S.N. NUCLEARELECTRICA S.A. ANNUAL REPORT 2016 COMPANY MANAGED IN ONE – TIER MANAGEMENT SYSTEM ANNUAL REPORT 2016 1 2 CONTENTS 3 1 BASIS OF THE REPORT ..................................................................................................................... 4 2 IDENTIFICATION DATA ................................................................................................................... 4 3 MESSAGE OF THE BOARD OF DIRECTORS .................................................................................. 5 4 STATEMENT OF THE CEO ................................................................................................................ 7 5 ACTIVITY ANALYSIS ........................................................................................................................ 9 5.1. PRESENTATION OF THE COMPANY ..................................................................................... 9 5.1.1. MAIN ACTIVITY OF THE COMPANY ............................................................................ 9 5.1.2. MISSION, VISION, VALUES, OBJECTIVES ..................................................................10 5.1.3. DATE OF ESTABLISHEMENT ........................................................................................12 5.1.4. SHAREHOLDING STRUCTURE .....................................................................................12 5.1.5. SIGNIFICANT MERGERS OR REORGANIZATIONS ...................................................12 5.1.6. ACQUISITION AND TRADE OF ASSETS ......................................................................12 5.2. ELEMENTS OF GENERAL ASSESMENT ...............................................................................13 5.3. PRODUCTION AND SALE ACTIVITY....................................................................................14 5.3.1. PRODUCTION OF ELECTRIC AND THERMAL POWER ............................................14 5.3.2. THE MAIN MARKETS FOR EACH PRODUCT AND THE DISTRIBUTION METHOD 16 5.3.3. THE EVOLUTION OF SALES ON THE INTERNAL AND/OR EXTERNAL MARKET AND LONG AND MEDIUM – TERM PERSPECTIVES ..................................................................20 5.3.4. THE SITUATION ON THE COMPETITIVE MARKET, THE WEIGHT OF PRODUCTS ON THE MARKET AND MAIN COMPETITORS ............................................................................21 5.3.5. DEPENDENCY ON A SINGLE CLIENT OR GROUP OF CLIENTS .............................23 5.4. THE TECHNICAL – MATERIAL SUPPLY ACTIVITY ..........................................................23 5.5. HUMAN RESOURCES ACTIVITY ...........................................................................................27 5.5.1. NUMBER, LEVEL OF TRAINING AND THE DEGREE OF UNIONIZATION OF THE LABOR FORCE ...................................................................................................................................28 5.5.2. THE RELATIONS BETWEEN MANAGEMENT AND EMPLOYEES ..........................29 5.6. THE ACTIVITY RELATED TO ENVIRONMENTAL PROTECTION ...................................30 5.7. RADIOPROTECTION PROGRAM ...........................................................................................33 5.8. RESEARCH AND DEVELOPMENT ACTIVITY .....................................................................36 5.9. OPERATING AUTHORIZATIONS AND LICENSES ..............................................................36 1 / 233 ANNUAL REPORT 2016 5.10. NUCLEAR SECURITY ..........................................................................................................40 5.11. INTEGRATED MANAGEMENT SYSTEM ..........................................................................41 5.12. CORPORATE SOCIAL RESPONSIBILITY .........................................................................43 5.13. INTERNATIONAL RELATIONS ..........................................................................................45 5.14. LEGAL ACTIVITY ................................................................................................................47 5.15. ACTIVITY RELATED TO RISK MANAGEMENT .............................................................49 5.16. PERSPECTIVE ELEMENTS .................................................................................................56 5.16.1. FACTORS THAT MAY INFLUENCE LIQUIDITY .........................................................57 5.16.2. CURRENT AND ANTICIPATED CAPITAL COSTS ......................................................57 5.16.3. EVENTS, TRANSACTIONS AND ECONOMIC CHANGES AFFECTING THE INCOMES ............................................................................................................................................64 6 NON – CURRENT ASSETS ................................................................................................................64 6.1. LOCATION AND CHARACTERISTICS OF MAIN PRODUCTION CAPACITIES ..............64 6.2. THE DEPRECIATION DEGREE OF THE ASSETS .................................................................65 6.3. OPERATIONAL PERFORMANCE INDICATORS ..................................................................65 7 MARKET OF SECURITIES ISSUED BY THE COMPANY .............................................................67 7.1. THE ROMANIAN MARKETS AND THE MARKETS OF OTHER COUNTRIES WHERE THE SECURITIES ISSUED BY THE COMPANY ARE TRADED ......................................................67 7.2. DIVIDEND POLICY ...................................................................................................................68 7.3. ACTIVITY OF SNN AT BSE .....................................................................................................71 7.4. PRESENCE IN THE INDEXES ..................................................................................................72 7.5. COMMUNICATION WITH THE SHAREHOLDERS AND INVESTORS ..............................73 7.6. FURTHER INFORMATION ......................................................................................................74 8 INDIVIDUAL FINANCIAL STATEMENTS AS AT 31.12.2016 ......................................................75 9 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31.12.2016 ...............................................76 10 CORPORATE GOVERNANCE DECLARATION .............................................................................77 10.1. IMPLEMENTATION OF THE CORPORATE GOVERNANCE PRINCIPLES ...................77 10.2. THE GENERAL MEETING OF SHAREHOLDERS .............................................................80 10.3. THE MANAGEMENT OF THE COMPANY ........................................................................88 10.3.1. THE BOARD OF DIRECTORS .........................................................................................88 10.3.2. THE EXECUTIVE MANAGEMENT ................................................................................97 10.4. CONSULTATIVE COMMITTEES ......................................................................................101 10.5. SHAREHOLDERS RIGHTS ................................................................................................108 2 / 233 ANNUAL REPORT 2016 10.6. TRANSPARENCY, FINANCIAL REPORTING, INTERNAL CONTROL AND RISK MANAGEMENT ....................................................................................................................................110 10.7. CONFLICT OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES..........114 10.8. INTERNAL AUDIT ..............................................................................................................115 11 PRESENTATION OF THE GROUP .................................................................................................116 12 SUBSEQUENT EVENTS ..................................................................................................................121 13 STATEMENTS AND SIGNATURES ...............................................................................................122 14 APPENDIXES ....................................................................................................................................123 APPENDIX I: ARTICLES OF INCORPORATION IN 2016 ....................................................................123 APPENDIX II: IMPORTANT CONTRACTS CONCLUDEDBY THE COMPANY IN 2016 .................124 APPENDIX III: APPOINTMENT/REVOCATION DOCUMENTS IN 2016 ...........................................140 APPENDIX IV: LIST OF HEADQUARTERS...........................................................................................141 APPENDIX V: LIST OF BRANCHES .......................................................................................................142 APPENDIX VI: LIST OF SUBSIDIARIES ................................................................................................143 APPENDIX VII: LIST OF THE ENTITIES AFFILIATED .......................................................................144 APPENDIX VIII: LIST OF ONGOING LITIGATIONS AT 31.12.2016 ..................................................145 APPENDIX IX: STAGE OF THE CORPORATE GOVERNANCE CODE IMPLEMENTATION OF BUCHAREST STOCK EXCHANGE ........................................................................................................203 APPENDIX X: NOMINATION AND REMUNERATION COMMITTEE REPORT FOR 2016 .............218 APPENDIX XI: AUDITED INDIVIDUAL FINANCIAL STATEMENTS AT 31.12.2016 PREPARED IN ACCORDANCE WITH IFRS - EU ............................................................................................................231