STATE ATOMIC ENERGY CORPORATION ROSATOM Joint Stock Company Nuclear and Power Engineering (Atomenergomash) Annual Report 2017

Transcription

1 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 Protocol No 12 of 07 ' May 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

2 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 Web Site and grpress@grpress.podolsk.ru Web site: Web site used by the issuer to disclose information as appropriate: Contact telephone and fax: tel.: (4967) , fax: (4967)

3 CONTENTS I. PREAMBLE 1. Key Performance Indicators Main Events Address by the Chairman of the Company s Board of Directors Address of the Company s Director General Report of the Board of Directors II. GENERAL 1. Company s Profile Company's Status. Principal Activities. Business Model. Global Reach Historical Background Financial and Economic Performance III. COMPANY S DEVELOPMENT STRATEGY 1. Company s Mission Role and Contribution of the Company to Implementation ROSATOM s Strategy Technological Development of VVER-type Reactors International Activities Competitive Environment IV. CORE BUSINESS RESULTS 1. Project Portfolio Design and Engineering Research and Development Designer Supervision Development of Design Technologies NPP Equipment Production and Supply Research and Intellectual Property Introduction of the ROSATOM Production System V. MANAGEMENT SYSTEM 1. Corporate Governance Quality Management Procurement Management Finance Management Investments and Upgrade Risk Management Internal Control and Audit VI. SUSTAINABLE DEVELOPMENT 1. Human Resources Management Social Policy Youth Policy Occupational Health and Safety Environmental Safety and Compliance VII. COMMUNICATIONS 3

4 1. External and Internal Communications Stakeholder Engagement in Preparing the Report VIII. APPENDICES Appendix 1 Information on the Report Appendix 2 Consideration of Stakeholders' Concerns Appendix 3 GRI Index Table Appendix 4 Accounts and Financial Statements Appendix 5 Audit Report attached to the Company s accounts and financial statements for the period from January 01, 2017 to December 31, Ошибка! Закладка не определена. Appendix 6 List of Abbreviations

5 I. PREAMBLE 1. Key Performance Indicators GRI 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 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 Indicator rate 2017/2016, % Proceeds from sales of goods, work and services, MM RUB 4, , , Net Profit, RUB mln 1, , , Sales Profit, RUB mln 1, , , Labour Efficiency, RUB mln/person Average Salary, RUB/month Events rated as higher than Level 2 (INES scale), quantity Government Defense Order, progress in %

6 Profitability Indicators, % Indicator Growth rate 2017/2016 Return on sales (net profit) Return on working assets (sales profit) Return on sales (ROS) Return on equity (ROE) Cost to revenue rate Return on assets (ROA/ ROTA) The stable high level of profitability indicators is the evidence of sustainable development of the Company. 2. Main events 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 " 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 cycle thereof (i.e. construction, preoperational tests and startup, commissioning and decommissioning, operation and upgrade) are performed subject to direct involvement of JSC OKB GIDROPRESS. Key results of 2017 Novovoronezh NPP-2 Unit 1 with a pioneer Generation 3+ VVER-1200 reactor was put into commercial operation. The physical startup of the following units was carried out: Unit 1 of Leningrad NPP-2 with VVER-1200 reactor; Unit 4 of Rostov NPP with VVER-1000 reactor. The power startup stage was completed at Unit 3 of Tianwan NPP in China. A limited construction license was received for Akkuyu NPP in Turkey. A license was obtained for designing and construction of Rooppur NPP in Bangladesh. The following power units were licensed for further operation: Unit 2 of Balakovo NPP - until 2043; Unit 2 of Kalinin NPP - until 2038; Unit 5 of Kozloduy NPP in Bulgaria - until 2027; The State Defence Order was carried out in full. 85 RPS projects were launched. The environmental management system was created and implemented in JSC OKB "GIDROPRESS". 6

7 Safety Our Values. Progress and Achievements in 2017 One step ahead Responsibility for the result Efficiency One team JSC OKB "GIDROPRESS" has corroborated compliance of the quality management system with the requirements of international standard ISO 9001:2015. The anniversary 10-th International Scientific and Technical Conference Safety assurance of NPP with VVER Certificate of acknowledgement issued by JSC "Atomstroyexport" to employees of JSC OKB "GIDROPRESS for active participation in development of the Final Safety Analysis Report for Units 3 and 4 of Tianwan NPP and its support in the National Nuclear Safety Authority of China. An employee of JSC OKB "GIDROPRESS" became the laureate of the Russian Federation Government Prize in the field of science and engineering for improving the operating performance and radiation safety of BN-600 reactor plant, using the obtained experience for advanced designs of fast neutron sodium-cooled reactor plants. An employee of JSC OKB "GIDROPRESS" became the laureate of the Moscow Region Governor Annual Contest in the field of science and innovations among young researches and specialists. Employees of JSC OKB "GIDROPRESS participated in the first conference "Developments and achievements of the Council of young researchers and specialists of the Moscow Region in 2017". Employees of JSC OKB "GIDROPRESS took part in the international conference "International Topical Meeting on Nuclear Reactor and Thermal Hydraulics" (NURETH-2017). JSC OKB "GIDROPRESS is the only Russian company invited by conference organizers to review the papers. Two reports of specialists of JSC OKB "GIDROPRESS ranked second in the contest of young scientists, organized in the framework of scientific-and-technical conference "Neutronphysical issues of nuclear power engineering" Neutronics The state defense order was carried out in full. The Final Acceptance Certificate was signed for commissioning the Unit 1 of Kudankulam NPP into commercial operation. JSC OKB "GIDROPRESS was appreciated among the largest taxpayers of Podolsk and awarded a certificate of honour and memorial cup. JSC OKB "GIDROPRESS was included into the circuit of development of the Rosatom production system (RPS) in the industry. An employee of JSC OKB "GIDROPRESS was declared the laureate of division nomination "Process Engineer" in the MAN OF THE YEAR Contest by ROSATOM. Two diplomas were received by employees of JSC OKB "GIDROPRESS in the VII-th scientific and practical conference of young specialists in nuclear power industry "TEAM 2017". The company specialists took the second prize in division 7

8 Respect tournament "Brain battle-2017". The sport team of JSC OKB "GIDROPRESS won the third prize in Sports Festival of labour collectives of Podolsk Urban District. JSC OKB "GIDROPRESS was appreciated by Andrey Vorobyov, the Moscow Region Governor, for fruitful cooperation and significant contribution to implementation of the region plans and development. Employees of the Company were awarded: medals of the State Corporation ROSATOM" - "For Merit to the Nuclear Power Industry" of degree 1, 2 and 3; medals of labour "Nuclear Power and Industry Veteran" (in greater detail on p. 80). Employees were awarded certificates of honour by the State Corporation ROSATOM, JSC Atomenergomash, certificate of acknowledgement by JSC Atomenergomash. Project "Bread is the staff of life!" - the laureate of the "Our Moscow Region Annual Prize of "Initiative" category by the Moscow Region Governor. The prize is awarded to the best social important projects aimed at development of the Moscow region. The team of singers "Singing hearts of OKB "GIDROPRESS became the laureate of degree 1 of the Moscow Region Veteran Chorus Festival "Singing the praises to the Moscow Region and native town". Employees of OKB "GIDROPRESS was highly appreciated by the library of Lenin State Farm for their participation in All- Russian charity activity "Present a book to a child! organized by the Russian State Children Library. 8

9 3. Address by the Chairman of the Company s Board of Directors (GRI ) Dear colleagues, 2017 was the year of high achievements in OKB "GIDROPRESS". The Company s personnel proved that they are able to perform a substantial scope of work within tight deadlines, and high performance and quality shown in the results of such work allows us to face the future with confidence was commemorated by a series of advances of the State Corporation ROSATOM, and a considerable contribution was made by JSC OKB "GIDROPRESS to achieve them. One of the key events was commissioning of the first most-up-to-date Unit of Generation 3+ with VVER-1200 reactor at Novovoronezh NPP-2. This event is of fundamental importance for the whole industry and, first of all, for JSC OKB "GIDROPRESS as the General designer of these reactors. Implementation of this project is the result of enormous work performed by collectives of many enterprises of the Power Engineering Division and the State Corporation ROSATOM, as a whole. Owing to successful start-up of the Unit of Generation 3+ with VVER-1200 at Novovoronezh NPP-2, one can safely speak about the leadership of Russia in development of the technology of pressurized water reactors to open a new stage in nuclear power engineering development worldwide. In the reporting year physical start-ups of three Units with VVER reactor plants took place: Unit 3 of Tianwan NPP in China and Unit 4 of Rostov NPP with VVER-1000 RP, Unit 1 of Leningrad NPP-2 with VVER-1200 RP. In the midterm the principal task of JSC OKB "GIDROPRESS" include active participation in the implementation of the strategic goal pursued by ROSATOM which is aimed at boosting the market share internationally and taking part in further construction and ensuring reliability and safe operation of NPPs in Russia. It may be safely said that high professionalism and competence of managers, great experience of qualified staff allows JSC OKB "GIDROPRESS to keep the pace and successfully implement the assigned tasks in % fulfilment of the Government Defense Order is also the important result of the Company's activities. The Board of Directors observed positive dynamics of finance indicators of JSC OKB "GIDROPRESS in Proceeds increased more than by 18 %, most of them being formed by design and engineering activities in accordance with the position of JSC OKB "GIDROPRESS" as the industry-wide design centre with unique competences. During 2017 the Company continued to produce and supply its equipment for NPPs with VVER type reactors. The supplies were carried out in full to Leningrad NPP-2 Unit 2 and Belarusian NPP Unit 1 under construction. The increase in proceeds was mainly provided by increase in labour productivity, including its improvement due to introduction of the ROSATOM Production System in JSC OKB "GIDROPRESS according to a plan developed in Owing to the activities effectively carried out in the framework of implementation of RPS projects, both the production lead time for a number of items and stock turnover period were considerably reduced, thus facilitating the achievement of the ROSATOM strategic goals. The positive effect due to RPS introduction was appreciated at the high industry level. Based on the results of a peer review of quality of deployment of the ROSATOM production system that took place in JSC OKB "GIDROPRESS in yearly 2018, all indicators of RPS deployment were recognized as successfully implemented. I would like to thank the managers and staff of JSC OKB "GIDROPRESS for the shown responsible leadership and professional competence, painstaking and conscientious work in

