25 are equipped with emergency alarm AECC JSC, UEIP JSC, NCCP PJSC, management system of TVEL FC, 28.4 systems in the case of self-sustaining MSZ PJSC, VNIINM JSC and EDB- 20 21.5 no damage was caused to the 6 fission chain reaction. Nizhny Novgorod JSC. Six of them are environment. 15 Units of the enterprises for short-term arrangements that have In 2017, the amounts of fines 10 processing, storage, manufacturing already been implemented within FTP increased due to revealed violations 1.8 1.7 5.4 with application of nuclear materials NRS in 2008–2015; and the rest 11 9 5 0.7 in document management in the 7.2 6.7 and radioactive substances, are new decommissioning projects. sphere of environment protection 0 5.1 radioactive wastes treatment have Apart from decommissioning (generally, failure to meet the 22 2015 2016 2017 sanitary-epidemiological conclusions of NRHF and rehabilitation of the deadlines for document handling). on compliance of conditions of contaminated territories of FTP The specified violations were revealed work with radiation sources with NRS-2, the decision was taken on Environment radiation Diagram 55 during the inspections of the State safety assurance sanitary rules. decommissioning of the sublimation Supervisory Authorities; in 2017, Fines and penalties collected According to the conclusions made production at AECC JSC, production the number of inspections increased Collection and treatment for the impact caused to by the territorial departments of the of uranium tetrafluoride at ChMP JSC of waste water as compared to 2016. According to the environment, RUB mln State Sanitary and Epidemiological and chemical metallurgical plant of the issued instructions the remedial Atmosphere air protection SGChE JSC. The above measures measures are taken within the and prevention of shall be implemented partially at the climate change 17 specified terms, and the reports In 2017, within the framework of expense of the special reserve fund events Waste management are submitted in accordance with 2 supervising the activity of TVEL No. 3 (Decommissioning and R&D) of of TVEL Fuel Company the established procedure. Protection and rehabilitation Fuel Company’s enterprises, ROSATOM State Corporation. are included of lands,surface and 1.5 1.52 the state supervisory authorities One of the key objectives set to in FTP NRS-2 ground water (Rostekhnadzor (Federal Service the industry is reduction in expenses totaling amount Other activities in the sphere 1 for Ecological, Technological and production costs to ensure RUB 38.9 billion, of environment protection and Atomic Supervision), FMBA, competitiveness on the world market. including

0.5 0.45 EMERCOM, RPN (Federal Service In this regard, it is planned that by RUB 35.3 billion 0.32 for Environmental Control) carried 2030 NRHF will be decommissioned, out of the federal 0 out 184 inspections and 470 thousand square meters budget 2015 2016 2017 of territories contaminated with

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 160 161

Table 53 Table 54 Execution of works under the FTP “Nuclear and Radiation Safety Assurance for 2016–2020 Sources of financing for liquidation of the nuclear “heritage” and up to 2030” at the sites of the Company’s subsidiaries at the expense of the federal budget* in 2017

Subsidiary Name of enterprise Scope of finance, RUB mln Sources Number of Scope of financing, List of major activities activities RUB mln 2017 2017 2018 (plan) (actual) (plan) The Federal Budget 5 922.9 XX Decommissioning of structure No.2 (building 802) and within the Federal Target structure No.4 (building No. 804) of AECC JSC SGChE JSC Reconstruction of facility 13 at Radiochemical Plant 100.0 100.0 60.0 Program “Nuclear XX Conservation of B-1 and B-25 ponds at SGChE JSC Conservation of B-1 storage bay 100.0 100.0 96.0 and Radiation Safety Assurance for XX Reconstruction of the site No.13 at SGChE JSC 2016–2020 and up Conservation of B-25 pond 157.7 157.7 97.3 XX Decommissioning of uranium-graphite production to 2030” (FTP) reactor of NCCP PJSC AECC JSC Decommissioning of structure No. 2 (Building 802) 752.5 360.3 769.4 and structure No. 4 (Building No. 804) XX Decommissioning of facility U-5 of VNIINM JSC

VNIINM JSC Decommissioning of facility U-5, preparation for decommissioning of areas of radioactive contamination 0.0 99.3 0.0 The Special 24 461.15 XX Complex engineering and radiation inspection of the 3rd No. 2 and No. 9 and research buildings Reserve Fund No. 3 and the 4th turn at Joint Venture AECC JSC “Decommissioning and XX Preservation of terrestrial solid radioactive waste R&D” of ROSATOM NCCP JSC Decommissioning of fuel rods for industrial storage of site 16 of Chemical-Metallurgical Plant 446.1 105.6 0.0 State Corporation uranium-graphite reactors at SGChE JSC

TOTAL at the Company’s sites 1,556.3 922.9* 1,022.7 XX Preparation for decommissioning of “Makety” Warehouse Complex at NCCP PJSC

* Taking into account the savings following the results of tendering procedures. XX Preparation for decommissioning of structures G, A at VNIINM JSC

XX Preparation for decommissioning of facility М2079 at SGChE JSC

Reserve No. 3 9 33.62 VNIINM JSC “Decommissioning XX Working out and introduction of database for of R&D” remaining deactivation technologies during decommissioning at the disposal of the of nuclear and radiation hazardous facilities organization XX Development of microplasma ablation decontamination method

XX Development and approval of procedure for dismantling of large tanks contaminated by radionuclides and containing radioactive deposits of complex composition

XX Creation of contamination confinement method using high-temperature application of powder fixing coatings Diagram 56 SGChE JSC

Investments into the development XX Review works in the area of B-1 pond of radioactive waste and spent nuclear fuel treatment technologies, RUB thous. Results 2017: SGChE JSC continues the Table 55 VNIINM JSC completed conservation of B-1 and B-25 ponds. Federal Target Program decommissioning of building 53 In 2016–2017, nearly RUB 481.9 mln “Nuclear and Radiation Safety Assurance for 2016–2020 and up to 2030” with construction area 360 m2 and out of the federal budget was spent variable number of storeys (2/3). to carry out these arrangements. 150,000 Indicator Unit Planned Actual In the territory of industrial site The works on development of

114,659.7 of NCCP PJSC decommissioning infrastructure for radioactive waste Number of INES violations of level 2 and higher units 0 0 100,000 to “green lawn” of building 73 with treatment were completed on the 82,039.7 Commissioning of spent nuclear fuel repositories thous. tons – – construction area of 12,144 m2 industrial site at AECC JSC; the works 3 50,051.4 was completed. The works were on dismantling and radioactive Commissioning of spent radioactive waste repositories thous. m 880 3,000 50,000 performed using own funds in the waste treatment are in progress. Preparation for decommissioning of nuclear and radiation-hazard facilities amount of RUB 416.8 mln. In 2016–2017, RUB 1.1 billion out units 11 11 0 of the federal budget was spent Number of decommissioned nuclear and radiation-hazard facilities units 3 3 2015 2016 2017 to carry out this work.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 162 163

radionuclides subject to rehabilitation designed and financed by UEIP JSC Table 56 amounted to 15,226.9 thous. m2. is currently the only Russian facility Pollution of the environment with radionuclides (RN) Following the conclusions of able to assure safety and reliable final regulatory authorities the radiation isolation of low and extremely low- Indicator 2015 2016 2017 and nuclear safety in the Company, level radioactive waste. Emission of alpha-active RN into the atmosphere, Bq 9.49·10 9 8.72·10 9 7.36·10 9 Rehabilitation of the Areas in general, conforms with the Most of radioactive wastes located Contaminated by Radionuclides regulations and rules in the field at the sites of TVEL JSC subsidiaries Presence of areas contaminated with RN, thous. m2 16,081.4 16,081.4 15,226.82 Lands contaminated with of nuclear power use. TVEL Fuel are placed in temporary RW disposal Discharge of waste water containing RN, Bq 2.09·10 9 3.22·10 9 3.41·10 9 radionuclides are within the area of Company registered no cases of sites (48.6% of the total volume professional responsibility of MSZ cancellation of any license related to in m3) and long-term RW storage PJSC, NСCP PJSC, ChMP JSC nuclear power application. facilities (39.6%). In the reporting year, and SGChE JSC. The Company implements the 47,877.1 m3 of ILW, 369,351.9 m3 Table 57 In 2017, within the scope concept of defence-in-depth, based of LLW, and 255.0 m3 of VLLW were Pollution of the environment with radionuclides as of the end of 2017 of remedial actions aimed at on physical barriers to ionizing delivered to specialized organizations. improvement of radiation situation in radiation proliferation at all stages the territory of MSZ PJSC industrial of nuclear facilities life cycle. Areas contaminated with radionuclides, thous. m2 site, the impact of radioactive During product transportation TVEL Including: contaminated areas on groundwater JSC ensures compliance with the Subsidiary Company Total and the environment in the northern Regulations for the Safe Transport of Sanitary protection Area of professional Industrial part of industrial site was studied, and Radioactive Materials NP-053-16 and zone responsibility site the territory of building 73 at NСCP IAEA SSR-6 Regulations for the Safe PJSC industrial site was rehabilitated Transport of Radioactive Materials, as MSZ PJSC 48.1 0 0 48.1 (FA production for uranium-graphite well as other international documents NCCP PJSC 372.3 0 210 162.3 production reactor). on transport. In the reporting year, the emissions In 2017, the first batch of RW No contamination of new areas ChMP JSC 202.5 0 0 202.5 of radionuclides into the atmosphere of UEIP JSC was placed for final occurred resulting from activities SGChE JSC 14,604.0 333 0 14,271.0 were within the permissible limits. isolation at class 3 and 4 subsurface of TVEL FC subsidiaries in the In the late 2017, the total area RW repository (CATU Novouralsk, reporting year. Total 15,226.9 333 210 14,683.9 of territories contaminated with Sverdlovsk region). RW repository,

Table 58 Presence of RW on the sites of TVEL FUel Company subsidiary sites by the level of radioactivity as of 31.12.2017

Level of radioactivity XX The scientists of VNIINM JSC intensity of materials use, simplicity in progress during 2016-2017 Indicator Unit presented technologies and and low price of cold crucible were completed 91 days ahead of High Medium Low Very low facilities for decontamination of structure. The crucible is an easily schedule provided by the contract. radiation hazardous sites: replaceable wear and tear part of XX The employees of SGChE JSC Presence of RW on the sites of m3 13,056 291,383 4,256,145 5,876,176 method and facility for air- the facility. Small size of melter were the first to apply this TVEL Fuel Company subsidiaries free application of localizing allows remote replacement of life- unique unrivalled technology as of the end 2017, total 16 18 14 14 and decontaminating polymer expired equipment. for conservation of open-type Bq 8.50·10 2.00·10 7.22·10 2.13·10 compounds which allows treating XX The project of ChMZ JSC radioactive waste storage facilities m3 13,000 291,261 3,865,385 5,816,078 Accumulated before July 15, 2011 large areas and preventing cross “Reprocessing of Substandard of B-1 pond. The application (“heritage”)* 16 18 14 14 contamination; Uranium-Containing Materials of of engineering solution made it Bq 8.50·10 2.00·10 7.02·10 2.08·10 foam decontamination of above- Previous Years with Production of possible to complete in time the m3 246 48,969 780,099 33,970 ground equipment using special Depleted Uranium Oxide Suitable covering of water area of open- Produced after July 15, 2011, total 14 15 13 12 decontaminating agents and for Enrichment” won the National type radioactive waste storage Bq 1.37·10 8.74·10 2.24·10 4.69·10 foaming systems. Award of the Udmurt Republic. facility. The economic effect of the m3 56 47,9 93 369,809 6,721 XX Specialists of VNIINM JSC XX SGChE JSC completed the engineering solution amounted Produced in the reporting year 13 14 12 11 developed cold crucible induction preparation of B-25 pond to RUB 15 mln. The radioactive Bq 2.71·10 6.44·10 2.25·10 3.57·10 melting technology for solidification conservation stage (nuclear waste stored in B-1 pond was of radioactive waste generating heritage facility remained after successfully isolated to protect * Date of entry into force of the Russian Federation Federal Law No. 190-FZ d/d July 11, 2011 “On Radioactive Waste Treatment at radiochemical enterprises and national defence programs the environment in 2017. and Amendments to a Number of Legislative Acts of the Russian Federation” that delimits the ownership between NPPs. Its main advantages are low completion). The activities being the Russian Federation and the companies that produce new radioactive waste.

