STATE ATOMIC ENERGY CORPORATION ROSATOM ENGINEERING DIVISION Be Digital Annual Report '17 Table of Contents CHAPTER 2. КEY PERFORMANCE RESULTS 55 2.1. Financial Capital 56 2.1.1. Financial Results 57 2.1.2. Financial Capital Management 58 Nowadays, maintaining 2.2. Manufactured Capital 62 2.2.1. Nuclear Power Plant Design and Construction as the Engineering Division’s Business Core 62 the leadership depends 2.2.2. Manufactured Capital Management 76 Information on The Report 4 2.2.3. The Rosatom Production System in the Engineering Division 78 largely on the company’s 2.2.4. Procurement Operations 80 About the Engineering Division 5 integration into the 2.3. Intellectual Capital 81 Financial and Operational Highlights 2017 7 2.3.1. Patenting of Intellectual Products 82 emerging digital economy. Key Milestones of 2017 10 2.3.2. Innovation Projects Launched in 2017 82 2.3.3. Information Technologies Implementation Projects 83 CEO Statement 14 Our Engineering Division 2.3.4. Multi-D Technology 84 is making good progress 2.4. Human Capital. Personnel Training due CHAPTER 1. STRATEGIC OVERVIEW 15 to Digital Transition Demand 85 while keeping this track. 2.4.1. Personnel’s Policy 86 1.1. Strategy of The Engineering Division And KPI of Its 2.4.2. Personnel’s Characteristics 86 Implementation 18 2.4.3. Personnel Policy Execution 88 1.1.1. The Engineering Division’s Contribution to Rosatom State Corporation 2.4.4. Social Policy Execution 92 Strategy Implementation 18 2.4.5. Labour Protection 93 1.1.2. External Environment Strategic Analysis 21 1.1.3. Sustainability Agenda 22 2.5. Natural Capital 96 V. I. Limarenko – CEO of Rosatom State 2.5.1. Natural Safety Management at the Stage of NPP Design 98 Corporation Engineering Division 1.2. Business Model 25 2.5.2. Natural Safety Management at the Stage of NPP Construction 101 1.3. International Footprint 28 2.5.3. Results in the Field of Natural Protection 103 1.3.1. NPP Construction and Operation's Market 28 2.6. Social And Relationship Capital 107 1.3.2. Diversification Markets 29 2.6.1. Awards in 2017 108 1.4. Digital Transformation 2.6.2. Main Communication Projects 108 of The Engineering Division 30 2.6.3. Contribution to the Development of Regions of Operation 109 1.4.1. Digital Transformation Program 30 2.6.4. Main Russian and International Agreements of 2017 112 1.4.2. Training and development in terms of digital transition demand 33 2.6.5. Engagement with Stakeholders 114 1.5. Risks And Opportunities 34 Engagement with stakeholders 119 1.5.1. Risk Management 34 Conclusion of the Public Assuarance 1.5.2. Basic Risks and Opportunities 36 of the Report 123 1.5.3. Risk Management in 2017 37 Additional Information 125 1.6. Corporate Governance 40 Information on the Report 125 1.6.1. Corporate Management System of The Engineering Division 40 List of Abbreviations 127 1.6.2. Corporate Management System of JSC ASE EC 42 Glossary 127 1.6.3. Corporate Management System of JSC ASE 46 List of Appendices 129 1.6.4. Corporate Management System of JSC Atomenergoproekt 48 Feedback Questionnaire 130 1.6.5. Corporate Management System of JSC ATOMPROEKT 50 1.6.6. Control of Financial and Economic Performanceand Anti-Corruption Policy 52 STATE ATOMIC ENERGY CORPORATION ROSATOM ENGINEERING DIVISION BE DIGITAL Information on the Report About the Engineering Division (GRI 102-1, 102-2, 102-3, 102-5) The annual public report for 2017 (hereinafter – the Report) of The Rosatom State Corporation Engineering Division includes four key organizations: JSC ASE EC (Nizhny Novgorod) – managing the Rosatom State Corporation Engineering Division (Engineering company, JSC ASE (Nizhny Novgorod), Atomenergoproekt (Moscow), JSC ATOMPROEKT (Saint Petersburg). Division, Division, Company) discloses financial and non-financial results of theperformance in the reporting year. The report is Our Mission issued in Russian and English. Our Vision (GRI 102–52) The integrated annual report is issued on an annual High-priority topics of the Report Our business involves the area of complex engineering We seek to establish a competitive business that is successful in basis. This is the third report for the Division and the tenth report construction project management based on the extensive record implementation of construction projects and complex engineering for JSC ASE EC. Following the results of 2017, the integrated – “Digital Transformation of the of nuclear project implementation, it creates a stakeholder value construction management projects and is focused on the report of the Division, a booklet (short report) of the Division Engineering Division” and “Training and ensures achievement of its objectives on the Russian and shareholder value maximization. according to the results of the year, reports of subsidiaries