Annual Report 2018 TABLE of CONTENTS

Annual report 2018 TABLE OF CONTENTS LETTER OF MANAGEMENT ANTI-CORRUPTION 57 LETTER OF THE CHAIRMAN OF THE BOARD OF REMUNERATION POLICY 57 DIRECTORS 3 INTERNAL CONTROL AND AUDIT 58 LETTER OF THE GENERAL DIRECTOR 4 CORPORATE GOVERNANCE CODE COMPLIANCE REPORT 60 KEY INFORMATION BUSINESS PROFILE 7 RISK MANAGEMENT COMPANY STRUCTURE 7 CORPORATE RISK MANAGEMENT RATINGS 7 SYSTEM 63 BASIC OPERATING INTERNAL CONTROL STANDARDS 64 INDICATORS 8 ANALYSIS OF SIGNIFICANT RISKS AFFECTING KEY PERFORMANCE INDICATORS 8 PERFORMANCE 65 KEY EVENTS AND ACHIEVEMENTS FOR THE SUSTAINABLE DEVELOPMENT REPORTING PERIOD 11 STAKEHOLDER ENGAGEMENT 69 INFORMATION POLICY 71 COMPANY OVERVIEW ENVIRONMENTAL IMPACT MANAGEMENT 72 HISTORY 13 ATMOSPHERIC AIR PROTECTION 72 MISSION 13 MITIGATION OF ENVIRONMENTAL IMPACT, VISION 14 ENVIRONMENTAL PROTECTION MEASURES 74 BUSINESS MODEL 14 GREENHOUSE GAS (СО2) EMISSIONS 75 GEOGRAPHY OF OPERATIONS 15 ENVIRONMENTAL EXPENDITURES 76 2016 -2020 DEVELOPMENT STRATEGY WATER MANAGEMENT AND WATER RESOURCES MAIN STRATEGIC DIRECTIONS 18 CONSERVATION 77 PROSPECTS OF THE 2020 EFFICIENT HANDLING AND DISPOSAL OF INVESTMENT PROGRAM 19 PRODUCTION WASTE 78 ENVIRONMENTAL MANAGEMENT SYSTEM 78 MARKET ANALYSIS 20 PUBLIC ASSESSMENT OF ENVIRONMENTAL ACTIVITIES 79 PERFORMANCE AND DEVELOPMENT PLANS FOR 2019 79 PROSPECTS OVERVIEW GENERATION OF ELECTRICITY 29 HUMAN RESOURCES AND SOCIAL POLICY TRANSMISSION OF ELECTRICITY 32 HUMAN RESOURCES MANAGEMENT POLICY 80 TRANSMISSION OF HEAT 33 HEADCOUNT AND EMPLOYEE SKILL LEVEL 81 PLANS FOR EQUIPMENT RENOVATION AND EMPLOYEE TURNOVER 84 MODERNIZATION FOR 2019 34 TALENT POOL 85 PROCESS AUTOMATION 37 ATTRACTING YOUNG SPECIALISTS 85 PROJECT IMPLEMENTATION BY THE SALES COMPANY 39 EMPLOYEE MOTIVATION AND REMUNERATION 85 PROCUREMENT AND SUPPLY 40 NON-FINANCIAL INCENTIVES 86 FINANCIAL AND ECONOMIC INDICATORS 42 INTERACTION WITH TRADE UNIONS 86 SOCIAL SUPPORT, GUARANTEES AND CORPORATE GOVERNANCE COMPENSATION 87 GENERAL MEETING OF SHAREHOLDERS 47 SPORTS AND RECREATIONAL EVENTS 88 RESULTS OF THE GENERAL MEETING OF PLANS FOR 2019 89 SHAREHOLDERS 47 OCCUPATIONAL HEALTH AND SAFETY 90 ORGANIZATIONAL STRUCTURE 48 CUSTOMER SAFETY 95 SHARE CAPITAL STRUCTURE 48 AWARENESS-RAISING CAMPAIGNS 95 DIVIDENDS 49 CUSTOMER HEALTH AND SAFETY EXECUTIVE BODY 50 IN SALES ENTERPRISES 95 BOARD OF DIRECTORS 51 SOCIAL PARTNERSHIP 96 MEMBERS OF THE BOARD OF DIRECTORS 52 CORPORATE EVENTS 96 PERFORMANCE OVERVIEW OF THE BOARD OF DIRECTORS 53 ABOUT THE REPORT 97 PERFORMANCE OVERVIEW OF COMMITTEES OF THE LIST OF TOPICS AND MATERIALITY MAP 98 BOARD OF DIRECTORS 54 GRI ELEMENT INDEX 99 SELECTION AND APPOINTMENT 55 GLOSSARY 109 CONFLICT OF INTEREST 55 ABBREVIATIONS 110 CORPORATE ETHICS 56 CONTACTS 111 Dyussenbay LETTER OF THE CHAIRMAN Turganov OF THE BOARD OF DIRECTORS Chairman of the Board of Directors, SEVKAZENERGO JSC Dear shareholders and partners! This is the annual report of SEVKAZENERGO JSC stating the key events of the Company in 2018. In the reporting year, the Company accomplished its objectives to ensure the comprehensive development of the energy complex. These objectives are to increase the reliability of the generating facility at Petropavlovsk CHP-2 of SEVKAZENERGO JSC as well as to improve the quality of power supply to the people of North Kazakhstan region. Today, the installed capacity of Petropavlovsk CHP-2 of SEVKAZENERGO JSC is 541 MW. The achievement of high performance indicators became possible thanks to the investment program for renovation and modernization of generating facilities being implemented since 2009. The state program of limiting rates, the attraction of borrowed funds from the European Bank for Reconstruction and Development and the Company's own funds made an important contribution to the renovation of the combined heat and power plant. automation projects and introduce advanced During the year, three turbine units and one boiler unit energy-saving technologies to reduce energy losses and were completely replaced at the plant, two turbines and increase the service life of equipment. Since 2011, three boiler units were renovated. After ten-year work, the North-Kazakhstan Regional Electric Distribution Company Company increased the installed capacity of the plant by JSC has been actively using an automated system for 161 MW, power generation - by 974.13 mln kWh, steam commercial accounting of electricity (ASCAE). Today, the capacity of boiler units - by 420 tons per hour, as well as system includes 28,334 electricity metering points. In reduced wear and tear of the plant equipment by 27.86% - 2018, Petropavlovsk Heat Networks LLP continued the from 89.47% to 61.61%. modernization of networks and heat insulation with the use of urethane-foamed pipes and polyurethane insulation Along with the growth of performance