Table of Contents TVEL | ANNUAL REPORT 2017 4 | PERFORMANCE RESULTS | Natural Сapital 164 165

FIRE AND DISASTER The officials of TVEL Fuel Organizational and technical fire Scheme 9 PREVENTION Company’s EMS improved their skills Thanks to the purposeful protection activities allowed to Key areas of activity to ensure emergency preparedness In 2017, TVEL Fuel Company in organization of communication, work carried out in TVEL Fuel prevent fire at industrial sites of the and response by TVEL JSC subsidiaries continued to improve facility-specific transmission of control and reporting Company emergencies of natural enterprises and continue the positive system of emergency prevention and signals, data exchange in dealing with and man-made, including fire, tendency of their number reduction 1. Development of radiation, response, and fire safety system. prevention of natural and man-made at Company's enterprises beginning from 2012. chemical and environmental situation monitoring systems To ensure the readiness for emergencies. for the reporting period emergency and fire management, Considerable efforts were made Emergency Preparedness and local warning systems not allowed. TVEL Fuel Company enterprises held to improve fire safety by carrying and Response the drills involving deployment of out organizational and technical Activity intended to ensure emergency 2. Continuous readiness material and human resources of both measures, which made it possible: preparedness and response of TVEL of emergency rescue teams the enterprises and the interacting XX to reduce the number of violations Fuel Company subsidiaries is carried forces of territorial and functional found by the state fire supervisory out in eight key areas. 3. Updating of emergency response plans subsystems of the Single State authorities of the EMERCOM of Non-staff emergency response at major industrial facilities Emergency Management System. Russia by 32% in comparison teams were formed at the Company’s In 2017, there were held 434 drills and with 2016; enterprises. These teams were 4. Emergency response drills under accident trainings, including 10 snap drills. XX to improve the timeliness of certified by the industry certification and emergency plans To control the readiness of TVEL compliance with the received commission of TVEL JSC, they have Fuel Company for freshet and fire instructions up to 99%; the necessary material and human 5. Setting up and maintaining the emergency preparedness season, on April 19, 2017 there was XX to complete the implementation resources to response emergency held a divisional drill with deployment of investment projects aimed at and are maintained in continuous and response packages at hazardous industrial facilities of material and human resources of re-equipment of facilities with readiness. the enterprises and the interacting automatic fire fighting systems 6. Introduction of corrective and compensatory measures forces of EMERCOM of Russia, to 100% in 2017; The Unified State Automated to prevent industrial accidents branches of the Emergency Center XX to ensure continuous monitoring of Radiation Monitoring System SPb FSUE, FMBA of Russia, Atom- fire situation in forests on industrial of the Russian Federation 7. Interaction with Emergency Centre SPb Okhrana FSUE, etc. The drill proved sites and surrounding areas and the The enterprises of TVEL Fuel Company and its affiliates to ensure emergency preparedness in transportation readiness of participants to seasonal complex of preventive measures (MSZ PJSC, ChMP JSC, VNIINM JSC, of dangerous goods and industrial safety natural hazards. that would prevent wildfires; SGChE JSC, UEIP JSC, AECC JSC, XX In October 2017, TVEL Fuel to improve the quality of training PA ECP JSC) operate and constantly 8. Maintenance of on-duty dispatching Company took part in the nationwide of managers and specialists improve the Automated Radiation service system in readiness civil defence drill involving interaction responsible for fire safety in Monitoring Systems (ARMS). with territorial bodies of EMERCOM of specialized training centres, and to The ARMS of TVEL Fuel Company Russia and local government bodies upgrade the system of fire safety 434 enterprises are included into the in dealing with major emergency briefing of employees; drills and trainings, Sector ARMS of ROSATOM State ARMS is untended for continuous recovery. The actions of the teams XX to ensure further development of including 10 snap drills, Corporation, which in its turn is radiation and meteorological control at UEIP JSC completed the that represented the Company the volunteer fire-fighter movement, to eliminate emergency interconnected with the Unified State production facilities of enterprises and automation of control over solid enterprises were favourably judged holding of review-contests and situations and fires Automated Radiation Monitoring in residential areas of the territories radioactive waste processing, during inspections and execution of competitions. were held in 2017 System (ARMS). of presence. The outcomes are as well as performance of practical tasks of the drills. transmitted to the Situation and Crisis equipment and safety systems. Management Center of ROSATOM The rate of data receipt and State Corporation, after that they processing by the monitoring are available at www.russianatom.ru. system increased several Diagram 57 Modernization will allow to monitor times; now, there is no need automatically all fixed monitoring in continuous on-site presence of Number of fires and ignitions in TVEL FC stations and to transmit the obtained the employees. New automated information to the Situation and workstations contributed to 7 Crisis Management Center on increase in quality of technological process and its safety, including 5 an hourly basis. environmental aspect. 4 3 3 2 Ignitions Fires 1 2 2 1 1 0 0 0 2012 2013 2014 2015 2016 2017

Table of Contents TVEL | ANNUAL REPORT 2017 TVEL | ANNUAL REPORT 2017 166 167

Physical Protection of The performance of the systems Nuclear Facilities of physical protection is regularly The systems of physical evaluated in the course of complex About the Report protection (PP) at the enterprises and special-purpose inspections. of TVEL Fuel Company are created In 2017 the security department and operated according to the of TVEL Fuel Company conducted requirements of current statutory five inspections of physical documents. protection and security at nuclear- In accordance with the Uniform and radiation-hazardous and Policy of ROSATOM and TVEL JSC high-security facilities of VNIINM the system of physical protection, JSC, SGChE JSC, MSZ PJSC, safety and counter-terrorism security ECP JSC, MZP JSC. In the course of all enterprises of TVEL Fuel of inspections of the systems of Company is being continuously physical protection special attention improved. was paid to verifying the compliance The Public Annual Report In the furtherance of the counter- with the requirements of legal terrorism security goals all facilities regulatory acts, conditions stipulated (hereinafter referred to as “the Report”) (territories) of the companies by the Rostekhnadzor licenses, is the ninth integrated report which covers included into the management as well as to corrective actions. system of TVEL Fuel Company were Analysis of the inspection findings performance of TVEL JSC and its subsidiary classified, safety data sheets and shows that the enterprises of TVEL companies (together referred to as Rosatom amendments thereto were drawn Fuel Company take measures aimed TVEL Fuel Company, TVEL Fuel Company, up, the updated summary list of at enhancement of the systems classified facilities (territories) of of physical protection, safety and TVEL FC, the Company) in 2017 the company was drafted. counter-terrorism security.

The subsidiary companies of TVEL OBJECTIVES OF THE JSC (AECC JSC, SGChE JSC, UEIP REPORT: JSC, PA ECP JSC, KMZ PJSC) also publish their integrated reports, which XX Providing complete, reliable can be found on their official websites. and balanced information about the Company’s activities in THE PURPOSE OF THE accordance with the GRI Standards REPORT: requirements; XX Ensuring compliance of the process XX Informing the target audiences, of preparation of the Report and stakeholders and the general public information in it with the current on the results of TVEL JSC in 2017, industry and international standards development strategies and plans and recommendations; for the short and medium term; XX Organization of constructive XX Providing expertise of public interaction with stakeholders; acceptability of TVEL JSC XX Development of the institution for performance through the interaction with subsidiaries; involvement of stakeholders in the XX Development and improvement dialogue and detailed acquaintance of the system of public annual with the reporting materials. reporting.

Table of Contents TVEL | ANNUAL REPORT 2017 ABOUT THE REPORT 168 169

This Report is prepared XX Sustainability Reporting Guidelines are material for all subsidiaries from Scheme 10 in compliance with the following of the Global Reporting Initiative. the Report profile, unless otherwise is Material aspects matrix regulatory documents: XX Standard АА1000 APS 2015 specified herein. Occupational Health (GRI Standards themes are italicized) of Accountability. and Safety aspect is important not XX Federal Law No. 208-FZ d/d XX International Integrated Reporting only for the Company, but also for Territories of presence Economic Performance Product Quality December 26, 1995 Framework, version 1.0. contractor organizations rendering Pollutant emissions Business Continuity “On Joint Stock Companies”. capital construction services at the Pollutant Discharge Position in the world market in Water Sources XX Federal Law No. 402-FZ d/d The integrated format of the Report Company’s facilities. The data on New business directions December 6, 2012 provides detailed description of “Occupational Health and Safety” Waste International Cooperation “On Accounting”. the Company’s performance in the were disclosed on all organizations Occupational health Environment protection XX RF Government Regulation context of the environment and shows of TVEL Fuel Company. Data on Nuclear and Radiation Safety No. 1214 d/d December 31, 2010 its impact on the stakeholders. government subsidies and training Significant impact Radiation Environmental Impact (as revised on July 19, 2017) in anti-corruption practices are RW and SNF Treatment, “On improving management The Report discloses the essential shown only for TVEL JSC. Rehabilitation of Contaminated Areas procedure of open joint stock information information which is Coverage of the aspects had no Decommissioning of Nuclear Facilities Innovation Activitiy companies, the shares of which are important to those who use this changes as compared to the previous under federal ownership and owned Report to assess the performance reporting period. No significant Customer Health and Safety Indirect Economic Impacts Social Welfare of Workers Employment by federal state unitary enterprises”. of the Company. In the course reformulations of the indicators given Human Rights Procurement Practices Reward XX Provision of the Bank of Russia of execution of the Report, in previous reports were done. Water consumption Demand for Qualified Staff No. 454-P d/d December 30, 2014 a questionnaire was conducted for Supply chain Workers training Labor/Management Relations “On Disclosure of Information by internal and external stakeholders, Materiality Determination Process Intellectual Property Compliance

the Issuers of Equity Securities”. and a matrix of material aspects Under conceptual development of Median impact Information transparency Energy Efficiency XX Corporate Governance Code was drawn up. the Report 2016, the materiality increasing Anti-corruption

