9 1 0 nanziaria annuale 2 fi elazione R OPEN POWER FOR A BRIGHTER FUTURE WE EMPOWER SUSTAINABLE PROGRESS enelrussia.ru ANNUAL REPORT 2019 ANNUAL REPORT 2019 To improve the operational efficiency of the power plants PJSC Enel Russia is introducing modern digital technologies. One of the projects of this kind is predictive analytics which detects negative dynamics in the operation of equipment at the early stages and, therefore, reduces CCGT operational risks. All power plants are equipped with e-Planner tool which enables additional control of the preparation process to maintenance campaign and provides a visual representation of key milestones. EtaPRO System was successfully introduced as part of the Heat Rate Management digital project. Every unit of gas power plant main equipment now can be monitored using an individual model which allows to keep a record of reasons of heat rate deviations in the real-time mode, to analyze reasons of losses and to develop a more detailed maintenance program as well as to control the quality of the works performed after the maintenance is completed. Health, Safety, Environment and Quality remains one of the main priorities of the company. We successfully implemented the SHE 365 project (Safety, Health, Environment 365 days) aimed to ensure everyday industrial safety and to incentivize employees to develop initiatives in operation, maintenance and interaction with contractors. A number of health and environment improvement plans have been implemented as part of the project. As far as the environment is concerned, the company focused mainly on decarbonization, reporting Address to shareholders 102-14 digitalization, water consumption optimization. Another important aspect of the company’s activity is the sustainable development strategy and non-financial disclosure. In 2019, a new Strategic Committee was established within the Board of Directors, one of its key functions is to coordinate the relevant strategy. We have reviewed our risk assessment approach making focus Dear shareholders! also on ESG risks (environmental, social and corporate governance). In January 2019, the company received With great pleasure we are presenting Annual Report 2019 of PJSC Enel Russia. its first ever ESG Risk Rating — assessment of ESG risks management — from Sustainalytics, independent Effective managerial decisions and favorable market prices allowed the company to outperform the financial goals agency. Follow-up assessment which took place at the end of the year demonstrated improved results. We set for 2019. continue the implementation of the projects aimed to support and develop areas of presence, including new regions — Rostov and Murmansk regions. Sustainable development principles (circular economy, efficient use of Net ordinary income in 2019 is 7.5 billion RUB and EBITDA reached the level of 15.3 billion RUB which is above resources, improved reliability and longer service life of equipment) and sustainable construction site principles the forecasted value. during implementation of new wind farm construction projects underpin all our business processes. Anticipating the period of strategic repositioning and earnings volatility in the medium term, the company The company also disclosed its non-financial results for the first time in its Annual Report according to the introduces a fixed dividend to assure a guaranteed return for its shareholders. Upon 2019–2021 the company is International GRI Standards providing a deeper understanding of its ESG performance. The report was recognized targeting to distribute 3 billion RUB per year. as the best in the Debut nomination of the XXII Annual Report Contest yearly organized by the Moscow In 2019, the company kept pursuing its energy transition and sustainability strategy, which includes transformation Exchange. The company not only maintained, but further on improved the high level of compliance with the and modernization of the asset portfolio, decarbonization and introduction of digital technologies. We keep paying Corporate Governance Code guidelines: as per December 31, 2019, PJSC Enel Russia complied with 77 out of 79 special attention to cooperation with local communities and creation of shared value. We apply the best practices recommendations vs 74 compliances in 2018. of Enel Group for the implementation of our strategy, including, the sector of renewables. It is worth mentioning that in 2019 PJSC Enel Russia demonstrated solid results regardless of complicated The deal between PJSC Enel Russia and JSC Kuzbassenergo concerning disposal of the largest national coal macroeconomic conditions. We have reached planned financial goals and on top of that we are actively developing power plant — Reftinskaya GRES — was one of the most important