STATE ATOMIC ENERGY CORPORATION “ROSATOM” Joint Stock Company Nuclear and Power Engineering (Atomenergomash) Protocol No___ of "___" _________20_ . Approved by: Board of Directors JSC OKB “GIDROPRESS” “ 04 '’ May 2018. Protocol No 12 of “ 07 '’ May 2018. Annual Report 2017 Joint Stock Company "Experimental and Design Organization "GIDROPRESS" awarded the Order of the Red Banner of Labour and CZSR Order of Labour" (JSC OKB "GIDROPRESS") Podolsk 2018 Full Name of the Company (GRI 102-1, GRI 102-5) The Company’s full name in Russian is as follows: Акционерное общество «Ордена Трудового Красного Знамени и ордена труда ЧССР опытное конструкторское бюро «ГИДРОПРЕСС» The Company’s full name in English is as follows: Joint Stock Company "Experimental and Design Organization "GIDROPRESS" awarded the Order of the Red Banner of Labour and CZSR Order of Labour" Abbreviated Name of the Company The Company’s abbreviated name in Russian is as follows: АО ОКБ «ГИДРОПРЕСС» The Company’s abbreviated name in English is as follows: JSC Experimental and Design Organization "GIDROPRESS" Principal Place of Business (GRI 102-3) 21 Ordzhonikidze Str., Podolsk, Moscow Region 142103 Web Site and E-mail: E-mail: [email protected] Web site: http://www.gidropress.podolsk.ru/ Web site used by the issuer to disclose information as appropriate:http://www.e- disclosure.ru/portal/company.aspx?id=14007 Contact telephone and fax: tel.: (4967) 54-25-16, fax: (4967)54-27-33 2 CONTENTS I. PREAMBLE 1. Key Performance Indicators .......................................................................................... 5 2. Main Events ................................................................................................................... 6 3. Address by the Chairman of the Company’s Board of Directors ................................... 9 4. Address of the Company’s Director General ............................................................... 11 5. Report of the Board of Directors .................................................................................. 13 II. GENERAL 1. Company’s Profile ....................................................................................................... 14 2. Company's Status. Principal Activities. Business Model. Global Reach ...................... 15 3. Historical Background .................................................................................................. 21 4. Financial and Economic Performance ......................................................................... 23 III. COMPANY’S DEVELOPMENT STRATEGY 1. Company’s Mission ..................................................................................................... 27 2. Role and Contribution of the Company to Implementation ROSATOM’s Strategy ...... 27 3. Technological Development of VVER-type Reactors .................................................. 29 4. International Activities .................................................................................................. 30 5. Competitive Environment ............................................................................................ 30 IV. CORE BUSINESS RESULTS 1. Project Portfolio ........................................................................................................... 31 2. Design and Engineering .............................................................................................. 32 3. Research and Development ........................................................................................ 34 4. Designer Supervision .................................................................................................. 35 5. Development of Design Technologies ......................................................................... 36 6. NPP Equipment Production and Supply ...................................................................... 37 7. Research and Intellectual Property.............................................................................. 38 8. Introduction of the ROSATOM Production System ...................................................... 41 V. MANAGEMENT SYSTEM 1. Corporate Governance ................................................................................................ 43 2. Quality Management ................................................................................................... 47 3. Procurement Management .......................................................................................... 49 4. Finance Management .................................................................................................. 50 5. Investments and Upgrade ........................................................................................... 51 6. Risk Management ........................................................................................................ 53 7. Internal Control and Audit ............................................................................................ 53 VI. SUSTAINABLE DEVELOPMENT 1. Human Resources Management ................................................................................. 55 2. Social Policy ................................................................................................................ 65 3. Youth Policy ................................................................................................................ 66 4. Occupational Health and Safety .................................................................................. 68 5. Environmental Safety and Compliance ........................................................................ 69 VII. COMMUNICATIONS 3 1. External and Internal Communications ....................................................................... 73 2. Stakeholder Engagement in Preparing the Report ...................................................... 74 VIII. APPENDICES Appendix 1 Information on the Report ............................................................................ 80 Appendix 2 Consideration of Stakeholders' Concerns .................................................... 83 Appendix 3 GRI Index Table ........................................................................................... 84 Appendix 4 Accounts and Financial Statements 2017 .................................................... 87 Appendix 5 Audit Report attached to the Company’s accounts and financial statements for the period from January 01, 2017 to December 31, 2017. ........ Ошибка! Закладка не определена. Appendix 6 List of Abbreviations ..................................................................................... 88 4 I. PREAMBLE 1. Key Performance Indicators GRI 102-7 In 2017 Joint Stock Company "Experimental and Design Organization “GIDROPRESS” awarded the Order of the Red Banner of Labour and CZSR Order of Labour (OKB “GIDROPRESS”) showed high financial and economic performance and increase in labour productivity. More specifically, in the reporting year the following results were achieved: Labour efficiency amounted to RUB 5.5 mln, thus showing an increase vs 2016 of RUB 0.8 mln or 17.0 percent; Sales proceeds totaled RUB 8,105.0 mln, thus showing an increase vs 2016 of RUB 1,251.8 mln or 18.3 percent; Net profit showed an increase vs 2016 of RUB 483.4 mln or 18.3 percent; Return on working capital (sales profit) totaled 39.1 percent; as such, efficiency of use thereof vs the previous year increased by 19.6 percent; Return on equity totaled 43.8 percent; as such, efficiency of use thereof vs the previous year increased by 0.5 percent; The absolute liquidity ratio is significantly higher than standard index, thus enabling the Company to pay its debts when due in full. The Company carried out its business without raising borrowed funds and was absolutely financially stable. As such, the Company managed its working capital properly and competently and its management could be characterized as highly professional; 618 employees were trained in RPS-methodology, while the target index in 2017 amounted to 220 employees. Key Performance Indicators Growth rate Indicator 2015 2016 2017 2017/2016, % Proceeds from sales of goods, work and 4,466.4 6,853.1 8,105.0 18.3 services, MM RUB Net Profit, RUB mln 1,378.5 2,635.1 3,118.5 18.3 Sales Profit, RUB mln 1,315.5 3,345.7 3,617.1 8.1 Labour Efficiency, RUB mln/person 3.0 4.7 5.5 17.0 Average Salary, RUB/month 100.5 114.6 117.3 2.4 Events rated as higher than Level 2 (INES 0.0 0.0 0.0 - scale), quantity Government Defense Order, progress in % 100.0 100.0 100.0 - 5 Profitability Indicators, % Growth rate Indicator 2016 2017 2017/2016 Return on sales (net profit) 38.5 38.5 0 Return on working assets (sales profit) 32.7 39.1 19.6 Return on sales (ROS) 48.8 44.6 -8.6 Return on equity (ROE) 43.6 43.8 0.5 Cost to revenue rate 81.7 74.6 -8.7 Return on assets (ROA/ ROTA) 28.8 28.0 -2.9 The stable high level of profitability indicators is the evidence of sustainable development of the Company. Aleksey Likhachev, ROSATOM State Corporation Director General: "In the previous year we have solved all the key tasks related to construction projects abroad and in Russia. For the first time in the new Russia history two physical start-ups of new units took place within one year: Unit 4 of Rostov NPP and Unit 1 of Leningrad NPP under construction…" 2. Main events Designing VVER reactor plants is the priority business of the Company. Any design work of construction sites and equipment related to reactor plants within the life