ANNUAL REPORT SUSTAINABILITY AND ENVIRONMENTAL 2014 RESPONSIBILITY REPORT JSC INTER RAO 2014 ANNUAL REPORT Preliminarily approved by the Board of Directors of JSC Inter RAO on April 07, 2015 (Minutes No. 138 of the meeting of the Board of Directors dated April 09, 2015) Management Board Chairman Boris Kovalchuk Chief Accountant Alla Vaynilavichute Table of contents 1. REPORT OVERVIEW __________________________________________________________________________________________________________2 7. COMPANY ON THE CAPITAL MARKETS ___________________________________________________________________________ 123 2. GENERAL INFORMATION ON INTER RAO GROUP ________________________________________________________________7 8. CORPORATE SOCIAL RESPONSIBILITY ____________________________________________________________________________ 129 2.1. About Inter RAO Group ________________________________________________________________________________________________7 8.1 Approach to sustainable development _______________________________________________________________________ 129 2.2. Group’s key performance indicators ______________________________________________________________________________ 12 8.2. HR management _____________________________________________________________________________________________________ 130 2.3. Inter RAO Group on the energy market _________________________________________________________________________ 13 8.3. Occupational health and safety __________________________________________________________________________________142 2.4. Associations and partnerships _____________________________________________________________________________________ 14 8.4. Contribution to the development of the regions of the Group’s operation ___________________________147 8.5. Environmental policy _________________________________________________________________________________________________155 3. STATEMENT FOR JSC INTER RAO SHAREHOLDERS AND OTHER STAKEHOLDERS ______________ 17 8.6. Asset security ________________________________________________________________________________________________________ 166 4 DEVELOPMENT STRATEGY OF INTER RAO GROUP AND ITS IMPLEMENTATION __________________ 21 9. RISK MANAGEMENT ______________________________________________________________________________________________________ 169 4.1 Strategy of the Company ____________________________________________________________________________________________ 21 4.2. Business model ________________________________________________________________________________________________________ 26 10. PROCUREMENT _____________________________________________________________________________________________________________ 177 4.3. Investment _______________________________________________________________________________________________________________ 27 4.4. Innovations ______________________________________________________________________________________________________________30 11. FINANCIAL PERFORMANCE____________________________________________________________________________________________ 185 4.5. Energy efficiency _______________________________________________________________________________________________________ 34 12. APPENDICES __________________________________________________________________________________________________________________191 5. INTER RAO GROUP’S BUSINESS OPERATIONS __________________________________________________________________39 12.1. Auditing Commission Opinion ____________________________________________________________________________________191 5.1. Segments ________________________________________________________________________________________________________________ 39 12.2. Consolidated financial statements according to IFRS ____________________________________________________ 193 5.2. Group’s key performance indicators ______________________________________________________________________________ 41 12.3. Financial statements according to RAS _______________________________________________________________________ 199 5.3. Generation in the Russian Federation __________________________________________________________________________ 43 12.4. GRI Content Index ___________________________________________________________________________________________________ 204 5.4. Supply in the Russian Federation_________________________________________________________________________________48 12.5. Information on compliance with the Corporate Governance Code ___________________________________ 220 5.5. Trading in the Russian Federation and Europe ______________________________________________________________ 55 12.6. Major deals and related party deals ___________________________________________________________________________ 220 5.6. Engineering ______________________________________________________________________________________________________________ 59 12.7. Information on non-core assets disposal programme and non-core assets register __________ 220 5.7. Georgia ____________________________________________________________________________________________________________________ 62 12.8. Information on participation in other companies __________________________________________________________ 222 5.8. Armenia __________________________________________________________________________________________________________________66 12.9. Internal regulations of the Company __________________________________________________________________________ 240 5.9. Moldova _________________________________________________________________________________________________________________70 12.10. Information on fulfilment of the orders of the President and Government 5.10. Turkey _____________________________________________________________________________________________________________________ 72 of the Russian Federation aimed at improving JSC Inter RAO’s business activities _____________ 243 5.11. Kazakhstan ______________________________________________________________________________________________________________ 74 12.11. Government support ________________________________________________________________________________________________ 245 12.12. Information on major litigation ___________________________________________________________________________________ 246 6. CORPORATE GOVERNANCE ____________________________________________________________________________________________ 77 12.13. Glossary ________________________________________________________________________________________________________________ 248 6.1 Corporate governance system _____________________________________________________________________________________ 77 6.2. Corporate governance model _______________________________________________________________________________________ 79 13. CONTACT DETAILS ________________________________________________________________________________________________________ 250 6.3. General Shareholders Meeting _____________________________________________________________________________________80 6.4. Board of Directors _____________________________________________________________________________________________________84 6.5. Management Board _________________________________________________________________________________________________ 106 6.6. Corporate control _____________________________________________________________________________________________________113 6.7. Information disclosure and external communications ______________________________________________________118 2 JSC INTER RAO / ANNUAL REPORT / 2014 1. REPORT OVERVIEW The JSC Inter RAO 2014 Annual Report (hereafter referred to as the Report) features a comprehensive The scope of information about the Group’s subsidiaries included in the Report complies with the scope description of Inter RAO Group’s financial and non-financial performance results for this reporting period. set by the IFRS (International Financial Reporting Standards). In this reporting period, LLC Omsk Power The Report aims to update stakeholders on all significant aspects of Inter RAO Group’s business activity, Supply Company, JSC RTS Aktiv, LLC Inter RAO – SP, LLC Inter RAO – Distributed Generation, Cosy as well as on the Group’s objectives and development prospects for the immediate future. The 2014 report House LLC, LLC Engineering center Gas turbine technologies all joined the Group, and TomskRTS JSC, has retained the structure adopted previously, but has been supplemented and updated pursuant to new OmskRTS JSC formed out of JSC TGK-11. LLC EnergoTeploRemont, LLC Transavto, Inter RAO Middle East financial reporting requirements and growing stakeholder expectations. B.V., and JSC Khramhesi III were divested from the Group. LLC ENERGIYA HOLDING was incorporated into JSC PSK (Petersburg Power Supply Company) and CPP TPP-5 became a branch of LLC BGC2. Inter RAO Group’s Annual Report has been compiled in accordance with the recommendations and regulatory requirements listed below: The information with regard to HR management, occupational health and safety, industrial safety and the environment is disclosed in the Report with the boundaries for data collection set by JSC Inter RAO. ► Decree of the Russian Government No. 1214 dated December 31, 2010 On the improvement of the procedure for management of open joint stock companies with shares in federal ownership and federal Internal and external stakeholders’ opinions were assessed to define the most relevant topics for inclusion state unitary enterprises;