10 I am fully confident that all the results achieved will be a new major reserve for further development of JSC OKB "GIDROPRESS" and strengthening the positions of the State Corporation ROSATOM at the international market of NPP construction and operation in 2018 and on. JSC OKB GIDROPRESS Chairman of the Board of Directors A.V. Nikipelov 10

11 4. Address of the Company s Director General Dear colleagues, It is my great pleasure to present the Integrated Annual Report 2017 of JSC OKB "GIDROPRESS. The report covers broadly the production, finance, social and environmental issues related to the Company. Owing to purposeful and hard work of the personnel of JSC OKB "GIDROPRESS in 2017, the year was full of the key events both for the Russian nuclear industry and world nuclear power engineering as a whole. Commissioning of the forerunner power unit with VVER-1200 reactor at Novovoronezh NPP became a key result of the activities in It is the world's first Unit of Generation 3+, its commissioning is the result of cooperative labour of nuclear industry enterprises and clearly represents the realized value of the ROSATOM State Corporation - "One team". The physical start-up of Leningrad NPP-2 Unit 1 is continuation of the successful activity on commissioning the NPP with VVER-1200 reactor plants. It is worth mentioning the completion of construction and physical start-up of Rostov NPP Unit 4 with VVER of the V-320 design that has been implemented and being operated at 24 power units of Russian and foreign NPPs. The Company's employees performed a huge scope of work on extension of the operating life of several power units. The result of this work is extension of the operating life of Balakovo NPP Unit 2 for 26 years, Kalinin NPP Unit 2 for 22 years, Kozloduy NPP Unit 5 in Bulgaria for 10 years. Prospects of these activities in extension of the operating life of Balakovo NPP Unit 3. In the reporting year 2017 and in the midterm the top priority business of JSC OKB "GIDROPRESS" is designing the VVER reactor plants. It comes from the fact that the Company is one of the key participants of implementation of the ROSATOM's strategy on boosting its share at the international markets. In 2017 JSC OKB "GIDROPRESS" carried out work at eight foreign sites simultaneously. Completion of the power start-up stage of Tianwan NPP Unit 3 in China was also a great achievement. The construction licenses were obtained for Akkuyu NPP in Turkey and Rooppur NPP in Bangladesh. In 2018 the activities on construction of power units abroad will be continued. The main task for 2018 is to commission Unit 1 of Leningrad NPP-2, Unit 3 of Tianwan NPP and Unit 4 of Rostov NPP. Solution of the tasks facing JSC OKB "GIDROPRESS depends on both each employee and well-coordinated work of the whole team. The teamwork only allows reaching the required results within tight deadlines of contractual obligations. In 2017 JSC OKB "GIDROPRESS was included into the circuit of development of the RPS in the industry. At present the Company mastered the up-to-date methods of business process management using such tools as decomposition of goals, x-matrix plotting and creation of information centres, thus allowing each employee to see the way its work influences achievement of the Company's goals and its contribution to the common cause. During the 2017 period 87 % of the Company's managers have implemented their personal RPS-projects and enhanced filing of improvement proposals, losses are detected and prevented both in the production and office processes. The level of involvement in implementation of RPS projects reached 63 % in This indicator shows the personnel readiness to evolve and change for the better. 11

12 In 2017 an enormous amount of work was carried out. We were glad and proud of these advances and achievements. There were also obstacles and challenges which were solved with full responsibility and concentrated resources. Summarizing performance shown in 2017 I think it is necessary to give credit to all the Company's employees for their responsible, good and highly efficient work and contribution to the achievement of the goals set for JSC OKB "GIDROPRESS". In 2018 we have to be also hard-working. I am sure that our personnel are able to cope with all the tasks, while maintaining the enterprise's status of a reliable partner and competitive company at the Russian and foreign markets of nuclear power engineering. I would like to thank the Company s Board of Directors and top management of the companies operating in the industry for their support, cooperation and productive collaboration which contributed greatly to our good performance in JSC OKB GIDROPRESS Director General V.V. Dzhangobegov 12

13 5. Report of the Board of Directors The Board of Directors held a number of scheduled meetings in the reporting period related to top priority lines of business of JSC OKB GIDROPRESS as well as extraordinary meetings convened on an as needed basis in order to address any issue related to the current business and financial operations of the Company. 43 meetings of the Board of Directors of JSC OKB GIDROPRESS were held in 2017.The agenda thereof included items falling within the competence of the Board of Directors as provided by Article 65 of the Federal Law On Joint Stock Companies and Article 14.2 of the Company s Articles of Association, including but not limited to the following: Approval of deals before they have been signed, their subject being the property, work and services, their cost being more than 10 (ten) percent of the balance cost of the assets of the Company, determined on the basis of the data of its accounting (finance) reporting as of the latest reporting date; Approval of candidates to be included in the list used to elect members of the Board of Directors of JSC OKB GIDROPRESS ; Approval of annual plans (budgets) of JSC OKB "GIDROPRESS" Approval of an auditor of the Company and determination of the amount of the payment for the auditor services; Other issues related to business and financial operations of OKB GIDROPRESS. In 2017 the Company s top priority lines of business were as follows: Development of water-cooled water-moderated power reactor (VVER) integrated design with a wide power range for nuclear power plants; Designer supervision of operation of VVER-440 and VVER-1000 NPP Units; Performing a set of operations aimed at justification of extension of the service life of Generation I and II VVER-440 and VVER-1000 reactor plants. Upon analysis of the Company s performance in 2017 it could be concluded that OKB GIDROPRESS managed to achieve positive results in the field of corporate development by the top priority lines of business thereof. Substantially all work performed by top priority lines of business consisted in testing various design solutions, check of operability and reliability of assemblies and equipment being performed at the experimental and research facilities of OKB GIDROPRESS in the environment close to the actual operating conditions. Commercial production of specific high tech equipment for NPPs at its own production facilities represents another top priority line of business of OKB GIDROPRESS. Moreover, these production facilities are used to manufacture testbench equipment, models, assemblies and items for subsequent testing as well as dedicated commissioning measurement and in-service inspection systems designed by OKB GIDROPRESS. Due to specific nature of the Company s business related to a considerable period of the reactor plant (RP) operating cycle (including designing, commissioning, maintenance and decommissioning thereof) the top priority lines of business of OKB GIDROPRESS will be similar in

14 II. GENERAL 1. Company s Profile 1.1. Auditor and Registrar Company s Auditor Company name: Nexia Pacioli Limited Liability Company Principal place of business: 2 Malaya Polyanka, Moscow, Postal address: 2 Malaya Polyanka, Moscow, It is a member of the Self-regulatory Organization of Auditors Association "Sodruzhestvo". It has License No to work with information belonging to the State Secret (Top Secret Information), the license is valid up to The professional responsibility of the Executor is insured by Rosgosstrakh LLC (Insurance Policy No of ). There are no factors, significant interests relating an auditor with the Company and able to effect the independence of the auditor on the Company: An auditor (persons holding positions in the management and inspection bodies of business and financial operations of the Auditor company) has no share in the authorized capital of the Company; The Company did not grant any loans to an auditor (persons holding positions in the management and inspection bodies of business and financial operations of the Auditor company); The Company staff has no close business relations (does not participate in promotion of products (services), does not participate in cooperative business activities etc.) and family relationships with an auditor; Persons holding positions in the management and (or) inspection bodies of business and financial operations of the Company do not take up any posts in the management and (or) inspection bodies of business and financial operations of the Auditor company. Order of Auditor Selection The Auditor company to render audit services for the Company's annual accounts (book-keeping) for 2017 as per the Russian standards was selected in compliance with the Rosatom State Corporation General Industry-Specific Procurement Regulations approved by Decision No.78 of of Rosatom State Corporation Supervisory Board. The Auditor company was selected by the Rosatom State Corporation, the company that had placed the order and arranged the procurement procedure in the form of an open on-stage bid invitation (Protocol No /0451/119/2 of ). Registrar of the Company Company name: Joint Stock Company Registrator R.O.S.T" Data on the licensee to maintain registers of registered security holders: License No Date of issue: December 3, 2002 Term of validity: without limitation of the period of validity Licensing authority: Federal Securities Commission of Russia Principal place of business: Bld. 13, 18 Stromynka st., Moscow Contacts: tel. (+7 495) ; fax (+7 495) Shareholders (GRI 102-7) 14

15 Company name: Joint Stock Company Nuclear and Power Engineering (Atomenergomash) State registration details: PSRN issued on by Interdistrict Inspectorate of the Federal Tax Service of Russia for Moscow No.46. Principal place of business: 24 B. Ordynka st., Moscow Share in the authorized capital: % Authorized capital: Two billion twenty four million one hundred two thousand two hundred fifty four (RUB 2,024,102,254) roubles Number of ordinary shares: Two billion twenty four million one hundred two thousand two hundred fifty four (2,024,102,254) shares Par value of an ordinary share: One (RUB 1.00) rouble; State registration number of the issue of ordinary shares and date of state registration: No Е The share held by the Company remained unchanged in Company name: State Atomic Energy Corporation "ROSATOM" State registration details: PSRN issued on December 18, 2007 by the Moscow Department of the Ministry for Taxes and Levies of Russia. Principal place of business: 24 B. Ordynka st., Moscow Share in the authorized capital: % Authorized capital: Two million five hundred thousand (2, ) roubles; Number of ordinary shares: Two million five hundred thousand (2,500,000) shares Par value of an ordinary share: One (RUB 1.00) rouble; State registration number of the issue of ordinary shares and date of state registration: No Е The share held by the Company remained unchanged in Shares held by JSC OKB GIDROPRESS in the Authorized Capital of Other Legal Entities Company name: Rusatom Service, Joint Stock Company State registration details: PSRN assigned by Interdistrict Inspectorate of the Federal Tax Service of Russia for Moscow No.46 on October 24, 2011 Principal place of business: 15A Leninsky prospekt, Moscow Share in the authorized capital: % Authorized capital: Nine million six hundred thousand (RUB 9, ) roubles; Number of ordinary shares: Nine million six hundred thousand (9, ) shares; Par value of an ordinary share: One (RUB 1.00) rouble; State registration number of the issue of ordinary shares and date of state registration: No Н The share held by the Company remained unchanged in Branch and Representative Offices JSC OKB GIDROPRESS has neither branch nor representative offices. 2. Company's Status. Core Activities. Business Model. Global Reach The Company is a part of the control circuit (i.e. it is a subsidiary company) operated by JSC Atomenergomash which is a machine-building and engineering division 15