Influence on stakehoder assessments and decisons Investment Activities (recommended by letter of the Aspect boundaries and content analysis was carried out in November Central Bank of the Russian of the Report were determined by 2016 in accordance with new GRI Biodiversity Materials used in production

Federation d/d April 10, 2014). the Committee on Public Annual Standards, including GRI principles. No Climate change impact XX Uniform Industry Specific Guidelines Reporting involving the Committee of Representatives of the Company on Execution of Public Reports in Stakeholders, and agreed on by TVEL and its key stakeholders were No impact Median impact Significant impact ROSATOM and its organizations. JSC subdivisions. Disclosed issues invited to evaluate both the GRI and Significance of the Comany's impact on economics, environment and society

Table 59 Information about Report TVEL Fuel Company-specific themes, The GRI content index is placed in The Stakeholders Commission was which complies with GRI Standards the interactive version of the Report: established by the Company in 2013 Reporting cycle Annual recommendations. Materiality matrix tvel.ru/wps/wcm/connect/tvel/tvelsite/ to promote regular feedback on the was prepared based on the survey finance/annual_report/. matters pertaining to the activity of Format Integrated result. When developing the concept the Company and its public position Comparative indicators For 3 years of the Report for 2017, in December Rationale for choosing priority on specific matters. 2017 the stakeholders were asked atopics of the Report Stakeholders’ suggestions were Target indicators Shown for 2018 and the reporting year, where the approved plans to confirm the relevance of the Based on the analysis of the taken into account while preparing are available material aspects selected in 2016, Company’s performance during the Report, as well as the analysis Report Profile TVEL JSC, AECC JSC, SGChE JSC, UEIP JSC, PA ECP JSC, KMZ PJSC, or propose changes. As a result the reporting period, the basic of the best Russian and international Tochmash VPA JSC, MSZ PJSC, ChMP JSC, MZP JSC, NCCP PJSC, of this questionnaire, the matrix of results and the key events the practices of disclosure in annual VNIINM JSC, Ecoalliance LLC, Centrotech SPA LLC, Centrotech SPb JSC, significant aspects did not change. priority aspects of the Report has reports. Details see in Section OKB-Nizhny Novgorod JSC (OKB-NN JSC), NRDC LLC, Incorporated Company RSK JSC, EC RGC, Industrial Innovation JSC, RusAR LLC, CFR-4 The matrix has been prepared been formulated to be disclosed in “Stakeholder Engagement”. (subsidiary companies of TVEL Fuel Company)* in axes of “The significance of the the integrated Report 2017: TVEL Following the 2017 reporting Company’s impact on economics, strategic initiatives — efficiency campaign 18 suggestions of Priority theme of the Report TVEL strategic initiatives — efficiency improvement and sustainable development environment and society” (average improvement and sustainable stakeholders were received: 8 of them assessment made by managers of development. have been taken into account while GRI disclosure level GRI G4 Comprehensive Version** TVEL Fuel Company, who took part in preparing the Report, 1 — partially survey) and “Influence on stakeholder Stakeholder Engagement considered, 3 — will be taken into Date of the previous Report publication June 2017 assessments and decisions” Stakeholders engagement is an account while preparing the next (external stakeholders’ assessments). integral element of public reports reports. The minutes of the respective The most essential issues were preparation and day-to-day dialogues are available on the website: ** Aspect boundaries are presented in the interactive version of the Report. ** Performance indicators and standard elements are generated and presented in the Report in accordance with the Russian Accounting Standards. highlighted in dark blue. activity of TVEL Fuel Company. tvel.ru/wps/wcm/connect/tvel/tvelsite/ Financial report data pursuant to the International Financial Reporting Standards (IFRS) are not presented due to later generation thereof. finance/annual_report/dialog/.

Table of Contents TVEL | ANNUAL REPORT 2017 ABOUT THE REPORT 170 171

Table 60 Reliability of the information Actual performance results may Compliance of the material aspects of TVEL Fuel Company to GRI aspects contained in the Report differ from the forecasted ones. has been confirmed by: The Company appreciates Competitive advantages of TVEL Fuel Company Compliance with GRI Material Aspects XX The Statement of the Director the employees who took part in for Internal Control and Audit preparation of this Report, and Economic Performance XX Economic Performance of TVEL JSC (with respect to all participants of public consultations

Occupational Health and Safety XX Occupational Health and Safety efficiency of the internal control and dialogues. We hope you will find system applicable to generation this Report interesting and informative Social Welfare of Workers of the Report and compliance in terms of the new information about XX Employment Employment of generation procedures with TVEL Fuel Company. Our working requirements of law, internal team is open to your feedback Workers Training XX Training and Education regulations of ROSATOM and and suggestions on the matters

Labor/Management Relations XX Labor/Management Relations TVEL JSC in the sphere of and the issues that you would like public reporting); to see in the next annual report. Compliance XX Ecological Compliance XX The Statement of the audit Feedback form is available in the XX Social-Economic Compliance organization Nexia Pacioli LLC, interactive version of the Report Energy Efficiency XX Energy confirming the reliability of 2017 on the site: tvel.ru/wps/wcm/connect/ Financial Statement of TVEL JSC; tvel/ tvelsite/finance/annual_report/. Anti-Corruption XX Anti-Corruption XX The Statement of the audit

Territories of Presence XX Local Communities organization confirming the reliability of non-financial data Pollutant Emissions XX Emissions published in the Report. Pollutant Discharge in Water Sources XX Effluents and Waste The Organization that renders Waste services of independent assurance Product Quality – of non-financial data of the Report was selected through competitive Business Sustainability – procurement practices. Position in the World Market – The Report was approved by TVEL JSC Board of Directors. New Business Directions – This Report covers the year 2017. All prior and future periods International Cooperation – are mentioned herein in description Environment Protection – of corporate strategy, collation of performance indicators and results, Nuclear and Radiation Safety – forecasts and risk assessments. In addition to factual information, Radiation Impact on Environment – this Report describes and assesses RW and SNF Treatment, Rehabilitation of Contaminated Areas – potential and probable events. Any statements herein other than Decommissioning of Nuclear Facilities – statement of facts shall be construed Innovative Activities – as forecasts. Forecasts of this kind are relevant only at the time of publishing. Reward – TVEL JSC (unless otherwise specifically provided for by applicable Demand for Qualified Staff – legislation) is not obliged to review or Investment Activities – update the said forecasts or factors in any new pieces of information.

Table of Contents TVEL | ANNUAL REPORT 2017 TERMS AND DEFINITIONS 172 173

Fuel Recharging Operations by material- Terms and Definitions handling machines to F replace the spent fuel; H I the fuel exposure degree Fast Neutrons required for recharging Heat Carrier Indirect Energy Use Neutrons with kinetic depends on the fuel Liquid or gas used for (Consumption) energy higher than certain composition after exposure, heat transfer from the Indirect energy use definite value. In Nuclear allowable work duration active zone of the reactor (consumption) indicates Reactor Physics fast and on the reactivity to steam generators or the amount of energy neutrons are those with change. directly to the turbines. required for production by energies above 0.1 MeV. the reporting company of Business Model Fuel-Element Cladding Highly Enriched Uranium the consumed or purchased According to the Financial Capital Metal tubes in the active Uranium with uranium-235 externally (i.e. produced International Integrated According to the zone of the reactor isotope equal or higher outside the company) Reporting Framework, A D E International Integrated containing oxide fuel than 20%. electric energy, steam, heat business model is a system Nuclear fuel where the Reporting Framework, pellets. energy and other types of Ash and Slag of transforming the capitals Dashboard content of fissionable the pool of funds that is: Human Capital intermediate energy. Waste generated from through business activity Interactive information nuclides is higher than XX available to an According to the solid fuel burning. aiming to fulfil strategic panel for presentation in natural raw material. organization for use International Integrated Integrated Report purposes and create value of information needed for in the production of Reporting Framework, Integrated report represents over the short-, medium- executibe decision-making, Enriched Uranium goods or the provision people’s competencies, brief overview that reveals and long term. enhancement of operating G Uranium which contains of services; capabilities and experience, how strategy, corporate efficiency, process more U-235 isotope than XX obtained through Gas Centrifuge and their motivations, management, activities and handling, KPI assessment, B natural uranium borrowings, equity or Equipment intended to including: prospects in the context etc. in user-friendly Reactor quality uranium grants, or generated obtaining enriched uranium XX alignment with of the environment lead Background Radiation interface. is usually enriched through operations required for operation of and support for to value creation over the Background Radiation C approximately to 3.5% or investments. nuclear reactors of nuclear an organization’s short, medium and long- Ionizing radiation Decommissioning U-235, and the content power plants. governance framework, term periods. composed of space Capital Decommissioning of of U-235 in weapon-grade Fuel Assembly risk management radiation and ionizing According to the a reactor facility and uranium is over 90%. A package of fuel elements Gas Diffusion Technology approach, and Intellectual Capital radiation of naturally International Integrated follow-up activity to ensure (rods, bars, plates and Gas-diffusion method ethical values; According to the distributed natural Reporting Framework, its safe dismantling, Enrichment (isotopic) others) held together with method for separating XX ability to understand, International Integrated radionuclides (on resources and relations equipment disposal and XX a) the content of atoms the aid of spacer grids and uranium isotopes, develop and implement Reporting Framework, Earth surface, in the being the source and the further use of the site. of a certain isotope in other structural elements, based on phenomenon an organization’s organizational knowledge- air, foodstuffs, water, results of value (integrated the isotopic mixture which are integral during of molecular diffusion strategy; based intangibles. human organism, etc.). value) creation processes. Depleted Uranium of the same element, transportation and in-pile through the micropores XX loyalties and motivations Uranium that contains if this exceeds the share irradiation. Assemblies are in a membrane (barrier). for improving processes, ISAE 3000 International Becquerel (bq) Circulating water less isotopes U-235 than of the given isotope in loaded into the nuclear including their ability Standard on Assurance A unit of radionuclide Water that has been natural uranium. a naturally occurring reactor core. Global Reporting to lead, manage and Engagements activity in the radiation used in the processing mixture (expressed as Initiative, GRI collaborate. The Standard of the source, equal to nuclide cycle, and after cooling Depleted Uranium a percentage); Fuel Pellet An international reporting International Federation activity where one nucleus or purification it is used Uranium depleted through XX b) process resulting A pellet of compacted system concerning of Accountants “The decays per second. for the same purposes. extraction of U-235, which in an increased content uranium dioxide is the economic, environmental performance of assurance is economically unfeasible of a certain isotope in basis of nuclear fuel and and social performance, engagements other Burnup Fraction Closed Nuclear to use; stored at a disposal the isotopic mixture. is contained inside fuel based on the Sustainability than audits and reviews Fraction of an initial Fuel Cycle site (dump). elements. Reporting Standards. of historical financial quantity of a given nuclide Nuclear fuel cycle information”. that has undergone where spent nuclear Dump of Radioactive Fuel Production burnup in reactor under fuel is processed for Material Nuclear fuel production, the neutrons influence. uranium and plutonium Controlled entry of generally in the form of extraction for nuclear radionuclides into water ceramic pellets enclosed fuel remanufacturing. bodies with liquid waste in metal tubes (fuel of a nuclear facility. elements), which are subsequently assembled in fuel assemblies (FA).