indicators of using the funds of the European Bank for Reconstruction SEVKAZENERGO JSC, the environmental performance is and Development and budget subsidies from the Ministry of also growing: in 2018, the Company became the winner of National Economy of the Republic of Kazakhstan. the republican Paryz competition in the Contribution to the Environment nomination. Since 2009, the Company has The correctness of the chosen development strategy of implemented a number of environmental measures, as a SEVKAZENERGO JSC is evidenced by the performance result of which the total annual ash emissions reduced by results achieved in the reporting year. In any activity, an 71%, and the total emissions of atmospheric pollutants - by indicator of high professionalism and quality of services 12%. provided is the level of customer satisfaction. SEVKAZENERGO JSC makes every effort to provide its Another priority activity of the Company is to invest in the consumers with the best-quality energy and services. This development of energy infrastructure. Power transmission is the main purpose of the Company's activities in the enterprises continued to implement large-scale future. 2018 3 LETTER OF THE GENERALLETTER OFDIRECTOR THE GENERAL DIRECTOR The Company continues toThe implement Company acontinues large-scale to implementIn 2019, a SEVKAZENERGOlarge-scale JSCIn 2019,will continue SEVKAZENERGO to pursue JSC its will continue to pursue its Igor Igor pipeline renovation projectpipeline for Petropavlovskrenovation projectHeat for goals,Petropavlovsk the main ofHeat which is togoals, ensure the reliable, main of high-qualitywhich is to ensure reliable, high-quality Networks LLP. In 2018, the CompanyNetworks carried LLP. In out 2018, scheduled the Company andcarried uninterrupted out scheduled power supplyand uninterrupted to the public. powerI am suresupply to the public. I am sure repair of main and distributionrepair networks of main and and replaced distribution a networksthat the and implementation replaced a of thethat Company’s the implementation investment of and the Company’s investment and Tatarov Tatarov total of 13.883 km of pipelines.total As of part13.883 of thekm investmentof pipelines. As partsocial of programsthe investment will contribute social to programsthe development will contribute of the to the development of the program, with the use of program,own funds, with a loanthe usefrom of the own funds,energy a loansector from both the in the regionenergy of sectoroperations both andin the in regionthe of operations and in the General Director, General Director, European Bank for ReconstructionEuropean and Bank Development for Reconstruction and andRepublic Development of Kazakhstan and as a Republicwhole. of Kazakhstan as a whole. SEVKAZENERGO JSCSEVKAZENERGO JSC budget subsidies from the Ministrybudget of subsidies National from Economy the Ministry of of National Economy of the Republic of Kazakhstan thethe RepublicCompany of renovated Kazakhstan 0.26 the Company renovated 0.26 km of the pipeline and restoredkm ofthermal the pipeline insulation and atrestored 13.3 thermal insulation at 13.3 km section of the pipeline. km section of the pipeline. Dear shareholders andDear partners! shareholders and partners! We present you the annualWe reportpresent on youthe theCompany’s annual reportreplacement on the Company’s of boiler unitsreplacement no. 1 and ofno. boiler 2 with units the no. 1 and no. 2 with the activities in 2018. activities in 2018. installation of an automatedinstallation process control of an automatedsystem, as process control system, as well as automation of turbineswell no. as 3, automation 6, 7, replacement of turbines of a no. 3, 6, 7, replacement of a Today, SEVKAZENERGO JSC Today,is a company SEVKAZENERGO that includes JSC all is a companylow-pressure that includes cylinder all of low-pressurethe turbine cylinderno. 2 andof thea turbine no. 2 and a power supply links of the citypower of Petropavlovsk supply links ofand the eight city of Petropavlovskhigh-pressure and cylinder eight of thehigh-pressure turbine no. 6. cylinder Thanks ofto the the turbine no. 6. Thanks to the districts of North Kazakhstandistricts region. of The North energy Kazakhstan sector is region.planned The energy activities, sector isby 2021,planned electricity activities, generation by 2021, at electricity generation at an important component of thean importanteconomic componentand social life of theof economicPetropavlovsk and social CHP-2 life of will reachPetropavlovsk 3,591,600 thous.CHP-2 willkWh, reach the 3,591,600 thous. kWh, the North Kazakhstan region, therefore,North Kazakhstan the priority region, activity therefore, of outputthe priority from activitythe plant of bus barsoutput will from amount the toplant

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