have international markets. been issued. and Professional Development of the High-priority topics of the Report were determined in the course Personnel under the Conditions of Digital Our Values of a dialogue on the determination of significant issues by Transformation”. JSC ASE EC management together with the key stakeholders’ Our values comply with these of the Safety • Responsibility for the result • Efficiency • representatives. ROSATOM and aim to execution the New items "Materials" and "Training" and "Education" were mission and maintain the sustainable One team • One step ahead • Respect included in material topics of the Report, while Procurement growth. (GRI 102-16) practices, Environmental Compliance and Supplier Environmental Assessment were excluded from the report. The report is prepared in compliance with GRI principles. Rosatom State Corporation Regulatory documents • Policy of Rosatom State Atomic Energy Corporation in the area Engineering Division’s Competitive Advantages Standards and Regulations of public accountability. The Report is developed according to the following regulatory • Public annual reporting model standard for Rosatom State • Representation of references on the Russian and foreign • Complex industrial technological Multi-D platform to ensure documents. Atomic Energy Corporation’s key organizations (in view of public markets. capital construction project management. accountability). • Available safe standard designs based on GenIII/III+ VVER • Management team and operation personnel’s extensive International standards and guidelines • Ethical code of the Rosatom State Atomic Energy Corporation. reactors with competitive advantages such as in terms of such expertise based on many years’ experience in NPP and other • АА1000 series standards (Institute of Social and Ethical parameters as LCOE, CAPEX and construction deadlines. complex engineering facilities construction. AccountAbility). Regulatory documents of the Engineering Division • Extensive network of management of NPPs and other complex • Own design capacities. • Global Reporting Initiative Sustainability Reporting Standads • Regulation on JSC ASE EC Stakeholders Commission. engineering facilities construction projects. • Outstanding engineering and technological infrastructure. (GRI SRS) (GRI SRS). • Regulation on JSC ASE EC Public Accountability Committee. • Integrated Reporting International Standard (International • Company standard STO 8841271.012–2016 “Procedure for <IR> Framework). elaboration of the Rosatom State Atomic Energy Corporation’s public annual report for the reporting period”. Membership in Associations (GRI 102-13) Regulatory and legal framework of the Russian Federation. • Federal Law No. 208-FZ dated. 26.12.1995 “On Joint Stock Level of Application of GRI Guideline • Federation of employers of atomic modernization, overhaul of nuclear • Association “Self-regulatory regional Companies”. industry, power engineering and science facilities “SOYUZATOMGEO”. industry federation of employers (GRI 102–54) of Russia”. • Self-regulatory organization NPO “Association of Nizhny Novgorod • Letter by the Bank of Russia No.06-52/2463 dd. 10.04.2014 developers” (since 2017). “On the corporate management code”. This report has been prepared in accordance with the GRI • Association of innovative design. “Association of organizations carrying Standards: Comprehensive option. out architectural design of nuclear For information about JSC ASE EC • Federal Law No. 5485-1-FZ dd. 21.07.1993 "On state secret". • European Utility Requirements. facilities “SOYUZATOMPROEKT”. organizational structure and operating assets GRI Content Index, table of compliance with Standard <IR> see • Federal Law No.98-FZ dd. 29.07.2004 "On Commercial Secret". • Self-regulatory organization of the companies within the management in Appendix 1 of the Book of Appendices. NPO “Association of organizations • National Association of engineers- • Federal Law No. 149-FZ dated 27.07.2006 “On information, scope of JSC ASE EC, see Appendices 6 conducting engineering survey during consultants in the construction field”. information technologies and information security”. For the Table of disclosure of public reporting indicators of the and 7 of the Book of appendices. Engineering Division and Rosatom State Corporation, see Appendix architectural design, construction, • Czech nuclear forum. • Federal Law No. 402-FZ of 06.12.2011 “On accounting”. 2 of the Book of Appendices. For the full information about the Report, including the process of the content determination thereof, see section “Additional information”/Information on the report. All appendices hereto are given in the Book of Appendices, see http://www.atomstroyexport.ru/invest/report/. 4 ANNUAL REPORT