Table of Contents TVEL | ANNUAL REPORT 2017 TERMS AND DEFINITIONS 174 175

Nuclear Fuel Primary Energy Sources Radioactive Discharge Rehabilitation of Spent Nuclear Fuel A material containing Initial form of energy Radionuclide emission into Contaminated Areas Reprocessing fissionable nuclides which, used to satisfy energy the atmosphere resulting Reduction of the extent of A complex of chemical L N being placed in the nuclear O requirements of the from operation of a nuclear radioactive contamination processes intended to reactor, makes it possible reporting organization. facility. to the level ensuring the remove fission products Low-enriched uranium Natural Capital to sustain a nuclear chain Ozone-Depleting Examples of primary maximum protection of from spent nuclear Uranium that contains According to the reaction. Substances sources include non- Radioactive Isotopes population and recovery fuel and fissile material the isotope U-235 in International Integrated Any substance with renewable energy sources, Isotopes with unstable of all elements of the recovery for reuse. a concentration of less Reporting Framework, Nuclear Fuel Cycle an ozone-depleting e.g. coal, natural gas, nuclei undergoing ecosystem (water, soil, than 20%. these are: The sequence of potential higher than 0, oil and nuclear energy. radioactive decay. air) to the applicable Sublimation Production XX renewable and non- manufacturing processes that can deplete the They also include such normative level. Uranium hexafluoride renewable environmental for ensuring the operation stratospheric ozone layer. renewable sources as Radioactive Waste production. resources and processes, of nuclear reactors from Most of ozone-depleting biomass, sun and wind Nuclear materials and Research Reactor including — air, water, uranium production to the substances, including energy, geothermal radioactive substances that A nuclear reactor designed M land, minerals and disposal of radioactive chlorofluorohydrocarbons, and hydraulic energy. no longer can be used. to be used as research forests; waste. halons and methylbromide, object with a view to obtain Manufactured Capital XX biodiversity and eco- fall under the Montreal Radioactive Waste data on reactor physics T According to the system health. Nuclear Fuel Depletion protocol as amended. Processing and technology required for International Integrated Reduction of any nuclide Technological operations design and development of Tailing Dump Reporting Framework, Net working time concentration in nuclear R aimed at altering the a reactor of the same type Complex of special manufactured physical Working time minus time fuel due to nuclear aggregative state and/or or of components thereof. structures and equipment objects (as distinct from of scheduled breaks. transformations of this Radiation Exposure physic-chemical properties intended for storage or natural physical objects) nuclide during the reactor P The total of individual of radioactive waste burial of radioactive, toxic that are available to an Neutron operation. exposure doses received and their transformation and other tailing materials organization for use in An elementary particle Phase Gate Approach or planned in the operations into forms suitable for called tails. the production of goods with no net electric charge; Nuclear Power to Investment on decommissioning, transportation, storage and/ S or the provision of can be found in each Branch of power A principle of planning and maintenance, repair, or disposal. Terminal farm services, including: atomic nucleus except for engineering that uses carrying out investment replacement or dismantling Social and Relationship Group of servers that are XX buildings and structures; hydrogen. Single neutrons nuclear energy for electricity activities applied to divide of nuclear facility Radioactive Waste Capital meant to provide remote XX equipment; moving with different and heat supply purposes. investment processes into components. Treatment According to the workspace (desktop, XX infrastructure. speeds are released phases, where each phase General term that covers International Integrated applocations) for users during the fission reaction. Nuclear Reactor is preceded by Gate Review Radiation Monitoring all activities related to the Reporting Framework, — that connect to them Maximum Permissible Slow (thermal) neutrons, A unit wherein a controlled of the results achieved Acquisition of information processing, conditioning, the institutions and the through client programs Dose in their turn, can easily chain nuclear reaction with and the further project on the radiological transportation, storage and relationships within the for remote access. The maximum value of cause fission of nuclei of energy release takes place. implementation plans and conditions in the burial of radioactive waste. Company and between the individual equivalent “fissionable” isotopes, Reactors are classified risk, and a decision is organisation and in the the Company and different Top Management radiation dose per year, e.g., U-235, Pu-239, according to their purpose, made on the further project environment and on Radionuclide groups of stakeholders Directors General, Deputies which does not cause U-233; fast neutrons can carrier type, design and implementation phase human exposure levels General name for and other communities Director-General. unfavorable changes cause fission of “fertile” other characteristics. to be proceeded to. (includes dose control and radioactive atoms. aimed to enhance in health after 50 years isotope nuclei, e.g. U-238. radiometric monitoring). They pose a great danger collective well-being. of uniform exposure. Sometimes atomic nuclei Nuclear Waste Power Unit to environment. can capture neutrons. Radioactive materials One of the NPP reactors Radiation Safety Social Partnership generated on various stages with necessary additional A set of arrangements Regenerated Uranium A system of institutes U Nuclear Energy of the nuclear fuel cycle, equipment. seeking to limit the Uranium separated from and mechanisms of Internal energy of atomic including development exposure of personnel spent nuclear fuel in the coordination of the Uranium Conversion nuclei released by nuclear of uranium deposits, Pre-test assembly and the public to the process of radio-chemical interests of the production Chemical engineering fission or nuclear reactions. enrichment, fuel production, program lowest possible radiation reprocessing for repeated process participants process of uranium- reactor operation, fuel A stage in the nuclear dose values in a socially use in nuclear fuel (workers, employers, state containing materials Nuclear Facility processing, etc. plant commissioning from acceptable way, as well as (regenerated fuel). authorities, local self- transformation into uranium Any facility that generates, the power start-up to the to avoid the early effects government) based on hexafluoride. processes or handles Nuclide plant’s acceptance for of exposure and keep the equal cooperation. radioactive or fissionable Type of atom with a definite commercial operation. delayed radiation effects materials. number of protons and within tolerable limits. neutrons in the nucleus characterized by an atomic mass and atomic (order) number.

Table of Contents TERMS AND DEFINITIONS TVEL | ANNUAL REPORT 2017 176 177

Uranium Hexafluoride a chemical compound of uranium and fluorine (UF6). Abbreviations This is the only highly V W volatile uranium-fluorine compound (when heated to VVER Worker capacity 53оC, uranium hexafluoride Water-water energetic Share of net working time passes from solid into gas); reactor with water used that the worker is doing it is used as raw material for as heat carrier and operations according to separation of uranium-238 decelerator. The most technological process and uranium-235 isotopes common type of Russian and current workplace using a gas-diffusion NPP reactors has two management. ACS DEP CERI EDEC FRM technology or a gas- modifications: VVER-440 Automated Control System Complex Engineering and Experimental demonstration Fabrication/refabrication centrifuge technology, and VVER-1000. for Design Engineering Radiation Inspection energy complex module and for production of Pre-production enriched uranium. CFHC EGP FSUE AFCF Chlorofluorohydrocarbons Energy channel-type Federal State Unitary Uranium Ore Enrichment Adjusted free cash flow graphite reactor with steam Enterprise Combination of processes CFR overheat, used on Bilibino for the primary treatment AFST Center of Functional NPP FTP of uranium-bearing mineral Automated gas filling Responsibility Federal Target Program raw material to separate station EMERCOM uranium from other CRMS The Ministry of the Russian GC minerals contained in the AMSIEM Corporate risk management Federation for Affairs of Gas Centrifuge ore. This does not involve Automated measuring system Civil Defence, Emergencies any changes in the content system of industrial and and Elimination of GCC of minerals, but only ecological monitoring CU Consequences of Natural Gas Centrifuge Complex mechanical separation Conversion unit Disasters thereof with the resultant ARMS GOST production of an ore Automated radiation DB Emergency Center SPb State Standard concentrate. monitoring system Database FSUE Federal State Unitary HEU BN DIC&A Enterprise “Emergency Highly Enriched Uranium Fast neutron reactor where Director for Internal Control Centre of the Ministry of the heat carrier within and Audit Nuclear Energy of Russia” HHCS the first and second loop (Saint Petersburg) Hyper heat-conductive consists of sodium, while EBITDA sections the third loop carries water Earnings before interest, EMS and steam. In Russia is taxes, depreciation and Emergency Management HM applied at Beloyarsk NPP amortization — an System (Facility Level) Heavy metals analytical indicator, used to BWR define a company’s profit, EUP HPP Boiling water reactor — before interest expenses, Enriched uranium product Heat and power plant a reactor that uses boiling taxes, depreciation and water as heat carrier amortization are subtracted FA IA Fuel Assembly Investment Activities CATU EChG-AFC Closed administrative and Electrochemical generators FE NFC IAEA territorial unit on alkaline fuel cells Front end of nuclear International Atomic Energy fuel cycle Agency — international CD and ES EChG-SOFC regulatory body that Civil defence and Electrochemical generators FE, FEG monitors nuclear safety emergency situations on solid oxide fuel cells Fuel element performance and non- proliferation of nuclear CEFA ECM FMBA weapons in the world Combined experimental Electronic Computing Federal Medical and fuel assembly Machines Biological Agency