16 of ROSATOM. The status, legal standing, mission and business profile, rights and discretions, competences and regulations governing activities of the Company s management and supervisory authorities are specified in the Articles of Association of Joint Stock Company "Experimental and Design Organization "GIDROPRESS" awarded the Order of the Red Banner of Labour and CZSR Order of Labour" (OKB GIDROPRESS ) (rev. of January 11, 2017). The Company plays a key role in the Nuclear Power Complex of the State Corporation ROSATOM. JSC OKB GIDROPRESS has been closely collaborating with its committed partners in Russia for several decades now and most of them are working within the scope of ROSATOM. Position of JSC OKB ''GIDROPRESS'' in NPP life cycle Research and Development Research Supervisor: - National Research Center Kurchatov Institute - State Scientific Center of the Russian Federation Institute for Physics and Power Engineering named after A.I.Leypunsky JSC OKB ''GIDROPRESS'' NPP Design Development ASE Group of Companies General designer JSC OKB ''GIDROPRESS'' General designer of reactor plant Production of Equipment Manufacturers JSC OKB GIDROPRESS NPP Construction Construction and installation service providers ASE Group of Companies JSC OKB GIDROPRESS NPP Operation Operators ASE Group of Companies JSC OKB GIDROPRESS Decommissioning Operators ASE Group of Companies Research Supervisor JSC OKB GIDROPRESS The Company performs a wide range of design, theoretical computation, test, research and manufacturing work related to development of reactors of various types featuring enhanced safety, reliability and efficiency and being competitive both in Russia and abroad. Principal activities (GRI 102-2) JSC OKB GIDROPRESS manufactures and markets its products, work and services in the following core business lines: I. Design and engineering o Reactor plants (RP) with pressurized water reactors (VVER) o RP with heavy liquid metal-cooled fast neutron reactors (BN); o steam generators (SG) for RP with sodium-cooled fast neutron reactors; II. Research and development III. Nuclear reactors and equipment for nuclear power plants (hereinafter referred to as Manufacturing equipment for NPPs) IV. VVER RP instrumentation and control systems (hereinafter referred to as Designer Supervision, including designer supervision of construction, commissioning, operation, extension of life cycle and decommissioning of reactor plants). 16

17 A detailed list of the activities is presented in the Company's Annual Report 2016, p.p Growth of Sales Proceeds in , mln RUB Products, work and services Growth SALE PROCEEDS rate 2017/2016, % Research and development 1, % Nuclear reactors and equipment for nuclear power plants 1,860 1,395 1, % Design and engineering 1,023 4,916 5, % VVER RP instrumentation and control systems % Other % TOTAL: 4,466 6,853 8, % Share in the total proceeds in 2017 broken down by types of products, work, services, mln RUB Sale Share in Products, work and services proceeds % Research and development Nuclear reactors and equipment for nuclear power plants 1, Design and engineering 5, VVER RP instrumentation and control systems Other 83 1 TOTAL: 8, Structure of JSC OKB "GIDROPRESS"(GRI 102-7, ) Design units Experimental facilities Production facilities Number of technologies under development 3 Number of test benches and facilities more than 20 D&E+R&D + Designer supervision Number of persons persons hold Academic Degrees Number of equipment units more than 210 Number of persons 444 The structure of JSC OKB "GIDROPRESS" was not changed in the reporting period. The Company s top priority business is designing VVER reactor plants with a wide power range varying from 600MW to 1,800MW for NPPs. Any design work of construction sites and equipment related to reactor plants within the life cycle thereof (i.e. construction, preoperational tests and startup, commissioning and decommissioning, operation and upgrade) are performed subject to direct involvement of JSC OKB GIDROPRESS. Supply chain (GRI 102-9) is an inherent part of the integrated business model of JSC OKB GIDROPRESS. The term "supply chain" also implies a product life cycle. It is defined as a system of interrelations with suppliers and contractors engaged in work on creation of a total value of the Company provided that the requirements of purchasing system (p. 69), quality (p. 66), occupational health (p. 87) are met. 17

18 Capital Scientific-production Financial Intellectual Environmental Human Social Resources of external and internal environment Strategic goals of the State Corporation ROSATOM and JSC OKB "GIDROPRESS" Values of ROSATOM BUSINESS MODEL CREATION OF VALUE (value added) Internal environment SUPPLY CHAIN External environment Business processes: D&E, R&D, product manufacturing, optimization of resources, modernization, budget payments, social programmes, higher eduction institution activities Products: designs, R&D results, NPP equipment, economic efficiency, region development Capital transformation Production optimization Production performance, optimization of costs Intellectual Property Environmental safety Personnel efficiency Social stability The business model of JSC OKB "GIDROPRESS" shows the system of the Company's activities on value creation and archiving the strategic targets with the use of available resources. It is a comprehensive description of the Company's value creation to demonstrate the processes and results of capital formation (gains, losses, redistribution, transformation, modernization) and its effect on stakeholders. Creating the value, the Company gives a special attention to operational efficiency, quality control and corporate responsibility. Capital of JSC OKB "GIDROPRESS" and effectiveness of its use in 2017 Capital Internal resources External resources Capital gains* Fixed assets and scientific-and-production Fixed assets and infrastructure of Scientific-andproductioproduction scientific-and- contractors and subcontractors; infrastructure consolidated investment resource, FTP assets Financial-andeconomical Intellectual 18 Company's financial resources Ideas and development, results of intellectual activity Effective interaction with contractors Objects of intellectual property, experience and knowledge 13 new investment projects initiated for a 5-year period; financing of investment projects in the current period - 141,8 RUB BN. Growth of sales proceeds is 18,27 %, Labour efficiency was increased by 18,0 %. Project portfolio growth - by 58,7 %. Growth of intangible assets 69 %. RF patents received: invention, utility model. Applications submitted: RF invention patent, RF utility patent, 5 - state registration of computer programs Environmental protection costs Environmental were RUB mln. Environment and Own natural Energy consumption consumed natural resources (thermal energy) in resources comparable conditions was reduced by 7.25 % Human Personnel, Personnel, accumulated Headcount person

19 Capital Internal resources External resources Capital gains* accumulated knowledge and skills Social Social ties, company's reputation on the Russian and international markets of corporate presence; effective cooperation and communication knowledge and skills of contractors and subcontractors Public acceptance of the industry LTIFR employees were trained employees were trained under internal training programs. Social expenditure - RUB 50.9 mln, including: Voluntary medical insurance - RUB 14.1 mln; Support of veterans and retirees RUB 5.8 mln. * Capital changes are shown relative to the indices in Supply chain Contracts Design and engineering Contracts SUPPLIERS RUB 1,524.0 mln transferred to suppliers and contractors For work and services/suppl y of materials Cash flow Research and development JSC OKB GIDROPRESS Manufacturing equipment for NPPs Designer Supervision For work and services/suppl y of products Cash flow CUSTOMERS RUB 6,887.2 mln received from buyers and customers 19

20 Global Reach (GRI 102-4, 102-6) KIRILL KOMAROV, First Deputy Director General for Corporate Development and International business of ROSATOM: "We have advantages on the market the state-of-theart technology of Generation III+ VVER-1200 reactors. Not only do we propose the design, but we also make it a rule to export only those reactor types that have references in Russia. " No. NPP % of proceeds % of geographic criterion 1 Foreign NPPs for foreign customers Kozloduy NPP 56 Armenian NPP 29 Tianwan NPP 14 Other 1 2 Foreign NPPs for Russian customers Paks NPP 14 Bushehr-2 NPP 17 Kudankulam NPP 9 Rooppur NPP 5 Tianwan NPP 5 Hanhikivi NPP 25 El Dabaa NPP 7 Belarusian NPP 15 Akkuyu NPP 3 Other 0 3 Russian NPPs for Russian customers Leningrad-2 NPP 46 Kola NPP 16 Balakovo NPP 6 Kalinin NPP 8 Novovoronezh-2 NPP 8 Other 17 4 Other activities in nuclear power engineering Total: 100 Market segments: civil nuclear power engineering, state defense order. In the segment of civil nuclear power engineering the global reach of JSC OKB "GIDROPRESS" is determined by location of power units with VVER reactor plants, being in operation at different stages of construction in compliance with the ROSATOM road map for construction of new NPP Units. Currently, 21 NPPs in 11 countries operate with VVER reactors: Russia, Ukraine, Armenia, Finland, Bulgaria, Hungary, Czech Republic, Slovakia, China, India and Iran. Their construction is under way in China and Belarus. The work is under development in Finland, Turkey, Iran, India, Bangladesh, Hungary, Egypt. 6 power units with VVER reactors are under construction in Russia. 20

21 Operating nuclear power plants and NPPs being built with VVER reactors designed by JSC OKB GIDROPRESS Belarus Belarusian NPP Finland Loviisa NPP Hanhikivi NPP Slovakia Bohunice NPP Mochovce NPP Czechia Russia Balakovo NPP Kalinin NPP Kola NPP Kursk NPP-2 Leningrad NPP-2 Novovoronezh NPP Rostov NPP Dukovany NPP Temelin NPP Hungary Paks NPP Bulgaria Kozloduy NPP Egypt China Tianwan NPP El Dabaa NPP Ukraine Rovno NPP Zaporozhye NPP Khmelnitski NPP South Ukraine NPP Turkey Akkuyu NPP Armenia Armenian NPP Bangladesh Rooppur NPP India Kudankulam NPP Iran Bushehr NPP 3. Historical Background A more detailed history of development of JSC OKB "GIDROPRESS" is presented in the Annual Report 2016 on p and in Section "Our Company" at the official web-site ( Start-up of Bushehr NPP (Iran) Start-up of Unit 1 of Kudankulam NPP (India) Completion of technical design of the VVER TOI reactor plant 2000 Start-up of Unit 1 of Temelin NPP (Czechia) 2001 Start-up of Unit 1 of Rostov NPP Start-up of Unit 1 of Mochovce NPP 1999 (Slovakia) Start-up of Unit 4 of Beloyarsk NPP with the steam generator designed by JSC OKB "GIDROPRESS" as a part of BN-800 RP 2017 Start-up of Unit 1 of Novovoronezh-2 NPP (the pioneer VVER-1200 RP) Start-up of Unit 1 of Tianwan NPP (China) Completion of technical design of VVER-1200 reactor plants (2 versions) 1999 Start-up of Unit 2 of Mochovce NPP (Slovakia) 21

