www.sibur.ru/en 01 STRATEGIC REVIEW 02 03 04 05 06 01 GEARED FOR GROWTH Annual Review 2018 Annual Review 2018 02 ABOUT THE REPORT This Annual Report contains information on the essential aspects of SIBUR’s business and development, including its business model and value chain, major assets and infrastructure, key elements of its investment history, development strategy, corporate governance and management, performance and activities aimed at ensuring sustainable development. In addition, in this Annual Report SIBUR strived to reflect the ideas pertaining to rational use of polymers, separate collection and recycling of used plastics based on the principles of the economics of renewable resources. All of the information provided by the Company is solely for information purposes and by reading it, you agree to be bound by the limitations set out below. SIBUR’s Annual Report should not be viewed as investment advice, as it has no regard to the specific investment objectives and contains forward-looking statements based on the current expectations and projections of the Company about future events. Furthermore, there may be material variances between estimated data set forth in this Annual Report and corresponding data previously published by or on behalf of SIBUR. All statements, other than statements of historical fact, contained in the Report are forward- looking statements. The Company may not actually achieve or realise its plans, intentions or expectations and therefore there can be no assurance that SIBUR’s actual results will not differ materially from the expectations set forth in such forward-looking statements. SIBUR’s future performance can be affected by a variety of factors including, but not limited to, the state of the global economy, the ability of the petrochemical sector to maintain levels of growth and development, risks related to petrochemical prices and regional political and security concerns. The Company and its Affiliates are under no obligation to update the information, opinions or forward-looking statements in this Annual Report. To download this Annual Review, please visit our corporate website: http://investors.sibur.com/~/media/Files/ S/Sibur-IR/reports/SIBUR-AR-2018-RU.pdf Annual Review 2018 www.sibur.ru/en 01 STRATEGIC02 REVIEW 03 02 04 03 05 04 06 05 06 03 CONTENTS SIBUR at a Glance 04 03 SUSTAINABILITY REVIEW 80 Application of Our Petrochemicals 06 What Does Sustainable Development 82 Business Model 10 Mean for SIBUR? 2018 Highlights 14 Environmental protection 86 Health and Safety 90 01 STRATEGIC REVIEW 16 Employees 92 Q&A with Dmitry Konov, 18 Communities and Society 94 Chairman of the Management Board Investment Case 22 04 CORPORATE GOVERNANCE 96 Growth Strategy 28 Corporate Governance Structure 99 2018 Operating Environment 36 Board of Directors 100 2018 Group Results Overview 38 Corporate Secretary 112 Management Board 113 02 BUSINESS REVIEW 40 Anti-corruption Policies 116 Map of Operations 42 and Compliance Our Business 44 Information for Shareholders 118 Feedstock 46 Risk Management 120 Midstream 48 Olefins & Polyolefins 54 05 FINANCIAL INFORMATION 126 Plastics, Elastomers & Intermediates 58 Value Chain 66 06 ADDITIONAL INFORMATION 245 Production Flows 68 Transportation & Logistics 70 Continuous Pursuit of Operational 73 Excellence State-of-the-Art Planning System 74 Research and Development 75 Digital Transformation Programme 76 Stakeholders 78 Annual Review 2018 04 SIBUR at a Glance SIBUR is a leader in the Unique Robust financial infrastructure performance Russian petrochemicals and production base and large expansion industry with excellent projects drive value- km accretive growth opportunities for long- 2,700 term growth and value OF PIPELINES AVERAGE EBITDA MARGIN FOR FEEDSTOCK OF creation. Our balanced TRANSPORTATION business model enables 35% OVER LAST 3 YEARS us to deliver resilient Largest (30%+ on average since 2010) financial performance and PETROCHEMICALS COMPANY IN RUSSIA AND THE CIS best-in-class margins. TRANSFORMATIONAL ZAPSIB INVESTMENT PROJECT WORTH We purchase hydrocarbon by-products of oil Consistent $ billion and gas extraction and process them into environmental high value-added polymer goods, including benefits 9 plastics, elastomers and other materials with total capacity of 3 that help to drive technological progress and billion m million tonnes improve the quality of people’s lives around >22 2 the world. OF PETROLEUM GASES of PE and PP that would otherwise have As a result SIBUR also helps to reduce been flared by oil companies, TO BE COMPLETED IN 2019 causing harmful emissions, are CO2 emissions stemming from the burning of oil extraction by-products, such as processed each year associated petroleum gas (APG), by recycling them instead. In 