Table of Contents TVEL | ANNUAL REPORT 2017 ABBREVIATIONS 178 179

IC LEU NF RBMK SFI TVS-K Information Center Low-enriched uranium Nuclear fuel High-power channel-type Suggestions for Name of fuel assembly for reactor — type of single- improvement PWR reactors developed in ICS LHM NFC cycle energetic reactor with Russia Internal Control System High purity lithium-7 Nuclear fuel cycle, water as hear carrier, and SH hydroxide monohydrate set of arrangements graphite as decelerator Stakeholders, parties UIPS IDP aimed at operation of concerned Uniform Industrial Integrated Development LIC nuclear power industry, RN Procurement Standard Planning Lithium-ion cells including production and Radionuclide SNF of ROSATOM State processing of uranium Spent nuclear fuel Corporation IFI LLC ore, fuel production, its RPS Information favoured index Limited liability company transportation to NPP, ROSATOM Production SPA VAT storage and treatment of System Scientific-production Value added tax IFRS LRW SNF. In case of SNF burial association International Financial Liquid radioactive waste NFC is called opened, RR VHI Reporting Standards and if fuel reprocessing Research Reactor SRWS Voluntary health insurance LTIFR and repeated use are Solid Radioactive Waste IMS Lost time injury frequency provided — it is called RRM/RF Storage VVER Integrated Management rate — number of lost closed RRM (regenerated raw Water-to-water energetic System for Quality, time incidents divided by material) — uranium SSC reactor Environment and Safety total hours worked for the NPF hexafluoride obtained State Scientific Center reporting year and rated Non-state pension fund from regenerated fuel of IMSd as 1 mln man hours industrial reactors SSC Integrated Management NPP RF — uranium hexafluoride Separation and sublimation System for Design LWS Nuclear power plant, obtained from irradiated complex Local warning systems industrial facility for electric fuel of NPP reactors INES power production STC International Nuclear Event MM RU Scientific and Technical Scale Mass media NRHF Reactor unit Council Nuclear and radiation IT MNUP hazardous facilities RUEI SWU Information Technologies Mixed nitride Russian Union of Separative work unit uranium-plutonium NRS Entrepreneurs and ITER Nuclear radiation safety Industrialists TASED International Thermonuclear MOX-fuel Territory of advancing social Experimental Reactor Mixed Oxide Nuclear Fuel OR RUNPIW and economic development built on basis of tokamak (generally on basis of Oil Refinery Russian Union of Nuclear by international group of uranium and plutonium) Power and Industry TIPS scientists under the aegis PHWR Workers Theory of Inventive Problem of IAEA. It is supposed MPS Pressurised heavy water Solving to be a pilot version of Managerial personnel reactor — foreign reactors Russian-Kazakhstan the world’s first DEMO reserve with heavy water (D2O) as Project ERC TVEL FC — thermonuclear power plant reactor coolant Russian-Kazakhstan TVEL Fuel Company MSE Project “Uranium TVEL JSC and subsidiary IUGR Managers, specialists, PJSC Enrichment Center” companies included into Industrial uranium-graphite employees Public Joint Stock the management system reactor Company RW of the Company and MW Radioactive waste consolidation framework JCPOA Megawatt — unit of power PWR used for the reporting Joint Comprehensive Plan equal to 106 watts. MW(e) — Pressurized water reactor — SC of Action electric power of a generator; type of foreign reactors with Subsidiary companies TVSA (FAAD) MW(t) — thermal power of pressurized water, analogue Fuel assembly of alternative JSC a reactor or heat source of VVER reactor SDIC design Joint Stock Company (e.g., full thermal power of Special Department for the reactor itself is generally R&D Internal Control KPI three times higher than Research and development Key performance indicators the electric power)

Table of Contents 5 Appendices TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 1 | Auditor’s Report on Financial Statements for the Year 2017 182 183

and obtain audit evidence that is XX Conclude on the appropriateness We communicate with those charged APPENDIX 1. sufficient and appropriate to provide of management’s use of the going with governance regarding, among other a basis for our opinion. The risk of not concern basis of accounting and, matters, the planned scope and timing Auditor’s Report on Financial Statements detecting a material misstatement based on the audit evidence obtained, of the audit and significant audit findings, resulting from fraud is higher than for whether a material uncertainty exists including any significant deficiencies in for the Year 2017 one resulting from error, as fraud may related to events or conditions that internal control that we identify during involve collusion, forgery, intentional may cast significant doubt on the our audit. omissions, misrepresentations, or the Company’s ability to continue as override of internal control. a going concern. If we conclude XX Obtain an understanding of internal that a material uncertainty exists, control relevant to the audit in order we are required to draw attention to design audit procedures that are in our auditor’s report to the THE AUDITED ENTITY THE AUDITOR appropriate in the circumstances, but related disclosures in the financial not for the purpose of expressing an statements or, if such disclosures are Name: Name: opinion on the effectiveness of the inadequate, to modify our opinion. Joint Stock Company “TVEL” Limited Liability Company “Nexia Pacioli” Company’s internal control Our conclusions are based on the (hereinafter referred to as JSC “TVEL”) (“Nexia Pacioli” LLC) XX Evaluate the appropriateness of audit evidence obtained up to the Location: Location: accounting policies used and the date of our auditor’s report. However, bld. 24, Bolshaya Ordynka st., Moscow, 119017 bld. 2, Malaya Polyanka st., Moscow, 119180 reasonableness of accounting future events or conditions may cause estimates and related disclosures the Company to cease to continue as made by management. a going concern. INDEPENDENT AUDITOR’S requirements that are relevant to our either intends to liquidate the Company REPORT TO THE audit of the financial statements in the or to cease operations, or has no realistic SHAREHOLDERS AND BOARD Russian Federation, and we have fulfilled alternative but to do so. Those charged OF DIRECTORS OF JSC “TVEL” our other responsibilities in accordance with governance are responsible for with these requirements and the IESBA overseeing the Company’s financial Opinion Code. We believe that the audit evidence reporting process. We have audited the accompanying we have obtained is sufficient and financial statements of JSC “TVEL” appropriate to provide a basis for our Auditor’s Responsibilities for the (the Company), which comprise: opinion. Audit of the Financial Statements XX Balance Sheet at December 31, Our objectives are to obtain reasonable 2017; Other Matter assurance about whether the financial XX Statement of profit or loss for the The financial statements of the Company statements as a whole are free from year ended December 31, 2017; for the year ended December 31, 2016, material misstatement, whether XX Statement of changes in equity for were audited by another auditor LLC due to fraud or error, and to issue the year ended December 31, 2017; “FBK” who expressed an unmodified an auditor’s report that includes our XX Statement of cash flow for the year opinion on those statements on opinion. Reasonable assurance is a ended December 31, 2017; March 01, 2017. high level of assurance, but is not a XX Notes to the financial statements for guarantee that an audit conducted in the year ended December 31, 2017. Responsibilities of Management and accordance with ISAs will always detect Those Charged with Governance for a material misstatement when it exists. In our opinion, the financial statements the Financial Statements Misstatements can arise from fraud present fairly in all material respects, Management is responsible for the or error and are considered material the financial position of JSC “TVEL” as preparation of the financial statements if, individually or in the aggregate, at December 31, 2017, and its financial in accordance with Russian accounting they could reasonably be expected performance and its cash flows for the standards and for such internal control to influence the economic decisions The certified auditor responsible Deputy of General director by audit year then ended in accordance with as management determines is necessary of users taken on the basis of these for the audit resulting in this “Nexia Pacioli” LLC ______O. V. Danilova Russian accounting standards. to enable the preparation of financial financial statements. independent auditor’s report is (signature) (name) statements that are free from material As part of an audit in accordance with T. S. Kaurova, State Registration Number 1027739428716 Basis for Opinion misstatement, whether due to fraud ISAs, we exercise professional judgment licence number 02-000088, Bld. 2, Malaya Polyanka street, Moscow, We conducted our audit in accordance or error. In preparing the financial and maintain professional skepticism main registration number 21606080624 119180, Russia with International Standards on Auditing statements, management is responsible throughout the audit. We also: A member of Self-regulated organization (ISAs). Our responsibilities under those for assessing the Company’s ability to XX Identify and assess the risks of of auditors Association “Sodruzhestvo” standards are further described in the continue as a going concern, disclosing, material misstatement of the financial Main registration number 11606052374 Auditor’s Responsibilities section of as applicable, matters related to going statements, whether due to fraud our report. We are independent of the concern and using the going concern or error, design and perform audit March 05, 2018 Company in accordance with the ethical basis of accounting unless management procedures responsive to those risks,

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 2 | Financial Statements for the Year 2017 184 185

Comments Index description Code As on As on As on APPENDIX 2. Financial Statements for the year 2017 December 31, December 31, December 31, 2017 2016 2015

Balance sheet as at December 31, 2017 5.5 Financial investments (excluding cash) 1240 71,473,277 27,797,237 1,640,000 Codes: 5.6 Cash 1250 3,934,336 9,435,365 42,826,542 Form under OKUD 0710001 Date (day, month, year) 31.12.2017 Other current assets 1260 361,464 454,658 863,924 Organization: Joint Stock Company “TVEL” under OKPO 45046040 Type of business: Production of nuclear fuel TIN 7706123550 Total II 1200 172,040,817 145,117,474 163,905,502 Form of incorporation/form of ownership: Joint Stock Company under OKVED 24.26 Measurement unit: in thous. RUB under OKОPF/OKFS 1 22 67/16 BALANCE 1600 386,515,535 364,223,027 394,357,456 Location (address): bld. 24, Bolshaya Ordynka st., Moscow, 119017 under OKEI 384

Comments Index description Code As on As on As on December 31, December 31, December 31, 2017 2016 2015

ASSETS LIABILITIES

I. NON-CURRENT ASSETS III. CAPITAL AND RESERVES

5.1 Intangible assets 1110 1,099,385 1,055,754 1,329,604 Equity capital (pooled capital, collective capital, contribution of partners) 1310 22,962 22,962 22,962 5.2 Results of research and development 1120 1,115,609 470,339 511,917 Own shares redeemed from shareholders 1320 – – – Intangible development assets 1130 – – – Received contributions from stockholders to share Tangible development assets 1140 – – – capital before registration of changes in constituent 1330 – – – documents 5.3 Fixed assets 1150 170,416 154,397 245,073 Revaluation of non-current assets 1340 – – – Buildings, vehicles, equipment etc. 1151 170,416 114,382 200,808 Additional capital (without revaluation) 1350 181,731,790 181,731,834 181,732,335 Capital investments in progress 1152 – 40,015 40,015 Reserve capital 1360 522,402 258,255 125,886

Advances to suppliers 1153 – – 4,250 5.14 XX Reserves formed in accordance with legislation 1361 521,254 257,107 124,738

Income-bearing investments in tangibles 1160 414,716 416,554 427,667 XX Reserves formed in accordance with founding documents 1362 1,148 1,148 1,148 5.5 Financial investments 1170 203,386,909 209,655,354 223,589,430 Undistributed profit (uncovered loss) 1370 110,095,198 97,246,595 105,197,731 Deferred tax assets 1180 5,207,194 4,042,626 1,480,598 Total III 1400 292,372,352 279,259,646 287,078,914 Other non-current assets 1190 3,080,489 3,310,529 2,867,665 IV. LONG-TERM LIABILITIES Total I 1100 214,474,718 219,105,553 230,451,954 Borrowed funds 1410 – – – II. CURRENT ASSETS Deferred tax liabilities 1420 – – – 5.4 Stock 1210 59,866,941 68,750,309 84,916,423 Estimated liabilities 1430 – – – XX Raw, materials and other similar assets 1211 7,774,339 8,578,293 8,581,245 Other liabilities 1450 2,450,963 1,429,164 925,753

XX Work in progress expenditures 1212 45,483,552 48,957,800 61,716,761 Total IV 1400 2,450,963 1,429,164 925,753 XX Finished products and goods for resale 1213 6,592,606 11,214,216 14,618,417 V. SHORT-TERM LIABILITIES XX Shipped goods 1214 16,444 – –

XX Other stock and expenses 1219 – – – 5.13 Borrowed funds 1510 50,140,638 40,181,112 63,008,851 Value added tax on purchased assets 1220 3,492,685 8,575,202 13,017,390 5.10 Accounts payable 1520 40,584,170 42,507,215 42,253,983