22 Start-up of Unit 5 of Novovoronezh NPP (the pioneer VVER-1000 unit) 1980 Start-up of Unit 3 of Beloyarsk NPP with the steam generator designed by JSC OKB "GIDROPRESS" as a part of BN-600 RP 1980 Start-up of Unit 1 of Rovno NPP (Ukraine) 1981 JSC OKB "GIDROPRESS" was awarded the Order of the Red Banner of Labour 1971 Start-up of Unit 3 of Novovoronezh NPP (the pioneer WWER-440 unit) 1971 JSC OKB "GIDROPRESS" was appointed the General designer organization for VVER reactor plants 1973 Start-up of Unit 1 of Kola NPP 1973 Start-up of Unit 1 of Nord NPP (East Germany) 1974 Start-up of Unit 1 of Kozloduy NPP (Bulgaria) 1962 Launching of K-27 nuclear-powered submarine (design 645) 1964 Start-up of Unit 1 of Novovoronezh NPP with the pioneer domestic watercooled water-moderated power reactor for VVER-1 NPP 1952 Start-up of MR reactor in the Instrumentation Laboratory of the Academy of Sciences of the USSR 1989 Start-up of Unit 1 of South-Ukraine NPP (Ukraine) 1982 Start-up of Unit 1 of Paks NPP (Hungary) 1984 Start-up of Unit 1 of Zaporozhe NPP (Ukraine) 1985 OKB GIDROPRESS was awarded the CZSR Order of Labour 1985 Start-up of Unit 1 of Dukovany NPP (Czechia) 1987 Start-up of Unit 1 of Khmelnitski NPP (Ukraine) Start-up of BN-350 fast neutron reactor plant 1976 Launch of a nuclear-powered submarine (design 705k, hull number 105) with the pioneer BM-40/A steam supply system 1976 Start-up of Unit 1 of Armenian NPP 1977 Start-up of Unit 1 of Loviisa NPP (Finland) 1978 Start-up of Unit 1 of Bohunice NPP (Slovakia) 1979 JSC OKB GIDROPRESS trademark was registered 1964 Start-up of VK-50 boiling reactor (Dimitrovgrad) 1966 Start-up of Rheinsberg NPP (East Germany) 1968 Start-up of BOR-60 fast development reactor of 60 MW power in Dimitrovgrad 1954 Start-up of the first NPP in the world in Obninsk 1955 Order of the Soviet Government for development of a water-cooled watermoderated power reactor (VVER) 22

23 1946 OKB "GIDROPRESS" was established by the Decree of the Council of People's Commissars of the USSR The first design was horizontal uranium-graphite heavy water reactor 4. Financial and Economic Performance Economic efficiency is one of the critical preconditions of success in terms of competitiveness of products manufactured by JSC OKB "GIDROPRESS". Financial Performance of JSC OKB GIDROPRESS (mln RUB) Growth Indicator rate 2017/2016, % Proceeds from sales of goods, work and services 4, , , Cost of goods, work and services sold 2, , , Gross profit 1, , , Selling costs Administrative expenses Sales profit 1, , , Income tax (considering allocation of income tax inside Consolidated Taxpayer Group) NOPLAT 1, , , Net profit 1, , , In 2017 the Company managed to raise its sales proceeds by 18.3 % (RUB 8, K in 2017 vs RUB 6, K in 2016) and increase the share of costs in the proceeds by 4.5 % (51.6 % in 2017 vs 47.1 % in 2016) due to reduction of stocks by 17 %, including the remaining work-in-process inventory costs reduced by 24 % vs 2016 owing to completion of long-term Customers' acceptance of the work performed by JSC OKB "GIDROPRESS" under foreign projects. In terms of business and financial operations of the Company in 2017 there is also a positive tendency of reduction in share of administrative and selling costs in sales proceeds by 0.3 % (3.8 % in 2017 vs 4.1 % in 2016). The Company s net profit totaled RUB 3,118,5 mln in the reporting year, thus showing an increase of 18.3 % vs the previous year. The following are the principal factors which contributed to net profit improvement: 1) Higher labour efficiency triggering an increase of the volume of products (work or services) sold 2) Implementation of programs aimed at improving operational efficiency and reducing costs 3) Allocation of income tax inside Consolidated Taxpayer Group 4) Deriving extra profit from depositing temporarily available cash, thus pursuing a sound financial policy and ensuring highly efficient management of those funds. 23

24 Core balance indicators of the Company in Assets Structure, mln RUB Share in the Assets balance as of , % Total: 1, , , Fixed assets , , Intangible assets Long-term financial investments Deferred tax assets Other Current Assets Profile, mln RUB Share in the Assets balance as of , % Total: 5, , , Inventory 1, , , Value added tax on assets acquired - Accounts receivable 3, , , Financial investments 0.0 1, Cash and cash equivalents 1, , , Other Capital and Reserves Structure, mln RUB Share in the balance as of , % Item Total: 4, , , Authorized capital 2, , , Add-on capital Reserve fund Retained earnings 2, , , Contributions made by the shareholders or members of the Company to the authorized capital prior to registration of amendments made in the constituent documents thereof

25 Liability Structure, mln RUB Share in the Item balance as of , % Total: 2, , , Accounts payable including: 1, , , suppliers and contractors advances received , , Estimated liabilities Balance Sheet Structural Analysis Indicator Current to non-current assets ratio Share of accounts receivable in the balance sheet, % Share of intangible assets in the balance sheet, % Borrowings Share of cash and cash equivalents in the balance sheet, % As of the Company s net assets totaled RUB 6,860.9 mln, thus showing a decrease of 6.9 % vs the assets as of (RUB 7,376.2 mln). Principal Financial and Economic Performance Indicators Indicator Output Labour Efficiency, mln RUB /person Value added/earnings (internal performance) Cost to Earnings Ratio, % Fixed cost to earnings ratio Solvency Indicators Debt/EBITDA Ratio of borrowed and own funds Financial stability index Equity to total assets Current assets coverage ratio Liquidity Indicators Quick assets ratio Working capital ratio Absolute liquidity ratio Quotient of general financial solvency Coverage ratio Profitability Indicators, % Return on assets Return on sales Return on equity Gross profit margin Net profit margin

26 Cash Flow Indicators, mln RUB Item Cash and cash equivalent balance as of the beginning of the year , ,063.1 Increase or decrease of cash flows (current operations) 1, , , Increase or decrease of cash flows (financial operations) 1, , ,111.2 Increase or decrease of cash flows (investments) 1,554.0 Increase or decrease of cash flows, total , Impact by foreign exchange/rub rate fluctuations Cash and cash equivalent balance as of the year end 1, , ,882.5 Generated and distributed direct economic value, mln RUB (GRI 201-1) No. ITEM Generated economic value 5, , , Distributed economic value 4, , ,511.3 Operating costs 1, ,578.4 Salary, other benefits and compensation payable to the Company s personnel 1, , ,127.4 Payables to capital providers 1, ,647.3 Taxes , ,314.8 Investments in other companies Non-distributed economic value , ,953.2 Depreciation Industry provisions Interest payable Internal performance (added value) A negative value of operating costs in 2017 is caused by simultaneous dividend payment for 2015 and 2016 to shareholders of the Company. 26

27 KIRILL KOMAROV, First Deputy Director General for Corporate Development and International business of ROSATOM: " nuclear power upgrowth is gathering force worldwide, especially in developing countries. As regards the types of reactors, they are mainly dependent on particular markets. By and large the water-cooled water-moderated power reactors of Generation III + will be of great demand " III. COMPANY S DEVELOPMENT STRATEGY Mission and Values 1. Company s Mission JSC OKB GIDROPRESS seeks to design equipment for competitive nuclear power plants. The Company s strategic objective is to ensure implementation of ROSATOM's critical long-term goals. The Company s vision of sustainable development was generated based on the values of ROSATOM. The Company carries out its business adhering to the following principles: Ensuring safety and competitiveness of reactor plants either being designed, constructed or operated; Strict compliance with applicable law of the Russian Federation, federal safety rules and regulations and industry best practices; High quality of research, development, engineering and experimental work; Reliability, durability and fail safe operation of equipment either being designed or supplied; Cost efficiency. 2. Role and Contribution of the Company to Implementation ROSATOM s Strategy The Company plays a key role in the complex proposal of the State Atomic Energy Corporation ROSATOM in the international market of NPP construction. The Company being the General designer of VVER and heavy liquid metal lead-bismuth reactor plants takes full responsibility for proper quality and reliability of reactor plants and components parts thereof designed and manufactured by the Company. The VVER reactor plants designed by JSC OKB "GIDROPRESS" represent a material contribution to achievement of ROSATOM s strategic goal for boosting its share in the international markets. At 2017 year-end ROSATOM's portfolio of foreign customers included 33 NPP Units in 12 countries worldwide. All these Units will be equipped with reactors designed by JSC OKB GIDROPRESS. In 2017 JSC OKB GIDROPRESS continued to consistently pursue the ROSATOM's strategy. 27

28 Strategic goals of the State Corporation ROSATOM Boosting its share in the international markets Development of new products both for the national and international markets Reduction in the product prime cost and process time 28 Implementation of Strategic Goals of the State Corporation ROSATOM Strategic goals of Results of 2017 Tasks of 2018 the Company The key role is the leadership in the main business area of the State Corporation ROSATOM and JSC "Atomenergomash ", i.e. nuclear power engineering. The key role is the leadership in the main business area of the State Corporation ROSATOM and JSC "Atomenergomash ", i.e. nuclear power engineering. Systematic introduction of RPS, mastering of up-to-date methods of business process management Implementation of the planned work on reactor plants under the concluded construction contracts: Hanhikivi-1 NPP, Finland; Akkuyu NPP, Turkey; Tianwan NPP, Units 3 and 4, China; Kudankulam NPP, Units 3 and 4, India; Bushehr-2 NPP, Units 2 and 3, Iran; Belarusian NPP, Units 1 and 2; Paks NPP, Hungary; Rooppur NPP, Unit 1 and 2, Bangladesh; El Dabaa NPP, Egypt. Updating of basic design VVER TOI Beginning of work on VVER TOI on the pilot site Activities to reduce the lead time of two RPSflows in the core business were successfully carried out: - stages I and II of RPS project "Creation of a standard flow of reactor plant detailed design documentation elaboration" - by 22,3 %; - commercial operation commissioning of Unit 3 of Tianwan NPP; - start-up of Unit 4 of Tianwan NPP; - elaboration of documentation in justification of service life extension of Kozloduy NPP Unit 6. Development advanced reactor plants of VVER Obtaining the status "RPS leader".