2018, SIBUR processed 22.3 billion m3 of APG thus cutting greenhouse emissions by 72 million tonnes, Balanced Strong team which is equivalent to the annual CO2 business model and stakeholder footprint of a middle-sized European country. ensures stable community performance >26,000 Three EMPLOYEES See APPLICATION OF OUR COMPLEMENTARY PETROCHEMICALS, p. 06 BUSINESS SEGMENTS provide for consistent >1,400 performance in terms CUSTOMERS IN of spreads and margins 80 COUNTRIES WORLDWIDE Annual Review 2018 www.sibur.ru/en 01 02 03 04 05 06 05 2018 HIGHLIGHTS REVENUE EBITDA RUB 569 bln / RUB 201 bln / $9.1 bln $3.2 bln (2017: RUB 455 bln / $7.8 bln) (2017: RUB 161 bln / 2.8 bln) INVESTED IN HIGH-QUALITY EBITDA GROWTH OVER 10 YEARS – MARGIN RUB bln / 853 35% $19 bln (2017: 35%) LOST TIME INJURY NET DEBT/ FREQUENCY RATE (LTIF) EBITDA 0.37x 1.58x (2017: 0.36x) (2017: 1.64x) INVESTMENT-GRADE CREDIT RATINGS MOODY'S FITCH S&P Baa3 BBB- BBB- STABLE OUTLOOK STABLE OUTLOOK STABLE OUTLOOK 2018 REVENUE BREAKDOWN BY SEGMENT AND GEOGRAPHY 1 5 4 10 18 31 59 42 30 In RUB terms as of Russia 59% Olefins & Polyolefins 18% 31 December 2018. In June 2019, Fitch Europe 31% Plastic, Elastomers and Intermediates 30% upgraded SIBUR’s rating Asia 5% Midstream 42% from BB+ to BBB- with stable outlook. CIS 4% Other 10% Assigned in August 2019. Other 1% Annual Review 2018 06 Application of Our Products 1 Bumpers (polypropylene) Normal saline containers Strong, lightweight, and 7 (polypropylene) mouldable, plastics 2 Artificial leather (PVC) are used in thousands Medical tourniquets 8 (rubber) of products that add Soundproofing 3 convenience, comfort and (polyethylene) safety to our everyday 9 Utilities (natural gas) lives. 4 Tyres (rubber) 10 Bottles (PET) Cooling and antifreeze 5 liquids (glycols) Plastic tableware 11 (polypropylene) Olefins & Polyolefins 6 Syringes (polypropylene) 17 Plastics & organic synthesis products Elastomers Midstream 18 7 6 8 16 20 15 14 19 13 5 10 24 22 11 2 3 12 23 1 9 4 21 Annual Review 2018 www.sibur.ru/en 01 02 03 04 05 06 07 Home appliances Heat insulation (EPS) Window profiles and sills (PVC) 12 16 20 (polypropylene) Roof moisture and vapour Geoweb and geotextiles Food packaging 17 sealing (polypropylene) 21 (polypropylene) 13 (polypropylene, polyethylene) Roofing materials (PVC Greenhouses and hotbeds Pipes and fittings 18 membrane, SBS) 22 (polypropylene) 14 (polypropylene, polyethylene, PVC) 19 Siding (PVC) 23 Seedling pots (polypropylene) 15 Wallpaper and linoleum (PVC) Motor fuel (methane, propane, 24 butane) 17 18 7 6 8 16 20 15 14 19 13 5 10 24 22 11 2 3 12 23 1 9 4 21 Annual Review 2018 08 Application of Our Petrochemicals What do recycling symbols mean? Plastic has been successfully EACH TYPE OF PLASTIC HAS A LABEL THAT integrated into the HELPS USERS UNDERSTAND ITS PROPERTIES: model of a circular economy, as 100% 1 2 3 4 5 6 7 of it can be recycled and reused for the РЕТ/РЕТЕ HDPE V LDPE PP PS/EPS OTHER Polyethylene terephthalate High-density polyethylene Polyvinyl chloride Low-density Polypropylene Polystyrene production of new (PVC) polyethylene items. The safety of each type of plastic is confirmed by relevant certificates and studies. PROPERTIES AND SAFETY High barrier properties High endurance and Safe for household and High endurance and High endurance and Can be used in disposable Items made of other chemical resistance industrial use chemical resistance chemical resistance packaging for cold food plastics or multilayer Resistant to sunlight packaging Can withstand Toxic only if burnt Heating or storing hot Microwavable Heating or storing hot Heating to temperatures temperatures up to 90°C (heating is safe) food not recommended food not recommended above 60°C not Freezable recommended Not microwavable Not microwavable Microwave- and oven-safe if so labelled Reuse not recommended RECYCLED PLASTICS CAN BE USED TO MAKE NEW ITEMS: Great recycling potential Good recycling potential Poor recycling potential Good recycling potential Good recycling potential Limited recycling potential Poor recycling potential Annual Review 2018 www.sibur.ru/en 01 02 03 04 05 06 09 1 2 3 4 5 6 7 РЕТ/РЕТЕ HDPE V LDPE PP PS/EPS OTHER Polyethylene terephthalate High-density polyethylene Polyvinyl chloride Low-density Polypropylene Polystyrene (PVC) polyethylene PROPERTIES AND SAFETY High barrier properties High endurance and Safe for household and High endurance and High endurance and Can be used in disposable Items made of other chemical resistance industrial use chemical resistance chemical resistance packaging for cold food plastics or multilayer Resistant to sunlight packaging Can withstand Toxic only if burnt Heating or storing hot Microwavable Heating or storing hot Heating to temperatures temperatures up to 90°C (heating