5.7 Accounts receivable 1230 32,912,114 30,104,703 20,641,223 XX Suppliers and contractors 1521 26,847,061 25,586,785 20,874,830

XX Settlements with buyers and customers 1231 24,291,307 18,387 786 14,927,726 XX Advances received 1522 12,158,164 12,434,174 18,249,393

XX Advances made 1232 2,129,997 611,518 2,151,253 XX Accounts payable to employees 1523 1,163 1,496 1,356

XX Other debtors 1233 6,490,810 11,105,399 3,562,244 XX Accounts payable to state non-budget bodies 1524 – – 70

XX VAT reclaimed 1235 4,176,139 6,576,297 497,216 XX Accounts payable in respect of taxes and levies 1525 3,315 3,318 17,472

XX Payments on agent act 1236 1,394,746 2,337,662 2,337,662 XX Other creditors 1526 1,574,467 4,481,442 3,110,862

XX Unpresented for payment accrued revenue 1234 – – – Deferred income 1530 1,417 2,309 912

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 2 | Financial Statements for the Year 2017 186 187

Comments Index description Code As on As on As on December 31, December 31, December 31, Profit and Loss Statement for the year 2017 2017 2016 2015 Codes Form under OKUD 0710002 5.15 Estimated liabilities 1540 965,995 843,581 1,089,043 Date (day, month, year) 31.12.2017 Provisions 1546 – – – Organization Joint Stock Company “TVEL” under OKPO 45046040 Type of business Production of nuclear fuel TIN 7706123550 Accounts payable to customers 1547 – – – Form of incorporation / form of ownership Joint Stock Company under OKVED 24.46 Other liabilities 1550 – – – Measurement unit: in thous. RUB under OKОPF/OKFS 1 22 67/16 Location (address) Bld.24, Bolshaya Ordynka st., Moscow, 119017 under OKEI 384 Total V 1500 91,692,220 83,534,217 106,352,789 Comments Index description Code Over 12 months Over 12 months BALANCE 1700 386,515,535 364,223,027 394,357,456 of 2017 of 2016

5.17 Proceeds, including 2110 145,024,699 147,245,526 Proceeds from sale of own products 125,159,028 129,289,163 Proceeds from carrying out work, rendering services 15,906,972 14,426,701 5.17 Prime cost of sales, including 2120 (92,972,461) (94,636,751) Acting Chief Director ______N. V. Nikipelova accountant ______V. P. Slobodyan Prime cost of sales of own products (79,127,989) (83,008,951) (signature) (name) (power of attorney (signature) (name) Prime cost of carrying out work, rendering services (12,169,594) (10,236,737) № 4/183/2017-Дов March 05, 2018 from 18.10.2017) Gross profit (loss) 2100 52,052,238 52,608,775 5.17 Commercial expenses 2210 (1,112,599) (2,142,985) 5.14, 5.17 Management expenses 2220 (9,189,894) (8,167,555) Sales profit (loss) 2200 41,749,745 42,298,234 Income from participation in other entities 2310 2,298,168 2,816,603 Interest receivable 2320 5,431,588 1,589,293 Interest payable 2330 (3,802,997) (4,181,471) 5.18 Other income, including 2340 1,505,471 2,661,314 Income from raw material, supplies and unmarketable goods (net) – 350,381 Income from foreign currency sales or purchases 364,195 744,039 Income from granting rights of using the results of intellectual activity 204,441 205,221 Income from bad debt reserves 675,872 – Income of prior years defined in the reporting period (net) 86,145 – Income from inventory surplus and other property 115,880 – as a result of inventory check 5.18 Other expenses, including 2350 (8,587,531) (21,352,489) Expenses from currency differences on liabilities (480,930) (6,171,144) and assets in foreign currency Other expenses from uncompensated disposal of assets (542,124) – Amortization of intangible assets (228,060) – Expense for reserve of investment depreciation/contribution to legal capital (6,302,919) (12,709,792) of other companies purchased for other purposes Expenses for R&D with positive results, not recognized as assets (468,716) – Income (loss) before tax 2300 38,594,444 23,831,484 Current profit tax 2410 (8,424,376) (6,978,752) 4.17 Including permanent tax liabilities (assets) 2421 (150,500) (218,385) 4.17 Variation of deferred tax liabilities 2430 (129,509) 8,959 4.17 Variation of deferred tax assets 2450 1,144,129 2,548,432 Other 2460 145,804 (65,867) Redistribution of profit tax within consolidated group of taxpayers 2465 646,868 2,237,544

Net profit (loss) 2400 31,977,360 21,581,800

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 2 | Financial Statements for the Year 2017 188 189

Comments Index description Code Over 12 months of 2015 Capital Statement for the year 2017 Codes: Form under OKUD 0710003 FOR REFERENCE ONLY Date (day, month, year) 31.12.2017 Result of revaluation of non-current assets not to be included 2510 – – Organization: Joint Stock Company “TVEL” under OKPO 45046040 in net profit (loss) of the period Type of business: Production of nuclear fuel TIN 7706123550 Form of incorporation/form of ownership: Joint Stock Company under OKVED 24.46 Result of other operations not to be included in net profit (loss) of the period 2520 (44) (501) Measurement unit: in thous. RUB under OKОPF/OKFS 1 22 67/16 Location (address): bld. 24, Bolshaya Ordynka st., Moscow, 119017 under OKEI 384 Cumulative financial result for the period 2500 31,977,316 21,581,299 1. FLOW OF CAPITAL For reference Basic earnings (loss) per share 2900 1,39 0,94 Index description Code Equity Own shares Received con- Additional Reserve Undistrib- Total capital redeemed tributions from capital capital uted profit Diluted earnings (loss) per share 2910 – – from stockholders (uncovered shareholders to share loss) capital before registration of changes in constituent documents

Value of the capital as of Acting Chief December 31, 2015 3100 22,962 – – 181,732,335 125,886 105,197,731 287,078,914 Director ______N. V. Nikipelova accountant ______V. P. Slobodyan (signature) (name) (signature) (name) For the year 2016 (power of attorney Increase of capital — total: 3210 – – – 278 4,699,894 21,581,800 26,281,972 № 4/183/2017-Дов March 05, 2018 from 18.10.2017) Including Net profit 3211 X X X X X 21,581,800 21,581,800 Revaluation of property 3212 Х Х Х – X – – Income charged directly to increase of capital 3213 Х Х Х 278 4,699,894 – 4,700,172 A dditional emission of shares 3214 – – – – X – – Increase in the par value of shares 3215 – – – – X – – Reorganization of the legal entity 3216 – – – – – – – U se of industry-based reserves for investment 3217 Х Х Х Х Х – – purposes Share capital payment before registration of amendments in founding 3218 Х Х – Х Х X – documents

Reduction of the capital — total: 3220 – – – (779) (4,567,525) (29,532,936) (34,101,240)

Including Loss 3221 X X – X X – – Revaluation of property 3222 Х Х – – X – – E xpenses charged directly to reduction of the capital 3223 Х Х – (779) (4,567,525) – (4,568,304) D ecrease in the par value of shares 3224 – – – – X – – D ecrease in the number of shares 3225 – – – – X – – Reorganization of the legal entity 3226 – – – – – – – Dividends 3227 Х Х – Х Х (29,532,936) (29,532,936) Share capital payment before registration of amendments in founding 3228 Х Х – Х Х X – documents

Change in the additional capital 3230 X X X – – – X

Change in the reserve capital 3240 Х Х X Х – – X

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 2 | Financial Statements for the Year 2017 190 191

Index description Code Equity Own shares Received con- Additional Reserve Undistrib- Total capital redeemed tributions from capital capital uted profit Capital Statement for the year 2017 (continued) from stockholders (uncovered shareholders to share loss) capital before 2. CORRECTIONS DUE TO CHANGE IN THE ACCOUNTING POLICY AND ELIMINATION OF ERRORS registration of changes in constituent Index description Code As of December Changes in the capital for 2016 As of December documents 31, 2015 31, 2016 On account of the Based on other net profit (loss) factors Value of the capital as on December 31, 2016 3200 22,962 – – 181,731,834 258,255 97,246,595 279,259,646 Capital — total For the year 2017 Increase of the capital — total: 3310 – – – 376 5,989,145 31,977,360 37,966,881 Before corrections 3400 – – – – including Net profit 3311 X X X X X 31,977,360 31,977,360 Revaluation of property 3312 Х Х Х – X – – Correction due to:

Income charged directly to increase of capital 3313 Х Х Х 376 5,989,145 – 5,989,521 XX change in the accounting policy 3410 – – – – A dditional emission

of shares 3314 – – – – X – – XX elimination of errors 3420 – – – – Increase in the par value of shares 3315 – – – – X – – After corrections 3500 – – – – Reorganization of the legal entity 3316 – – – – – – – including U se of industry-based reserves for investment 3317 Х Х Х Х Х – – Undistributed profit (uncovered loss) purposes Share capital payment Before corrections 3401 – – – – before registration of amendments in founding 3318 Х Х – Х Х X – documents Correction due to:

Reduction of the capital — total: 3320 – – – (420) (5,724,998) (19,128,757) (24,854,175) XX change in the accounting policy 3411 – – – –

including Loss 3321 X X – X X – – XX elimination of errors 3421 – – – – Revaluation of property 3322 Х Х – – X – – After corrections 3501 – – – – E xpenses charged directly to reduction of the capital 3323 Х Х – (420) (5,724,998) – (5,725,418) D ecrease in the par value Other capital items, where corrections were made of shares 3324 – – – – X – – Decrease in the number Before corrections 3402 _ _ _ _ of shares 3325 – – – – X – – Reorganization of the Correction due to: legal entity 3326 – – – – – – –

D ividends 3327 Х Х – Х Х (19,128,757) (19,128,757) XX change in the accounting policy 3412 _ _ _ _ Share capital payment before registration of 3328 Х Х – Х Х X – XX elimination of errors 3422 – – – – amendments in founding documents After corrections 3502 – – – – Change in the additional capital 3330 X X X – – – X

Change in the reserve capital 3340 Х Х X Х – – X

Liability on December 31, 2017 3300 22,962 – – 181,731,790 522,402 110,095,198 292,372,352

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 2 | Financial Statements for the Year 2017 192 193

3. NET ASSETS

Cash Flow Statement for the year 2017 Codes: Index description Code As of December 31, As of December 31, As of December 31, 2017 2016 2015 Form under OKUD 0710004 Date (day, month, year) 31.12.2017 Organization: Joint Stock Company “TVEL” under OKPO 45046040 Type of business: Production of nuclear fuel TIN 7706123550 Net assets 3600 292,373,769 279,261,955 287,079,734 Form of incorporation/form of ownership: Joint Stock Company under OKVED 24.46 Measurement unit: in thous. RUB under OKОPF/OKFS 1 22 67/16 Location (address): bld. 24, Bolshaya Ordynka st., Moscow, 119017 under OKEI 384