29 - "CPS drive SHEM-3" - by 20 %. In 2017 the ratio of cost to proceeds was less than 55 %. This value corroborates the Company s financial stability in 2017, also shows a positive dynamics of business and financial operations implemented by JSC OKB "GIDROPRESS" and certifies that the Company improved efficiency of use of its assets from the perspective of deriving profit over several years. Information in greater detail is presented on page Technological Development of VVER-type Reactors Within the framework of implementation of ROSATOM s strategic goal to develop new products both for the national and international markets, the Company set objectives aimed at developing VVER technology (with regard to reactor plants). JSC OKB GIDROPRESS continues to improve the existing designs and implement the following advanced designs: Evolutionary improvement of VVER large power reactors; Mastering of medium and small power reactors; Development of new engineering solutions for the medium power VVER plant; Improvement of nuclear fuel; Development and experimental justification of methods designed to ensure commissioning and in-service monitoring of vibration behaviour of reactor internals using external instruments; Introduction of CFD methods to support engineering and justification of VVER reactor plants designed by the Company; Development of a system coupled computer code to support designing and safety analysis of state-of-the-art and innovative reactor designs. The following are the principal trends in evolutionary development of VVER-type reactors by JSC OKB GIDROPRESS : Enhanced safety; Lower unit cost of the equipment; Lower duration of installation work; Reduction of operational costs; Compliance with the customer s requirements as to the load-following mode (power control); Capability to use MOX and REMIX fuel; Higher steady-state availability factor; Higher capacity factor. 29

30 In view of the foregoing trends in technological development the main equipment layout is being optimized; new materials are used to construct reactor vessels; design of reactor vessel, core and steam generator is improved and that of the main coolant pump reworked etc. Any work as aforesaid is aimed at ensuring safety and competitiveness of the reactor plant. Information systems are used when designing and configuring a reactor plant, implementing the requirement management system, improving design management systems in the overall plan for reactor plant technology development. The VVER technology has a high upgrading potential and capable to operate with high performance in a 2-component nuclear power system. In 2017 a program was elaborated for further development of VVER technology. 4. International Activities The Company has been cooperating extensively with foreign companies in the field of nuclear power industry and engineering for 50 years now. The history international cooperation is given in the Annual Report 2016 on p and website of the Company /int-co-operation.php. Principal Results of International Cooperation Projects Undertaken in 2017 In 2017 the priority in international cooperation projects undertaken by OKB GIDROPRESS was given to performing the Company s obligations under the contracts. Information on the companies involved in cooperation is presented in Section II General. Global Reach In addition to its contractual obligations the Company s employees participated extensively in other international cooperation projects as well. They attended the meetings of technical committees and work teams established by IAEA as experts in nuclear safety and other issues connected with nuclear power industry, namely: Atomic Energy Research (AER) International Cooperation in VVER physics and safety; ATLAS Project of OECD NEA; World Association of Nuclear Operators (WANO) as the Moscow Centre Category 3 member included into the Governing Board, Board of Directors and Peer Review Groups on safety, fuel and seismic stability. OKB "GIDROPRESS" is the only member of WANO which is not referred to operating organizations. The Company s employees participate extensively in international conferences, symposiums, workshops and forums. They were invited as lecturers to participate in the training programmes involving personnel from the new comer states which are planning to build nuclear power plants, in regional training courses of IAEA on VVER safety assessment issues. In the reporting year JSC OKB "GIDROPRESS" held an important international event - the 10th International Scientific and Technical Conference "Safety assurance of NPP with VVER" organized under the assistance of the State Atomic Energy Corporation ROSATOM. More than 240 participants from 14 countries, including 40 foreign specialists, representatives of IAEA and other international organizations took part in the conference work. 5. Competitive Environment 30

31 JSC OKB "GIDROPRESS" has the status of General designer of reactor plants with VVER and heavy liquid metal lead-bismuth reactors. The competitive advantages enabling JSC OKB "GIDROPRESS" to held its position in the State Corporation ROSATOM are: Available 70-year practical experience; Availability of highly qualified personnel; Reliable, durable and fail-safe operation of the equipment designed and supplied by the Company as well as high quality of design, engineering, research, development and experimental work; Employment of best practices in design; Application of computational-experimental justification of engineering solutions, including those based on unique computer codes developed in the Company and use of unique experimental-research facilities available in JSC OKB "GIDROPRESS"; Mandatory compliance of reactor plant design documentation with Russian and international safety requirements and consideration of IAEA recommendations Availability of research and test facilities; Availability of advance manufacturing facilities; The principal competitive advantages of products and services provided by JSC OKB GIDROPRESS in its major projects of reactor plants with VVER-1000, VVER- 1200, VVER-TOI, SVBR-100, SG for BN-800 and BN-1200 reactor plants are presented in detail in the Annual Report 2016 on p and website of the Company in Section In a number of fields of activities in the Russian market JSC OKBM named after Afrikantov and JSC NIKIET are the competitors of JSC OKB "GIDROPRESS". Due to large-scale projects on construction of nuclear power plants the competitive struggle is carried on in the field of creation and export of nuclear reactors in the foreign market between large companies, such as Westinghouse Toshiba (Japan), AREVA-EDF (France), MHI (Japan), KEPCO (Korea), CNNC+CGN, SNPTC (China) etc. ROSATOM's portfolio of foreign customers includes 33 NPP Units in 12 countries and all of them will be equipped with VVER reactor plants designed by JSC OKB "GIDROPRESS". Nowadays the work on construction of nuclear power plants is under way in nine countries. IV. CORE BUSINESS RESULTS The Company manufactures and sales its products, work and services in the core business lines that are described in Chapter II Section 2 p.17 (GRI 102-2). 1. Project Portfolio Project Implementation in 2017 by Activity Categories Design and Engineering (including Research and Development) year contracts as of the end of the reporting period, mln RUB 4,455 9,931 16,882 Share in the business portfolio, % 55 % 76 % 83 % The principal customers of Company's design and engineering work are companies of engineering, electric power and machine building divisions. The major associate contractors involved in the Company s projects are as follows: NRC "Kurchatov Institute", JSC NPO CNITMASH, FSUE "CNII KM Prometey", JSC "CKBM". 31

32 NPP Equipment Production and Supply year contracts as of the end of the period for manufacturing and supply of equipment for NPP, 3,614 2,956 2,947 mln RUB: Including orders for manufacturing of CPS drives SHEM-3, % of the overall volume of orders for 68 % 72 % 59 % manufacturing of NPP equipment Share in the business portfolio, % 44 % 23 % 14 % The pool of principal customers of the Company with regard to manufacturing and supply of NPP equipment includes companies of engineering and electric power division. The list of supplied raw materials required for NPP equipment manufacturing: pipes, forgings of various steels, heat-resistant wire, set-making parts. Other Services, mln RUB year contracts as of the end of the reporting period 620 Share in the business portfolio, % 3 Orders Placed by Foreign Customers, mln RUB 10-year contracts as of the end of the reporting period 2017 Total, including 2,775 non-cis states 2,285 CIS states 490 Share in the business portfolio, % 14 The aforementioned minor share of orders placed by foreign customers is explained by the fact that the major scope of work for the benefit of foreign customers is performed through the industry integrator companies Design and Engineering 2.1. VVER reactor plants Implementation of the planned design and engineering work on reactor plants for construction of: Bushehr-2 NPP Units 2, 3; Kudankulam NPP Units 3, 4; Hanhikivi NPP Unit 1; Paks II NPP Units 5, 6: El Dabaa NPP Units 1, 2; Rooppur NPP Units 1, 2; Akkuyu NPP; Kursk NPP-2. Participation in construction, installation and commissioning work of power units: Tianwan NPP Units 3, 4; Belarusian NPP Units 1, 2; Novovoronezh NPP-2 Unit 2; Leningrad NPP-2 Units 1, 2; Rostov NPP Unit 4. Extension of Operating VVER NPP Lifetime

33 Any work related to extension of any operating NPP lifetime is performed in two stages. Stage 1. Assessment of technical and economic feasibility and safety of any work aimed at extending NPP Unit lifetime. Stage 2. Preparing a NPP Unit for lifetime extension. Deliverables made available upon any work with regard to extension of the operating life shall be delivered by the operator to the regulatory authority for licensing purposes and approval of further operation of the nuclear power plant unit in excess of its initial operating life. In 2017 the Company performed the following work related to extension of the operating life of VVER-1000 NPPs: Unit 6 of Kozloduy NPP: the second stage of PLEX work was continued; Unit 2 of Kalinin NPP: the operating license was obtained for Unit operation till 2038; Unit 2 of Balakovo NPP: the operating license was obtained for Unit operation till 2043; Unit 3 of Balakovo NPP: the second stage of PLEX work was completed; Unit 1 of Balakovo NPP - up to 60 years: a complex of tests and calculations was performed. In 2017 the Company performed the following work related to extension of the operating life of VVER-440 NPPs: Unit 3 of Novovoronezh NPP: studies of mechanical property degradation after 45-year operation were carried out; Unit 4 of Novovoronezh NPP - up to 60 years: the limited operating license was obtained for Unit operation till 2020; Unit 1 of Kola NPP - up to 60 years: the second stage of PLEX work was completed; Unit 2 of Kola NPP - up to 60 years: the second stage of PLEX work; a complex of calculations was developed; Unit 2 of Armenian NPP - up to 40 years: the second stage of PLEX work; In 2018 the Company plans to implement further the RP-related design and engineering work for construction of the above-mentioned NPPs abroad and in Russia, including obtaining the construction license for Akkuyu NPP Units, carrying out the power uprating work for Unit 5 of Kozloduy NPP and Unit 4 of Balakovo NPP. In 2018 the Company plans the following work on extension of the operating life of VVER-1000 NPPs: Unit 3 of Balakovo NPP: obtaining the license for PLEX; Unit 6 of Kozloduy NPP: supply of a set of PLEX justification documents. Obtaining the PLEX license for Unit 6 of Kozloduy NPP in In 2018 the Company plans the following work on extension of the operating life of VVER-440 NPPs: Unit 4 of Novovoronezh NPP - up to 60 years: obtaining the exclusive operating license for Unit operation till 2032; Unit 1 of Kola NPP - up to 60 years: obtaining the operating license for Unit operation till 2033; 33

