Annual Report 2018 | FSC logo means that this Report was printed on paper that LEADER comes from responsibly managed forests FEDERAL PASSENGER COMPANY COMPANY PASSENGER FEDERAL in passenger mobility JSC FPC’s Annual Report was approved by resolution of the Board of Directors dated MESSAGE FROM THE CEO – 24 May 2019 CHAIRMAN OF THE MANAGEMENT (Minutes No. 22 dated 27 May 2019) BOARD, RUSSIAN RAILWAYS The railway industry proved highly competitive in 2018. Passengers choose rail when they expect faster trips due to higher travelling speeds and a great customer experience. FPC maintained growth in key metrics during the year by focusing on passenger services operating new types of carriages, while our long- distance trains carried over 100 million people, with passenger km travelled up by 6%. This growth is particularly prominent in the segments of high-speed and daytime trains made up of the newest and latest carriages – our double- deckers carried 37% more passengers than the year before. Our outstanding service for football fans during the 2018 FIFA World Cup >100 also contributed towards FPC’s strong performance and international million people recognition. In response to our passengers’ evolving needs, we have been consistently transported by long-distance trains in 2018 replacing and upgrading our carriage fleet while offering new routes, launching marketing campaigns and new high-quality services, and enhancing our digital proposition. More than a half of all long-distance rail tickets are now sold online, driven by the continuous improvements to both our RZD Passengers mobile app and the RZD Bonus Loyalty Programme. 6% We aim to provide only the very best customer experience across all of our was the growth routes, paying close attention to feedback by carefully considering all passenger inquiries. of passenger traffic In the coming years, we are planning to replace or upgrade most of our rolling stock, with innovative types of carriages being designed in collaboration with major Russian manufacturers. We are maintaining our focus on new multimodal and digital services to offer a smooth door- 37% to-door travelling experience and are expanding the routes covered by our high-speed train services. All these initiatives are captured in the Long-Term the growth Development Programme of Russian Railways to 2025. in passenger traffic in double-deckers Oleg Belozerov CONTENTS 1 2 3 4 5 6 COMPANY PROFILE DEVELOPMENT PERFORMANCE CORPORATE SUSTAINABLE APPENDICES STRATEGY OVERVIEW GOVERNANCE DEVELOPMENT Our History . 6 Message from the Chairman . 24 Message from the General Overview of the Corporate FPC’s Involvement Major Transactions . 192 Director. 46 Governance Model and Practice . 124 in the State Social Policy. 174 Geography . 12 Company Strategy . 26 Interested-Party Transactions. 192 Market Overview. 48 Share Capital. 128 Our People and Social Policy . 175 Types of Activities . 14 Key Objectives for 2019. 33 Balance Sheet Marketing Policy . 51 Dividend Policy. 129 Managing Environmental Impact. 184 As at 31 December 2018, Key Metrics. 15 Business Model . 34 ’000 RUB . 193 Customer Service . 68 Shareholders Meetings . 130 Energy Consumption . 187 FPC’s Peer Companies. 16 Assets . 36 Statement of Financial Results Rolling Stock . 80 Board of Directors. 131 Charitable Activities . 188 for 2018, ’000 RUB . 196 Investment Appeal. 17 Asset Structure and Changes in the Asset Structure. 38 Government Relations. 90 Board of Directors’ Report . 140 Disposal of Non-Core Assets Credit Ratings . 17 and Carriages . 198 Organisational Structure. 39 Risk Management, Internal General Director . 154 Key Events in 2018 . 18 Control, and Internal Audit . 91 Report on Compliance Subsidiaries. 40 Deputy General Directors . 155 with the Bank of Russia’s 2018 FIFA World Cup. 20 Safety and Security . 100 Corporate Governance Code . 200 Corporate Secretary . 161 Key Operating Highlights. 103 Registrar Details . 222 Key Provisions Investment Management. 115 of the Policy on Remuneration List of FPC’s Branches and Their and Reimbursement Structural Units Certified Procurement. 118 for Governing Bodies. 162 to GOST R ISO 9001-2015 . 223 International Activities . 119 Control and Audit . 162 Disclaimer . 225 Internal Qualitative Assessment of Corporate Governance. 163 Contacts . 225 Report on Compliance with the Bank of Russia’s Corporate Governance Code . 164 Corporate Quality Management System. 165 Conflict of Interest Resolution and Corruption Prevention . 171 Preventing and Countering Corruption. 