Index description Code Over 12 months of 2017 Over 12 months of 2016

Cash flow associated with day-to-day operations Acting Chief Director ______N. V. Nikipelova accountant ______V. P. Slobodyan Receipts — total 4110 147,868,698 139,075,345 (signature) (name) (power of attorney (signature) (name) Including: № 4/183/2017-Дов March 05, 2018 from 18.10.2017) From sale of products, goods, works and services 4111 138,058,600 137,008,106 From lease payments, license payments, royalty and 4112 418,716 446,160 other similar payments From re-sale of financial investments 4113 – – Other receipts 4119 9,391,382 1,621,079

Payments — total 4120 (104,520,065) (94,644,551) Including:

To suppliers (contractors) for raw materials, materials, works, services 4121 (85,203,532) (77,250,914)

Associated with remuneration of employees labour 4122 (2,361,344) (2,130,913) Interest on debt obligations 4123 (3,744,963) (3,984,701) Corporate profit tax 4124 (6,752,835) (6,406,575) Other payments 4129 (6,457,391) (4,871,448) Balance of cash flow associated with day-to-day operations 4100 43,348,633 44,430,794

Cash flow associated with investment activities

Receipts — total 4210 101,394,000 121,234,156 Including:

Cash flow associated with investment activities 4211 166,486 115,855

From sale of shares (participation shares) in other organizations 4212 71,118 916,442

From return of loans granted, from sale of debt securities 4213 93,812,858 114,942,600 (rights of funds claim from third parties)

Dividends, interest from long-term financial investments and 4214 7,343,539 4,230,926 similar revenues from share interests in other companies

Other receipts 4219 – 1,028,333

Payments — total 4220 (139,383,978) (142,314,916) Including:

Associated with acquisition, creation, modernization, reconstruction 4221 (1,773,012) 1,100,888 and preparation for current assets operation Associated with acquisition of shares (participation shares) 4222 – – in other organizations Associated with acquisition of debt securities (rights of funds claim 4223 (137,452,565) (141,214,028) from third parties), loans provision to third parties

Interest on debt obligations included in the value of investment asset 4224 – –

Other payments 4229 (158,400) – Balance of cash flow associated with investment activities 4200 (37,989,978) (21,080,760)

Table of Contents Appendix 2 | Financial Statements for the Year 2017 TVEL | ANNUAL REPORT 2017 5 | APPENDICES 194 195

Index description Code Over 12 months of 2017 Over 12 months of 2016 APPENDIX 3. Cash flow associated with financial activities Internal Audit Conclusion Receipts — total 4310 61,117,400 58,507,400 Including: on “Public Annual Reporting Preparation” Getting credits and loans 4311 61,117,400 58,507,400 Owners’ (participants’) money deposits 4312 – – From issue of shares, increase in participation shares 4313 – – From issue of bonds, promissory notes and other debt securities 4314 – – and etc. Budgetary provisions and other target financing 4315 – – Report of the Internal Control Other receipts 4319 – – and Audit Department of Payments — total 4320 (71,644,157) (107,197,008) Including: TVEL JSC following the Results

To owners (participants) due to repurchase their shares of “Public Annual Reporting Preparation” 4321 – – or their resignation Audit Process 2017 For payment of dividends and other payments under distribution 4322 (20,428,757) (28,232,936) of profit in favour of owners (participats) Associated with payment (repurchase) of promissory notes 4323 (51,215,400) (78,964,072) and other debt securities, repayment of credits and loans The internal audit of the process of preparation of the draft Report, expertise XX Assessment of compliance of the Other payments 4329 – – preparing the public annual report of of the draft Report by the ROSATOM public annual reporting generation TVEL JSC (further — the Report) was public reporting working group, procedure with the requirements of Balance of cash flow associated with financial operations 4300 (10,526,757) (48,689,608) executed in compliance with “The conducting public events (dialogues, applicable laws and internal statutory Balance of cash flow for the reporting period 4400 (5,168,103) (25,339,574) Procedure for Planning and Conducting public consultations) with stakeholders, requirements regulating the business Internal Audits of Business Processes conducting pubic assurance of the process of public annual reporting Balance of cash and cash equivalents as of reporting 4450 9,435,365 42,826,542 Carried out by TVEL JSC and the Report, ensuring approval of the Report preparation. period beginning Companies Included in the Management by the Board of Directors of TVEL JSC XX The recommendations of improving Balance of cash and cash equivalents as of reporting System of the Fuel Company”, approved and publication of the Report on the the quality of preparing public annual 4500 3,934,336 9,435,365 period end by the Order No.271 of the President website www.e-disclosure.ru and on the reporting were given. TVEL JSC dated December 14, 2011. official TVEL JSC website www.tvel.ru. Effect of exchange rate changes to ruble 4490 (332,925) (8,051,603) The audit results proved the In conformity with the Regulation of The auditing covered the following: satisfactory status of the internal Public Annual Reports (Order of the XX Assessment of efficiency of the control system for the process of President d/d February 10, 2016 No. internal control system for the process making the public annual reporting and 4/32-П), TVEL JSC approved the order of preparing the public annual the compliance of the annual public d/d October 26, 2016 No. 4/408-П reporting (including the analysis of reporting generation procedure of TVEL Acting Chief “Concerning preparation of Annual regulations and formalization of the JSC with the applicable laws, Policy Director ______N. V. Nikipelova accountant ______V. P. Slobodyan Report of TVEL JSC for 2017”, which key processes related to generation of of ROSATOM in the sphere of public (signature) (name) (power of attorney (signature) (name) defines the basic stages and dates the public annual reporting; analysis of reporting and the requirements of № 4/183/2017-Дов March 05, 2018 from 18.10.2017) of the Report generation, including effective implementation of key control internal statutory documents of TVEL preparation of the Concept of the procedures ensuring the reliability of JSC regulating the process of public Report, information accumulation, the public annual reporting). annual reporting preparation.

Director for Internal Control and Audit ______N.V. Belykh (signature) (name)

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES Appendix 4 | Independent Assurance Report on Joint-Stock Company TVEL Annual Report 2017 196 197

aforementioned criteria. TVEL to the principles (Inclusivity, taken into account abovementioned APPENDIX 4. Materiality, and Responsiveness). analysis of compliance to the GRI LIMITATIONS Standards requirements. Independent Assurance Report on Joint-Stock Company TVEL OF THE ENGAGEMENT Compliance of the Report with The engagement was performed only the GRI Sustainability Reporting Compliance of the Report with Annual Report 2017 in relation to data for the year ended 31 Standards (Comprehensive option) the requirements of the International December 2017. Analysis of compliance to the GRI Integrated Reporting Framework The evaluation of reliability of the Standards requirements Based on the procedures performed information on performance in the In order to form a position on this and evidence obtained, we did not Report was conducted in relation to issue, we have performed analysis identify material non-compliance with INTRODUCTION XX Compliance of the Report preparation with AA1000APS 2008 principles, compliance with the criteria to be of compliance to the GRI Standards the guiding principles of the International The Independent Assurance Report process with the requirements of State collection of evidence confirming applied to prepare sustainability report requirements concerning principles Integrated Reporting Framework and is addressed to the Management of Corporation “Rosatom” in the sphere practical implementation of these ’in accordance’ with the GRI Standards and disclosures for the chosen with requirements to the structure of Joint-Stock Company TVEL (hereinafter of public reporting. principles. and information referred to in the GRI ’in accordance’ option. content elements of integrated reports. referred to as JSC TVEL). XX Participation in the dialogues and Content Index, as well as in relation XX General disclosures are reported in The subject of assurance is The engagement was planned and public presentation of the Report, to compliance with requirements of compliance with the requirements of Compliance of the Report sustainability activities of JSC TVEL performed in accordance with AA1000 study of minutes of public dialogues. the International Integrated Reporting the standard GRI 102 (2016) for the preparation process with the as well as the Annual Report 2017 of Assurance Standard 2008 (moderate XX Interviewing the management and Framework. In respect to the quantitative chosen ’in accordance’ option. requirements of State Corporation JSC TVEL including information on key level of assurance) and International employees of JSC TVEL and obtaining performance indicators the conformity XX Management approach disclosures Rosatom in the sphere of organisations of TVEL Fuel Company Standard on Assurance Engagement documentary evidence. assessment to external and internal are reported mainly in compliance public reporting of Rosatom within the declared 3000 (revised) “Assurance engagements XX Study of information available on reporting documents provided to us with the requirements of the standard Based on the procedures performed consolidation perimeter (hereinafter other than audits or reviews of historical the web-sites of JSC TVEL and its is performed. GRI 103 (2016): explanations of why and evidence obtained, we did not referred to as the Report). financial information” (limited level of subsidiary companies related to their Assurance does not apply to the topic is material and of how the identify material non-compliance of the assurance). The statement corresponds activities in the context of sustainable forward-looking statements, as well as organization manages the topics are Report preparation process with the RESPONSIBILITIES to type 2, as defined by АА1000AS development. statements expressing the opinions, reported for material topics as well as Unified Sectoral Guidance of the State The management of JSC TVEL bears 2008, in accordance with the limitations XX Study of public statements of third beliefs and intentions of JSC TVEL to explanations of how the organization Corporation Rosatom in the sphere of full responsibility for the preparation and specified in section “Limitations of the parties concerning economic, take any action relating to the future. evaluates the management approach public reporting. accuracy of the Report. engagement” of the present statement. environmental and social aspects The assurance on the statements which for some material topics. We are responsible for the results of The selective verification of information of activities of JSC TVEL and its are based on expert opinion is not Recommendations independent assurance of the Report only in the Report performed under subsidiary companies in order to performed. Topic-specific disclosures required 1. It is reasonable to disclose GRI to JSC TVEL within the engagement and aforementioned levels of assurance check validity of the declarations Assurance is performed only in relation for the Comprehensive option indicators in relation to target values. do not assume any responsibility to any does not claim to provide a high level made in the Report. to the Russian version of the Report are reported in compliance with 2. Increase completeness of reporting third party. of assurance. The work was based XX Analysis of non-financial reports in the MS Word format which includes requirements of GRI Standards. on material topics by reducing the on the supporting materials provided of foreign companies working in information to be published in a hard- If it is not possible to disclose required number of disclosures with omissions. SCOPE, CRITERIA by the management of the entity the similar market segment for copy form as well as in digital form on information, the Report identifies the 3. In case of disclosure with omissions AND LEVEL OF ASSURANCE and its employees, publicly available benchmarking purposes. the JSC TVEL website. information that has been omitted due to absence of a recording system, Sustainability activities of JSC TVEL information and analytical methods of XX Analysis of the current system of This assurance report is the translation and explains reason for omissions. provide more specific information about was evaluated considering the following confirmation. In relation to the quantitative internal audit of non-financial reporting of the Russian original. The Russian criterion: information contained in the Report the in JSC TVEL. version prevails. Overall assessment XX Nature and level of JSC TVEL work performed cannot be considered XX Selective review of documents of the Report compliance with the principles of sufficient for identification of all possible and data on the efficiency of the CONCLUSIONS As a result and within the scope of the AA1000 Accountability Principle deficiencies and misstatements. However, management systems of economic, The following conclusions are based our work, we did not identify material Standard 2008 — inclusivity, the collected evidence is sufficient for environmental and social aspects on the assurance work performed non-compliance to the requirements materiality, responsiveness. expressing our conclusion in accordance of sustainable development in JSC within the limitations of the engagement to the report prepared ’in accordance’ with the above levels of assurance. TVEL. specified above. with the Comprehensive option of the The Report was evaluated XX Study of the existing processes of GRI Standards. The conclusion is stated considering the following criteria: METHODOLOGY OF ASSURANCE collection, processing, documenting, Nature and extent of compliance XX Compliance with the requirements In our engagement, we have performed verification, analysis and selection of of JSC TVEL with AA1000 of GRI Sustainability Reporting the following procedures: data to be included into the Report. APS 2008 principles Standards (Comprehensive option). XX Study and selective testing of systems XX Analysis of information in the As a result and within the scope of our XX Compliance with the requirements and processes implemented by Report for compliance with the work, we did not identify material non- of the International Integrated JSC TVEL to ensure and analyze compliance with criteria of AA1000APS Reporting Framework. the compliance of the activities 2008 in respect to adherence of JSC