34 Unit 2 of Kola NPP - up to 60 years: completion of the second stage of PLEX work; Unit 2 of Armenian NPP - up to 40 years: completion of the second stage of PLEX work Heavy Liquid Metal Reactors The development work on advanced reactor plants was carried out Equipment for sodium-cooled fast reactor plants Design and engineering: Development of new design solutions and updating of detailed design documentation related to BN-1200 steam generator. The aforesaid work was performed in cooperation with the following companies: JSC ATOMPROEKT (Unit designer); JSC State Research Center of the Russian Federation, Institute of Physics and Power Engineering (scientific supervisor); JSC OKBM named after Afrikantov (General designer of the reactor plant). 3. Research and Development The list of the R&D work to be performed is given in the Annual Report 2016 of JSC OKB "GIDROPRESS" (p. 52). The principal customers of the Company's R&D in 2017 were: NRC "Kurchatov Institute" (Scientific Supervisor of the VVER reactor plant project); Russian State Concern for Production of Electric and Thermal Energy at Nuclear Power Plants JSC "Rosenergoatom" VVER reactor plants In 2017 the Company completed a number of researches, including the following topics: "Elaboration and safety justification of nuclear fuel application for NPP with VVER-1000 reactors based on the structure of TVS-2 fuel assemblies"; "Development and justification of nuclear fuel use for reactor plants of AES design". The Company performed the work on experimental justification and verification of the chosen engineering solutions in VVER-1200 dummy fuel assembly. Development of a thermohydraulic CFD-model for the primary circuit flow path of AES-2006 reactor plant was completed for full-scale modeling of hydrodynamics and heat mass exchange in the reactor coolant system. Computational modeling of heat mass exchange in a heated rod bundle cooled by water with supercritical parameters was implemented in the framework of the Coordinated Research Project "Research of Thermohydraulic Processes Relevant to Supercritical Water Reactors". The R&D work was continued within the framework of the investment project "Development of the experiment-calculated complex of JSC OKB "GIDROPRESS" to justify reactor plant designs". The work on verification, cross-verification and validation of thermal hydraulic codes developed by JSC OKB "GIDROPRESS" and other companies was continued. To ensure successful commissioning of LNPP-2 Unit 1, Rostov NPP Unit 4, Tianwan NPP Units 3 and 4 in China and Kudankulam NPP Unit 2 in India specialists of the Company carried out a complex of experimental work using a commissioning measurement system at the aforesaid units. 34

35 In 2018 the R&D work will be continued within the framework of the investment project "Development of the experiment-calculated complex of JSC OKB "GIDROPRESS" to justify reactor plant designs", as well as the work on verification, cross-verification and validation of thermal hydraulic codes. A complex of work is planned to be performed using the commissioning measurement system in the course of commissioning of Unit 1 of Belarusian NPP and Unit 2 of NVNPP-2. In 2018 a set of tests will be performed for the work on the topic "Development and justification of the safe use of nuclear fuel for NPPs with VVER-440 reactors: Introduction of Generation II optimized water-to-uranium ratio fuel assemblies for VVER-440 at NPP" Heavy Liquid Metal Reactors The R&D work on advanced reactor plants was carried out Steam Generators for Sodium Cooled Fast Neutron Reactor Plants A computational study of automatic protection system components of BN-800 steam generator was performed to justify operability of the collector circuit with sodium bleeding to a buffer tank. In the framework of the performed study a hydraulic calculation procedure was developed for the SG automatic protection system. New engineering solutions were developed for BN-1200M RP. In 2017 the R&D programme was being elaborated for the steam generator of BN-1200M reactor plant, and considering the R&D programme proposals (related to the steam generator) were made to the detailed Road Map regarding the BN-1200M RP power unit project. In 2017 the steam generator detailed design was modified for BN-1200 reactor plant. The steam generator detailed design documentation was being updated for BN RP on the basis of comments of the customer (JSC OKBM named after Afrikantov). 4. Designer Supervision 4.1. Designer Supervision of VVER Reactor Plants As a part of designer supervision JSC OKB "GIDROPRESS" provided the following work: The Company rendered consulting services in relation to operation of NPP Units and ensured technical support during repair of various systems and equipment; The Company ensured functioning of an emergency management team for NPPs in the Technical Support Center of JSC OKB "GIDROPRESS". In reporting 2017 year as per the design and with designer supervision of OKB GIDROPRESS work on construction and commissioning of respective Units was implemented: VVER-1200 NPP: Novovoronezh NPP-2, Units 1, 2; Leningrad NPP-2, Units 1, 2; Belarusian NPP, Units 1, 2. VVER-1000 NPP: Rostov NPP, Unit 4 Tianwan NPP, Units 3, 4, China; Kudankulam NPP, Unit 2, India. The designer supervision of operation of the following VVER Units was carried out: Balakovo NPP Units 1-4, Kalinin NPP Units 1-4, Rostov NPP Units 1-3, Novovoronezh NPP Units 3-6, Kola NPP Units 1-4, Tianwan NPP Units 1-2, Kozloduy NPP Units 5-6, Temelin NPP Units 1-2, Bushehr NPP Units 1, Kudankulam NPP Unit 1. 35

36 The designer supervision of manufacturing the equipment was implemented for Novovoronezh NPP Unit 4, Kola NPP Units 1 and 2, Kudankulam NPP Units 3 and 4, Leningrad NPP-2 Units 1, 2, Belarusian NPP 1 and 2, Kursk NPP-2. Tasks of 2018 RP General designer supervision of obtaining the operating license for Unit 2 of Novovoronezh NPP-2; Designer supervision of o commissioning tests at Leningrad NPP-2 Unit 1, Novovoronezh NPP-2 Unit 2 and Tianwan NPP Unit 4; o commercial operation commissioning of Rostov NPP Unit 4 and Leningrad NPP-2 Unit 1; o operation of Units 3, 4 of Tianwan NPP; o installation of RP equipment at Unit 2 of Leningrad NPP-2 and Unit 2 of Belarusian NPP. Development of reactor plant lifetime management programmes for Balakovo NPP Units 1-4, Kalinin NPP Unit 1-4, Rostov NPP Unit 1-4 and Novovoronezh NPP Unit 5,6; Designer supervision of manufacturing the equipment for Unit 1 and 2 of Rooppur NPP, Units 3 and 4 of Kudankulam NPP, Units 1 and 2 of Akkuyu NPP, Units 1 and 2 of Kursk NPP Designer Supervision of BN Reactor Plant Equipment: Designer supervision of operation, maintenance and repair of PGN-200M steam generator and electric heating system components of Beloyarsk NPP Unit 3; Designer supervision of operation, maintenance and repair of PGN-272 steam generator, SG automatic protection system and electric heating system components of Beloyarsk NPP Unit 4. In 2018 the designer supervision of steam generator operation will be provided for Beloyarsk NPP Units 3 and Development of Design Technologies In 2017 the Company completed work on the topic "Assurance of the Russian Party's work in the ATLAS Project of OECD NEA to promote the VVER technology in the international market: organizing and performing the computational simulation of tests at the ATLAS facility and validation of the software being used in safety analysis of VVER reactor plants". Participation in international benchmarks in the framework of the ATLAS Project of NEA/OECD is aimed at practical use and correspond to state-of-the-art approaches to development of the software, KORSAR and SOCRAT codes that are used for calculation of water-cooled reactor plants (VVER). Work on validity extension of the certificate of PUCHOK-1000 code developed in JSC OKB "GIDROPRESS" was completed. The code is used in design justification of VVER-type reactors. Implementation of two innovative projects focused on the development of design and reactor safety analysis methods with employment of state-of-the-art computer codes and CFD simulation techniques was continued in 2017: 1. "Development of a system coupled computer code to support designing and safety analysis of state-of-the-art and innovative reactor designs"; 2. "Introduction of CFD methods to support design engineering and justification of reactor plants''. These projects were aimed to reduce the reactor design period and at the same time ensure compliance with licensing requirements applicable to any contractual work performed abroad. The period of implementation - from 2016 to

37 For the BN-800 a spatial hydraulic model of the automatic protection system was created, necessary parameters of the model were determined and a series of calculations was performed. The Company developed and implemented a system which is meant to prevent design errors. Data on development of information technologies is also given in Section III. Company s development strategy 7. Investments and Upgrade Introduction of State-ofthe-Art Automation Techniques Elimination of nonconformities (including respective interaction with third party companies) is ensured in view of the requirements of "Standard Regulations for Management of Nonconformities in Construction of NPPs" approved by ROSATOM s Order No.1/1116-P of December 23, NPP Equipment Production and Supply Commercial production of specific high-tech NPP equipment at its own manufacturing facilities is one of the principal lines of business of JSC OKB GIDROPRESS. The modernized step electromagnetic CPS drive SHEM-3 for VVER- 1000/1200/TOI reactor plants is the principal product manufactured commercially by the Company. The Company continuously improves and upgrades its design for higher safety and competitiveness. Since 2010 CPS drives SHEM-3 have been produced for newly commissioned NPP with a modernized housing. NPP Equipment Manufactured CPS drive SHEM-3: pcs.; pcs.; pcs. In 2017 the Company manufactured 190 CPS drives SHEM-3 for o Unit 2 of Leningrad NPP pcs.; o Unit 1 of Belarusian NPP 55 pcs. Components of CPS drives SHEM-3: pcs. of LPI-M and PPI indicators; 12 pcs. of extension shafts; 75 pcs. of housings pcs. of PPI indicators pcs. of PPI indicators. NFMC/NTLMC housings and NFMC/ICID fittings: pcs pcs pcs. In 2017 the Company fulfilled its production plan for NPP equipment in full. In the reporting 2017 the number of CPS drives SHEM-3 and their components manufactured by the Company corresponded to Customer's needs as to the supply scope and time. Other products manufactured and supplied: sets of hold-down device, 2 sets of elastic tubular component, 4 sets of drive sealing units. 37

