INFORMATION TRANSLATION Draft 2017 Annual Report of PJSC Inter RAO / Report on Sustainable Development and Environmental Responsibility Chairman of the Management Board Boris Kovalchuk Chief Accountant Alla Vainilavichute Contents 1. Strategic Report ...................................................................................................................................................................................... 8 1.1. At a Glance .................................................................................................................................................................................. 8 1.2. About the Report ........................................................................................................................................................................ 11 Differences from the Development Process of the 2016 Report ............................................................................................................ 11 Scope of Information ............................................................................................................................................................................. 11 Responsibility for the Report Preparation .............................................................................................................................................. 11 Statement on Liability Limitations .......................................................................................................................................................... 11 1.3. Address of the Chairman of the Board of Directors of PJSC Inter RAO ...................................................................................... 12 1.4. Address of the Chairman of the Management Board of PJSC Inter RAO ................................................................................... 13 1.5. Brief Information about the Company ......................................................................................................................................... 15 Company History .................................................................................................................................................................................. 15 2017 Key Events ................................................................................................................................................................................... 18 Key Awards in 2017 .............................................................................................................................................................................. 19 Company Structure ............................................................................................................................................................................... 21 Geographical Footprint ......................................................................................................................................................................... 24 The Group's Key Indicators for 2015–2017 ........................................................................................................................................... 25 Group Business Model .......................................................................................................................................................................... 27 Competitive Review .............................................................................................................................................................................. 30 Inter RAO Group Investment Attractiveness Factors ............................................................................................................................. 34 Supply Chain ........................................................................................................................................................................................ 37 1.6. Market Review, Strategy and KPIs ............................................................................................................................................. 38 Market Review ...................................................................................................................................................................................... 38 Development Strategy .......................................................................................................................................................................... 47 2 System of Key Performance Indicators ................................................................................................................................................. 55 1.7. Risk Management and Internal Control ...................................................................................................................................... 59 Goals and Objectives of the Enterprise Risk Management Framework and Internal Control Framework .............................................. 59 Participants of Risk Management and Internal Control Frameworks ..................................................................................................... 60 ERM and IC Efficiency Assessment ...................................................................................................................................................... 63 Main Results of the Performance of Risk Management and Internal Control Frameworks in 2017 ........................................................ 64 Priorities in risk management and internal control for 2018 ................................................................................................................... 65 Critical Risk Map ................................................................................................................................................................................... 66 1.8. Investment Activities................................................................................................................................................................... 67 The Group's Investment Plans: Key Areas of Capital Investments ........................................................................................................ 69 1.9. Operating Results by Segments ................................................................................................................................................. 72 Key Business Results of the Group ....................................................................................................................................................... 72 Generation in the Russian Federation ................................................................................................................................................... 76 Supply in the Russian Federation ......................................................................................................................................................... 93 Trading in the Russian Federation and Europe ................................................................................................................................... 106 Engineering in the Russian Federation ............................................................................................................................................... 113 Foreign Assets .................................................................................................................................................................................... 118 1.10. Analysis of Financial Results .................................................................................................................................................... 133 Revenue ............................................................................................................................................................................................. 137 Operating Costs .................................................................................................................................................................................. 138 EBITDA............................................................................................................................................................................................... 140 Cash Flow ........................................................................................................................................................................................... 141 Total Debt Load .................................................................................................................................................................................. 142 Net Profit Distribution and Volume of Net Assets ................................................................................................................................ 144 Credit Ratings ..................................................................................................................................................................................... 144 3 Formation of the Created Direct Economic Value, Distributed and Undistributed Economic Value...................................................... 145 2. Corporate Governance ......................................................................................................................................................................