Table of Contents Appendix 4 | Independent Assurance Report on Joint-Stock Company TVEL Annual Report 2017 TVEL | ANNUAL REPORT 2017 5 | APPENDICES 198 199 plans to obtain data in future. fundamental principles of integrity, LLC employs a system of quality 4. Take into account remarks in the objectivity, professional competence control of audit services, including APPENDIX 5. foregoing sections of the statement. and due care, confidentiality and control of compliance to ethical professional behavior. norms. Statement on Public Assurance STATEMENT OF COMPETENCE “NP Consult” LLC applies “NP Consult” LLC states that AND INDEPENDENCE International Standard on Quality the present assurance report is an “NP Consult” LLC, an independent Control 1 and, accordingly, maintains independent auditor’s position on the audit firm, professionally rendering a comprehensive system of quality Report. “NP Consult” LLC and its staff assurance services, is a licensed control including documented policies have no relations with JSC TVEL and its provider of assurance services in and procedures regarding compliance subsidiary companies that could result accord-ance with AA1000 Assurance with ethical requirements, professional in the conflict of interest related to the Standard. “NP Consult” LLC is a standards and applicable legal and independent assurance of the Selected member of Self-regulatory organization regulatory requirements. “NP Consult” Indicators. Statement on Public Assurance of auditors Association “Sodruzhestvo”. of the TVEL JSC Report “NP Consult” LLC complies with the independence and other ethical for 2017 requirements of the Code of Ethics for Professional Accountants issued by the International Standard Board General Director for Accountants, which is founded on LLC “NP Consult” ______N. Y. Khrenov INTRODUCTION We are not aware of any facts COMPANY’S RESPONSE (signature) (name) TVEL Fuel Company (hereinafter “the that compromise reliability of data TO COMMENTS AND Company”) management contacted us set forth in this Report. However, RECOMMENDATIONS Moscow, July 2, 2018 with an offer to assure the 2017 Annual checking of the data collection system OF STAKEHOLDERS Report of the Company (hereinafter and verification of reliability and The Company consistently proceeds “the Report”) in terms of completeness completeness of information is not the with serious work on providing wide and materiality of information disclosed subject matter of public assurance. audience for the dialogues and in therein, and to assess the performance No remuneration has been received the course of preparation of this of Company’s management in from TVEL FC for our efforts and time Report traditionally demonstrated response to recommendations and invested in this project. its willingness to conduct open remarks of stakeholders. We were The results of our work are communication with stakeholders on provided with the possibility to take formalized in this Statement on Public various aspects of its activities part in off-site dialogue concerning the Assurance wherein the opinions we all The Company has duly noted Report’s concept (December 2017), agreed upon are presented. recommendations of the stakeholders dialogue on the priority topic (February received during dialogues and public 2018) and public consultations on COMPLETENESS AND consultations, conducted their analysis the draft of the Report (May 2018). MATERIALITY OF INFORMATION and used most of them in the final We also took part in the process of The Report contains relevant version of the Report. Moreover, the actualization of priority topics to be information that is sufficiently complete Company carried out several obligation disclosed in the Report. for proper understanding of the current that were taken in the previous state and prospects of the Company. reporting campaigns, thus the Reports DRAFT REPORT The Report covers topics that are transparency and information value EVALUATION PROCEDURE material for stakeholders. Materiality were increased. We hereby confirm that we are acting assessment procedure used by the independently and undertake to be Company, based on GRI Standards ASSESSMENT, COMMENTS AND objective in our evaluation, thereby requirements, made it possible to take RECOMMENDATIONS expressing our personal expert opinion into account opinions of all stakeholder We all share positive opinion about the rather than the opinion of organizations groups. Report — its form and the information we represent. According to our reckoning there disclosed. The Company has prepared Our conclusion is based on the study are no reasons for doubt concerning an informative and well-structured of the final version of the Report and the reliability and relevance of topics document that meets our expectations. the analysis of information obtained prioritization results. We note that the Company is in the course of dialogues and public focused on following advanced consultations, in which we and our Russian and international standards representatives participated and were on corporate reporting. allowed to freely express our opinion on the matters under discussion.

Table of Contents Appendix 5 | Statement on Public Assurance TVEL | ANNUAL REPORT 2017 5 | APPENDICES 200 201

In the first place these are GRI and sustainable development” the businesses. Strategy is described in Standards on sustainability reporting Company demonstrated high level detail, as well as reporting year’s input APPENDIX 6. (an outstanding feature of the of aspiration to maintenance of in its achievement, SWOT-analysis, Company is the application of the social and ecological acceptability factors of Company’s long-term RUIE Public Endorsement of the Report comprehensive option). on the territories of presence of its sustainability. In our opinion, the Company has enterprises, as well as actual results We are confident that the Company TVEL JSC Annual report 2017 has passed a public endorsement pursued a successive approach achieved on the way to compacting will consistently pursue commitments in the Council of RUIE on non-financial reporting to increasing transparency and production areas and cost optimization and plans, disclosed in this Report, accountability of its activities. aimed at efficiency improvement. and will preserve the high quality of By defining the priority topic of We believe that the Report discloses stakeholder engagement. the Report as “TVEL strategic information on all key aspects of initiatives — efficiency improvement Company’s activities, including new

(signature) (name)

Councillor of the Head of The Federal Service for the Supervision of Environment, Technology and Nuclear Management A. I. Kislov

Executive Director of the Association of Closed Administrative Territorial Unit for Nuclear Industry A. I. Makarenko

Secretary of the Central Committee of RUNPIW

A. G. Vanichkin

Deputy Chairman of RUNPIW

Y. V. Borisov

Head of Project Department of the Nuclear Fuel Life Cycle ROSATOM State Corporation O. I. Linyaev

Member of Public Council of ROSATOM State Corporation, Member of the Board of the Centre for Russian Ecological policy V. F. Menshchikov

Candidate of technical sciences, Honored Worker of the Russian Water Industry, Director of “Consulting Institute of ecological projects”, Member of Public Council of ROSATOM State Corporation N. G. Davydova

Executive Director of Interregional Public Ecological Organization “GREENLIGHT” O. V. Plyamina

Director General of the Institute of Natural Monopolies Issues Yu. Z. Saakyan

Table of Contents TVEL | ANNUAL REPORT 2017 5 | APPENDICES TVEL | ANNUAL REPORT 2017 202 203 APPENDIX 7. CONTACT DETAILS Table of Considerations of Suggestions by the Stakeholders

No. Suggestions by Stakeholders to the information Response by TVEL Fuel Company to be disclosed in the Report TVEL Joint Stock Company (TVEL JSC) 1 Detailed coverage of the results and plans of the project to improve Taken into account the efficiency of areas use both in terms of improving the production process, and in terms of the positive social impact of the enterprises of TVEL JSC on the regions of presence 2 Add the information on the costs of all activities related to the implementation Not taken into account Address of location: of the project to improve the efficiency of areas use 49 Kashirskoe Shosse, Moscow 115409, 3 Show the relationship of the UN Sustainable Development Goals The possibility of disclosure in future reports Russian Federation with the strategic objectives of TVEL Fuel Company will be considered 4 Take into account the changes in environmental legislation in the formation Taken into account Registered office: of the Report section “Natural Capital” 24 Bolshaya Ordynka St, Moscow 119017, Russian Federation 5 Focus on the works of TVEL Fuel Company in respect of young experts: Taken into account school graduates, university students Tel.: +7 (495) 988-82-82 6 Reduce the use of unnecessarily borrowed words in the Annual Report, Partially taken into account such as “Workout”, “Case”, etc. Fax: +7 (495) 988-83-83, ext. 6956 E-mail: [email protected] 7 Describe the program “Lean Polyclinic”: goals, results, plans. Taken into account Include the data on evaluation of patient satisfaction Official web-site: www.tvel.ru 8 Show the dependence of wage increase on labor productivity The Report provides the information on labor productivity for each enterprise in the section “Manufactured Capital”, the dynamics of wages — in the section “Human Capital”. The information on each enterprise is useful to reflect COMMUNICATIONS DEPARTMENT: in the annual reports of the companies themselves, which are part of the Fuel Division Director of Communications Department — 9 Provide the information on the specific deadlines for the completion In “Natural Capital” section of the Report there of activities under the nuclear and radiation safety program is a reference to the FTP NRS-2, which presents Daria Vitalievna Ozerova the specific terms of the implemented activities E-mail: [email protected] 10 Reflect the information that all the enterprises of the Fuel Company Considered in “Social Capital” were registered by the state and each of them was assigned Tel.: +7 (495) 988-82-82, ext. 7095 a certain category of environmental impact Department e-mail: [email protected] 11 Show the planned environmental effect from the production and To be modified in future reports technical measures implemented by the Fuel Company 12 Shift the focus to the result in the table which gives the information on Not taken into account organizational events for improving the environmental management system 13 Add the reference year 2015 to the diagram “Amount of Financing Not taken into account, since financing is not linked for Energy Saving and Efficiency Improvement Program” to the reference year and in 2015 it was implemented in accordance with the previous program 14 Not to record in the tables those companies of the Fuel Company Taken into account that do not affect the total emissions of pollutants 15 Visualize fines and penalties as compensation for damage to the environment Not taken into account Design and layout ZORAN DESIGN 16 To bring the Report in line with the current regulatory framework regarding Taken into account www.zoran.ru the Uniform Industry Specific Guidelines on Execution of Public Reports in ROSATOM and its organizations Consultant for preparation of the Report 17 Add the case about the annual Best Solution / Development contest Considered in “Human Capital” section Nexia Pacioli Consulting within the Fuel Company www.pacioli.ru 18 Disclose in the Report concrete results of the activities of the Scientific To be modified in the future reports and Technical Council (NTS) as one of the main elements in the creation and implementation of innovative developments

Table of Contents