38 sets of hold-down device, 6 sets of elastic tubular component, 1 set of isolation device, 4 sets of isolation device spare parts sets of hold-down device, 6 sets of elastic tubular component, 1 set of isolation device, 1 set of isolation device spare parts. In 2017 the Company produced pcs. of expanded graphite gaskets for equipment sealing at Russian and foreign NPPs. The Company s manufacturing facilities are used to produce test benches, models, units and items for testing purposes as well as dedicated commissioning measurement and in-service inspection systems designed by JSC OKB ''GIDROPRESS". The automated residual life monitoring system (SAKOR) was supplied to both operating Units and those being under construction: Unit 3 of Balakovo NPP; Unit 2 of Belarusian NPP. The SAKOR was installed and adjusted under the Company s supervision at the following Units: Unit 4 of Rostov NPP; Unit 1 of Leningrad NPP-2; Unit 2 of Balakovo NPP. In 2017 the CMS complexes were manufactured and supplied for commissioning LNPP-2 Unit 1 and Rostov NPP Unit 4. These complexes were installed, adjusted and put into operation at the aforesaid Units. Aleksey Likhachev, ROSATOM State Corporation Director General: "Only science is able to open the door of the nuclear industry future. Therefore we shall change our attitude to science and give priority to the search for new engineering solutions..." Research and Intellectual Property 7.1. Research In 2017 the Company s employees published 19 academic papers. These academic papers contain the results of work which was performed in relation to a wide range of issues related to NPP reactor design. Academic and research papers published, including R&D topics (pcs.) Total R&D Total R&D Total R&D Participation in scientific conferences, including participation with presented papers (pcs.) Participation Participation with papers Participation Participation with papers Participation Participation with papers In 2017 the Company continued its work on a full-time postgraduate program on such topics as Nuclear Power Plants (including design, operation and decommissioning) and Nuclear reactor engineering, machinery, plants and technology of materials in nuclear industry. Number of theses defended, pcs

39 Doctor Candidate Doctor Candidate Doctor Candidate Number of postgraduates trained by a full-time postgraduate program, person Number of postgraduates working in the Company, person OKB GIDROPRESS as the General designer of VVER-type reactors has been hosting every two years the International Scientific and Technical Conference "Safety Assurance of NPP with VVER" for over 15 years now. This event allows one to review and summarize experience gained recently in design, operation and safety assurance and put emphasis on the most challenging problems the industry faces. The results of R&D, experimental and design work presented in the conference papers make an important contribution to the choice and justification of engineering solutions, which ensure VVER safety within the frameworks of programmes for modernization and lifetime extension of operating nuclear power plants and those under construction in Russia and other countries. In May 2017 the tenth anniversary conference was held in JSC OKB "GIDROPRESS" Intellectual Property Identification of protectable intellectual property obtained as a result of the Company s business and registration of related rights as provided by applicable law of the Russian Federation is one of the top priority lines of business carried out by OKB GIDROPRESS. JCS OKB GIDROPRESS has accumulated a considerable research, design and manufacturing potential which is based on invaluable experience gained by many generations of researchers, designers and engineers involved in the design work which covers reactors of VVER-type successfully operated both at Russian and foreign NPPs. As part of international patent work the following applications were filed by the Company in 2017 under the Patent Cooperation Treaty: Type and description of intellectual property (in Russian) Electric heater device for decontamination bath Modular thermal insulation structure for pipelines Application or patent details (date and ID) and expected date of issue of the patent No. РСТ/RU/2017/000797, (priority date ), No. РСТ/RU/2017/000796, (priority date ), Country of filing Expected to be filed in 31 states Expected to be filed in 31 states 39

40 Besides, in 2017 the Company continued abroad to take legal protection measures for 4 inventions: Quantity of filed Application or patent details applications to the Type and description of (date and ID) and expected national patent intellectual property (in Russian) date of issue of the patent offices of other countries Horizontal steam generator for a nuclear power plant and its assembly method Steam generator with a horizontal bundle of heat exchanging tubes and its assembly method Steam generator coolant collector with U-shaped tubes in a horizontal heat exchanging bundle and its fabrication method Horizontal steam generator for a water-cooled water-moderated power reactor and reactor plant equipped with the mentioned steam generator No. РСТ/RU2015/000788, (priority date ), No. РСТ/RU2015/000786, (priority date ), No. РСТ/RU2015/000787, (priority date ), No. РСТ/RU2015/000785, (priority date ), Filing of 123 applications is ensured In 2017 JSC OKB "GIDROPRESS" received 4 Russian invention patents and 2 Russian useful model patents. In 2017 one application for Russian invention patent, one application for Russian useful model patent and five applications for state registration of computer software were filed with the Federal Institute of Industrial Property. As of December 31, 2017 the IP portfolio of JSC OKB GIDROPRESS included: trademark; 60 invention patents issued in Russia; 32 useful model patents issued in Russia; 53 computer codes. 6 intellectual property items were taken onto the Company s books in 2017 as intangible assets with the aggregate initial value thereof amounting to RUB K. 40

41 Intellectual property result management system in JSC OKB "GIDROPRESS" (including regulatory documents); Scheme of business processes of intellectual property result management Identification and assurance of legal protection Intellectual property right accounting Intellectual property right management Identification of intellectual activity results Preparation for commercial use of technologies (in terms of intellectual property right management) Selection of types and forms of legal protection Corporate accounting of intellectual property rights Preparation of agreements on trade-related aspects of intellectual property rights of the Company Assurance of legal protection of intellectual activity results Preparation of agreements on trade-related aspects of intellectual property rights of third parties Intellectual property protection activities JSC OKB GIDROPRESS is the General designer of reactor plants with VVER and heavy liquid metal reactors. Intellectual property results protected by the Company's Russian patents are implemented in the detailed designs developed by JSC OKB "GIDROPRESS". As of December 31, 2017 no license agreements were concluded with JSC OKB "GIDROPRESS" to give the right of use of intellectual activity results to manufacturers. 8. Introduction of the ROSATOM Production System To increase the efficiency of production processes and their transparency and to obtain economic benefits the Company entered in 2017 the circuit of development of the ROSATOM Production System in the industry. Basic results of 2017 JSC OKB "GIDROPRESS" took part in the industry contest of RPS projects and improvement suggestions. For the contest the Company presented two RPS projects and one improvement suggestion. One of the RPS projects, i.e. "Packing section", became the contest finalist. Results of RPS-flow: "CPS drive SHEM-3" No. Indicator and unit of measure Values Reference (Beginning of 2017) Target (End of 2017) 1 Lead time from production startup to packing (a set of drives of 124 pcs.), business days Achieved (actual)

42 2 Work in progress from production start-up to packing, drive sets 3 Number of operator error-caused non-conformance reports, pcs. 4 Labour Efficiency, mln RUB/person 5 Downtime of hot running-in test benches due to unplanned outage (failure), hours In "CPS drive SHEM-3" RPS-flow the Company reached the quantitative indicators in full and 93 % of the qualitative criteria. Results of RPS-flow: "RP detailed design development" No. Indicator and unit of measure Values 1 Reduction of the lead time of RP detailed design development, months Reference (Beginning of 2017) Target (End of 2017) Achieved (actual) In 2017 Stages I and II of the RPS project were successfully implemented. In "RP detailed design development" RPS-flow the Company reached both the quantitative indicators and qualitative criteria in full. In 2018 the Company plans to continue the work (Stage III). Implementation of this project will allow reaching the new level of work planning and management related to RP detailed design development. During the 2017 period 87 % of the Company's managers carried out their personal RPS-projects. Based on the results of the peer review of quality of RPS deployment in 2017 JSC OKB "GIDROPRESS" was given a quality estimate of 83,5 %. In August 2017 the Company's personnel was estimated with respect to involvement in RPS activities. 165 respondents took part in the estimation. They included: 8 top managers; 52 mid-level managers; 62 specialists, officer workers and researchers; 43 workers. Based on the research results the RPS involvement level amounted to 63 %. In the employees' opinion the RPS activities resulted mainly in reduction of the lead time, increase in efficiency of processes and of the Company as a whole (increase in the volume of manufactured products and in the information awareness of employees). In 2017 the Company's employees received training on the basic courses of ROSATOM Production System. 42

43 V. MANAGEMENT SYSTEM 1. Corporate Governance Management Structure (GRI ) Pursuant to Article 11 of the Company s Articles of Association its management bodies shall be represented by the following: General Meeting of the Company s shareholders; Board of Directors; Director General (sole executive authority). Pursuant to Article of the Company s Articles of Association this annual report shall be approved by the Company s Board of Directors (GRI ). Details of Members of the Company s Board of Directors (GRI ): The Company s Board of Directors as of June 14, 2017 with members thereof elected by Resolution No.01/16-GOSA of June 28, 2016 of the General Meeting of Shareholders of Joint Stock Company Experimental and Design Organization GIDROPRESS awarded the Order of the Red Banner of Labour and CZSR Order of Labour is as follows: Andrey V. Nikipelov, Chairman of the Board of Directors and CEO of JSC Atomenergomash; Victor V. Dzhangobegov, member of the Board of Directors and Director General of JSC OKB GIDROPRESS ; Vladimir P. Razin, member of the Board of Directors and Deputy CEO for Operations of JSC Atomenergomash; Vladimir A. Piminov, member of the Board of Directors and Designer General of JSC OKB GIDROPRESS ; Ksenia A. Sukhotina, member of the Board of Directors and First Deputy CEO for Strategy and Organizational Development of JSC Atomenergomash. As per Resolution No.02/17-GOSA of June 14, 2017 of the General Meeting of Shareholders of Joint Stock Company Experimental and Design Organization GIDROPRESS awarded the Order of the Red Banner of Labour and CZSR Order of Labour no changes were made in the Company s Board of Directors. (GRI ) Chairman of the Board of Directors Place of employment and positions in Andrey V. Nikipelov CEO of JSC Atomenergomash Date of birth: March 7, Education: higher, Lomonosov Moscow State University (1992). Major discipline: Political Economy. the last five years JSC TVEL: Senior Vice-President for Economy, Finance and Development State Corporation ROSATOM: to date Member of the Management Board State Corporation ROSATOM: to date Head of Division JSC Atomenergomash: to date CEO Share in the issuer s authorized capital in %: 0. Ordinary shares in the issuer s authorized capital held by the member of the Board of Directors in %: 0. 43