171 1 COMPANY In 77 23 459 Russian regions international routes train pairs passenger transportation to 19 countries run on the railway PROFILE is carried out with in-house trains system 6 7 COMPANY PROFILE OUR HISTORY Carriage operator Integrated mobility provider 2010 2011 2012 2013 2014 2015 2016 2017 2018 FPC was included FPC was officially FPC was awarded FPC was granted Credit ratings FPC won the Best FPC’s 2015 Annual FPC won the Moscow FPC’s 2017 Annual in the Register admitted with the Company the observer status were assigned Loyalty Programme Report won the Best government’s Best Report was awarded of Natural Monopolies. to the international of the Year 2012 at the OSJD, enabling to FPC by leading rating by a Transport Company Annual Report by a Non- Employer for Young the second prize in the Best Organisation National Award representation agencies. category at the national Public Company category People 2017 award Presentation of a Business for Cooperation by RosBusinessConsulting of the Company’s loyalty marketing at the Annual for Efficient Fulfilment Model by a Non-Public of Railways (OSJD) (RBC) information agency. interests at meetings FPC’s Annual Report won competition Loyalty Report Competition of Student Team Company at the Annual and was made a member of OSJD’s working the Best Presentation Awards Russia 2015. by the Moscow Potential. Report Competition of the International bodies, which reinforced of a Business Model Exchange. by the Moscow Exchange. Union of Railways (UIC). the Company’s position by a Non-Public Company A double-decker in the international category at the Annual train seating 1,320 FPC won the Best FPC’s 2017 Annual Report transport market. Report Competition from Moscow Employer for Young was also shortlisted by the Moscow to Voronezh was People 2016 award for the Best Annual Report Exchange. enteredi into the Russian in the Reliable by a Non-Public Company. Book of Records Partnerships category. as “the year-round FPC won an award scheduled long-distance The Year of the Passenger for promoting corporate train with the most Programme was volunteering, granted passenger seats”. successfully implemented: by the Volunteer in 2016, FPC reversed Centres Association FPC’s Annual Report won its declining passenger at the International the Best Presentation rates for the first time Volunteer Forum. of a Business Model in five years, achieving by a Non-Public Company a growth of 4%. FPC successfully passed category for the second a QMS inspection time at the Annual for compliance with GOST Report Competition R ISO 9001-2015 (Quality by the Moscow Management Systems – Exchange. Requirements). Company Profile Development Strategy Performance Overview Corporate Governance Sustainable Development Appendices Annual Report 2018 JSC Federal Passenger Company 8 9 STATE AND RESTRUCTURING 2010 2011 2012 2013 2014 2015 2016 2017 2018 Restructuring of long- Regulatory Cooperative agreements The Plan Third-class open The Russian Government The Russian Government The draft Development A federal law allowing distance rail passenger and legal framework were signed to Develop and Implement sleeping and fourth- resolved to reduce resolved to reduce Strategy of JSC FPC carriers to sell non- services was completed for calculating revenue with the governments a Mechanism class seating carriage the VAT rate from 18% the VAT rate for long- to 2030 was prepared. refundable tickets was under Stage III shortfall was finalised. of the Republic of Karelia, for Long-Term Subsidising fares were reduced to 10% for long-distance distance rail passenger adopted on 18 April of the Railway the Komi Republic, of Long-Distance Rail following a resolution rail passenger services services from 10% to 0% The VAT rate applicable 2018 with effect Restructuring Programme. and the Republic Passenger Transport was by the Federal Tariff between 1 January 2016 between 2017 and 2030. to long-distance rail from 1 January 2019. of Ingushetia. approved by instruction Service (FTS of Russia). and 31 December 2017. passenger services was of the Russian Deputy The Federal reduced from 10% to 0% Prime Minister Arkady In accordance Antimonopoly Service until 2030. Dvorkovich. with Resolutions (FAS) of Russia agreed of the Russian to reduce infrastructure Government No. 1223 tariffs for higher-speed dated 19 November trains travelling at 91 2014 and No. 1044 dated to 140 km/h. 11 October 2014, FPC was entitled to subsidies covering part of its interest expenses under loans granted to purchase rolling stock (double-decker carriages) and included as a beneficiary Company Profile of the Programme to Support Investment Development Projects in Russia Based Strategy on Project Financing Arrangements. Performance Overview Corporate Governance Sustainable Development Appendices Annual Report 2018 JSC Federal Passenger Company 10 11 BUSINESS DEVELOPMENT 2010 2011 2012 2013 2014 2015 2016 2017 2018 FPC commenced Online registration was The Development A double-decker A pilot project