strategic decisions. As per the results of the new projects related to green power, thermal assets modernization and innovation. Sustainable development transition period, the total amount of the deal should amount to 20.7 billion RUB excluding VAT. Proceeds of the strategies help us to strike the balance between growth, financial stability of the business, local communities’ deal enable us to follow the energy transformation strategy while developing windfarms construction projects and interests and shareholders’ remuneration. gas power plants modernization projects. In 2019, two Groundbreaking Ceremonies took place: one in the Rostov region for 90 MW Azov WPP and another in Murmansk region for 201 MW Kola WPP. At the same time, the Governmental tender for the selection of Carlo Palasciano Villamagna Stephane Zweguintzow renewable energy projects resulted in awarding the company construction of a new 71 MW wind generation General Director of PJSC Enel Russia Charmain of the Board of Directors of PJSC Enel Russia facility in the Stavropol region. We are also active participants of the power plant equipment modernization program launched by the Government of the Russian Federation. Four of PJSC Enel Russia projects were selected in 2019: two projects of Sredneuralskaya GRES and two projects of Nevinnomysskaya GRES. Modernization should help us to increase the reliability of heat and electricity supply to the customers, to boost efficiency of the equipment and to decrease emissions to the atmosphere while ensuring positive economic implications for the company. 2 Annual Report 2019 PJSC Enel Russia 3 annual REPoRt 2019 PJSC EnEl RuSSia 01. 02. 03. 04. 05. 06. about the Report Company Financial Sustainability Risk annexes overview and Performance and Corporate indicators Governance Limitations of the Report 8 Events Calendar 16 Analysis of Performance Sustainability Management 64 Risk Governance Annex 1. Dynamics as Compared and Internal Control System 150 GRI content index 200 Definition of Material Company Overview 18 to the Plan and Previous Period 52 Stakeholder Engagement 70 Topics 9 Internal Control System 152 Annex 2. Geography of Assets 19 Main Production Indicators 54 Integrated Management Financial statements Material Topics of the Report 10 System 76 Organization Units and auditor's report 210 Mission and Values 20 Sales 56 and Corporate Bodies Related Changes in Materiality Occupational Health Organizational Structure 22 to Risk Governance System 153 Evaluation Matrix 10 Heat Power 57 and Safety 78 of the auditor’s reports 234 Business Model 24 Description of Main Risk Factors Materiality Topics Boundaries 12 Investment Activities 58 Responsible Attitude Associated with the Company's Annex 3. to the Environment 90 Reporting Principles 13 Company Regulations Activity 154 Structure of generation in the Industry 26 Business and Management 105 facilities and structure Feedback 13 Corporate Governance of fuel consumption 235 Competition 28 Our Employees 115 System 157 Annex 4. Fuel Factor 29 Engaging Local Communities 130 Management Bodies Information about observance of the Company 160 of the Corporate Governance Grid Limitations and Human Rights 141 Code recommendations UES Modes 29 Remuneration 177 by the company 237 Sustainable Supply Internal Audit Commission 184 Chain 143 Annex 5. Company Strategy Auditor 185 Information about the most material transactions and related Strategic Plan for 2020–2022 32 Information about the party transactions closed Internal Audit 186 by the Company in 2019 260 Sustainability Plan for 2020–2022 38 Securities of the Company Annex 6. and Interaction with Shareholders Numerical and statistical Transition to Renewable and Investors 188 information 266 Energy Sources 43 Controlled Companies Glossary 294 and Participation in Other Organizations 196 Contacts 298 1. ABOUT THE Report Definition of Material Topics About the Report The Materiality Matrix helps identifying and evaluating and accountability. The Global Sustainability Unit of Enel the needs and expectations of stakeholders, matching Group coordinates the process and provides methodological 102-54 About the Report them with the priorities of the company and its business support for the annual update of the matrix of materiality that is strategy, checking their consistency and identifying areas for performed by the Sustainability Unit of PJSC Enel Russia with improvement. The material topics of the annual report of the the participation of the company’s managers and managers company are defined on its basis. who interact with one or another category of stakeholders in their daily activities. The results received at the country level Company Overview To provide the stakeholders with regular and quality information, we prepare