44 Member of the Board of Directors 44 Victor V. Dzhangobegov Director General of JSC OKB GIDROPRESS Date of birth: October 04, 1956 Education: higher, Moscow Engineering Physics Institute (MEPhI), Obninsk branch (1980). Major discipline: Nuclear Power Plants and facilities. Vladimir P. Razin First Deputy CEO for Business Operations of JSC Atomenergomash Date of birth: October 12, Education: higher, Bauman Moscow State Technical University awarded the Order of Lenin and the Order of the Red Banner of Labour (1979). Major discipline: Power Plants and facilities. Vladimir A. Piminov Designer General of JSC OKB The member of the Board of Directors held no shares in the Company in the reporting period. A.V. Nikipelov made no transactions providing for acquisition or disposal of the Company s shares. Place of employment and positions in the last five years JSC OKB GIDROPRESS : to date Planning Engineer; Head of Procurement Department; Deputy Head of Operations; Deputy Chief Engineer, Head of Operations; Chief Engineer Head of Division; Acting Director - Designer General; Director General Share in the issuer s authorized capital in %: 0. Ordinary shares in the issuer s authorized capital held by the member of the Board of Directors in %: 0. The member of the Board of Directors held no shares in the Company in the reporting period. V.V. Dzhangobegov made no transactions providing for acquisition or disposal of the Company s shares. OJSC Energopromservice: Director for Business Development JSC Atomenergomash: Director for Manufacturing Unit Management JSC Atomenergomash: Deputy CEO for Operations JSC Atomenergomash: Deputy CEO for Business Operations JSC Atomenergomash: to date First Deputy CEO for Business Operations Share in the issuer s authorized capital in %: 0. Ordinary shares in the issuer s authorized capital held by the member of the Board of Directors in %: 0. The member of the Board of Directors held no shares in the Company in the reporting period. V.P. Razin made no transactions providing for acquisition or disposal of the Company s shares. JSC OKB GIDROPRESS : to date Design Engineer of category 1, Deputy Head of Section, Head of Section, Designer General

45 "GIDROPRESS" Date of birth: August 07, Education: higher, graduated from the Bauman Moscow State Technical University in Major discipline: Process System Design. Ksenia A. Sukhotina CEO of JSC OTEK Date of birth: 22, 1971 Education: higher, Lomonosov Moscow State University (1993). Major discipline: Sociology June Share in the issuer s authorized capital in %: 0. Ordinary shares in the issuer s authorized capital held by the member of the Board of Directors in %: 0. The member of the Board of Directors held no shares in the Company in the reporting period. V.A. Piminov made no transactions providing for acquisition or disposal of the Company s shares. JSC Atomenergomash: Director for Human Resources, Deputy CEO for Human Resources and Organizational Development, First Deputy CEO for Strategy and Organizational Development to date CEO of JSC OTEK Share in the issuer s authorized capital in %: 0. Ordinary shares in the issuer s authorized capital held by the member of the Board of Directors in %: 0. The aforesaid member of the Board of Directors held no shares in the Company in the reporting period. K.A. Sukhotina made no transactions providing for acquisition or disposal of the Company s shares. In 2017 members of the Company s Board of Directors failed to approve any transaction involving the Company s shares. Sole Executive Authority In accordance with Resolution of the extraordinary General Meeting of Shareholders of Joint Stock Company Experimental and Design Organization GIDROPRESS awarded the Order of the Red Banner of Labour and CZSR Order of Labour" (Minutes No.3 of December 21, 2012) the following individual held until December 21, 2017 the position of the Company s Sole Executive Authority: Victor V. Dzhangobegov. By the Resolution of the extraordinary General Meeting of Shareholders of Joint Stock Company Experimental and Design Organization GIDROPRESS awarded the Order of the Red Banner of Labour and CZSR Order of Labour (Minutes No.03/17-VOSA of December 21, 2017) the following individual was elected on December 22, 2017 for 3 (three) year period to the office of the Company s Director General (GRI ): 45

46 Victor V. Dzhangobegov Director General of JSC OKB GIDROPRESS JSC OKB GIDROPRESS : to date Planning Engineer; Head of Procurement Department; Deputy Head of Operations; Deputy Chief Engineer, Head of Operations; Chief Engineer Head of Division; Acting Director - Designer General; Director General Date of birth: October 04, 1956 Education: higher, Moscow Engineering Physics Institute (MEPhI), Obninsk branch (1980). Major discipline: Nuclear Power Plants and facilities. Share in the issuer s authorized capital in %: 0. Ordinary shares in the issuer s authorized capital held by the member of the Board of Directors in %: 0. The member of the Board of Directors held no shares in the Company in the reporting period. V.V.Dzhangobegov made no transactions providing for acquisition or disposal of the Company s shares. Principal Provisions of the Company s Policy for Remuneration and Reimbursement of Expenses. Procedure for Payment and Determination of the Amount of Remuneration or Reimbursement Payable to Members of the Company s Executive Authorities in 2017 (GRI ) The amount of all types of remuneration, including the salary payable to the members of the Company's Board of Directors, being its employees and those on offhour work, bonuses, commission, fees paid for participation in work of the Board of Directors and other types of emoluments which were paid by the Joint Stock Company in the reporting 2017 year was RUB 6 646, Neither compensation payments nor resolutions were made on reimbursement of expenses related to fulfilling functions by the members of the Company's Board of Directors, reimbursed by the Company during the reporting 2017 year. The Company s Articles of Association do not provide for availability of an executive board. The amount of emolument of the Sole Executive Authority (Director General) of the Company is defined in the labour contract in compliance with law of the Russian Federation and the Unified Remuneration Scheme used in ROSATOM companies and takes into account the efficiency of attaining the key performance indicators that are annually determined for the Director General (GRI ). Compliance with the Corporate Code of Conduct (GRI ) The Corporate Code of Conduct was not approved by the Company. Respective provisions of the Corporate Code of Conduct pursuant to recommendations made available in Letter No.06-52/2463 of April 10, 2014 of the Bank of Russia are adhered to by the Company in view of the specific legal status of ROSATOM provided by the existing regulations of the Russian Federation which ensure centralized management of the companies operating in the nuclear power industry and are stated in a number of local standards to provide a shareholder with all means of participation in Company's management and getting acquainted with Company's activities. Report on Distribution of Declared and Accrued Dividends on the Company s Shares 46

47 By Resolution No.02/17 of June 14, 2017 of the Annual General Meeting of JSC OKB "GIDROPRESS" the Company resolved to pay dividends based on the results of The total amount of dividends accrued on the Company's shares is 3 647, 884, (three billion six hundred forty seven million eight hundred eighty four thousand fifty seven) roubles 20 kopecks. The total amount of dividends paid in fact on the Company's shares of this category (type) as of December 31, 2017: 3 647, 884, (three billion six hundred forty seven million eight hundred eighty four thousand fifty seven) roubles 20 kopecks. Dividends of 2016 were paid in full. No dividends were accrued or paid upon expiry of the first quarter, half year or nine months of the reporting year. Major Transactions effected by the Company in the Reporting Year The Company failed to make any transactions in the reporting year which pursuant to the Federal Law On Joint Stock Companies are deemed major transactions. Year Interested Party Transactions effected by the Company in the Reporting In the period from January 01, 2017 to January 11, 2017 the Company made no transactions which were deemed Interested Party Transactions. On January 11, 2017 the Company has registered a new revision of the Articles of Association stating that Article XI of Federal Law No.208-FZ dated December 19, 1995 "On Joint Stock Companies" is not applicable to the Company. 2. Quality Management The Company seeks to issue high quality warranties and ensure reliability, safety and competitiveness of its products and services as well as meet the requirements and expectations of its end users or customers to the fullest extent possible, including Russian and international safety standards applicable to nuclear power facilities. The reliability, durability and fail safe operation of the equipment designed and supplied by the Company and high quality of design, engineering, research and development and experimental work performed by the Company is ensured through its certified quality management system. In 2017 JSC OKB "GIDROPRESS" received the Certificate of Compliance of the Company s Quality Management System with ISO 9001:2015 international standard No QM15 of April 10, 2017 issued by the certifying authority DQS GmbH. Scope of certificate application: design and engineering of nuclear reactor plants and related equipment manufacturing. The Company s priority goals consist in ensuring nuclear and radiation safety, competitiveness, quality and reliability of nuclear reactor plants designed as well as related equipment either developed or manufactured by the Company. In 2017 the Company carried out its business pursuant to the licenses issued by the Federal Environmental, Industrial and Nuclear Supervision Service of Russia (Rostechnadzor), they are presented in Section "Our Company" at the official web-site ( The high quality of manufactured products is ensured by taking measures aimed at developing and updating applicable corporate standards and guidelines governing any respective work and assigning responsible executives. 47

48 Effectiveness 2 of the quality management system The quality management system analysis and assessment are performed as part of internal and external audits. In the reporting year 2017 the following audits were performed: - 1 internal audit; - 11 external audits of the Company's quality management system by its customers (JSC ASE EC, Fennovoima Oy (Finland), JSC Atomenergomash, JSC Atomenergoproekt, MVM Paks II (Hungary), JSC ATOMPROEKT, RAOS Project Oy (Finland), MVM Paks II (Hungary), JSC TVEL; - re-certification audit by DQS GmbH. Upon both internal and external audits performed in 2017 generally a high degree of compliance of the Company s quality management system with applicable rules and regulations and customers requirements has been acknowledged. Respective nonconformities and shortcomings have promptly been or are being eliminated and remedied. The Company is continuously involved in the work providing for standardization both at the corporate level and at the level of ROSATOM. The following activities are scheduled for 2018 to support the Company s business: receipt of a Rostechnadzor's license for designing of nuclear power plant equipment, related to design development of fuel assemblies and rod cluster control assemblies, burnable absorber rod bundles; elaboration of quality assurance program in manufacturing CPS drives SHEM- 3 for Akkuyu NPP. No single nonconformity with applicable rules and regulations having regard to information and labels with product and service properties or impact these may have in terms of health and safety has been identified. No licenses entitling the Company to carry out its business in the field of nuclear power use have been revoked in the reporting period. Currently, there is no reasonable basis for any of the aforesaid to occur (GRI 416-1, GRI 416-2). Safety Culture A Safety Culture Program was developed and implemented to maintain and raise the high level of nuclear safety culture in the Company. Implementation of a set of measures on assurance of high quality of the output products (services to be rendered, work to be executed), which are aimed at assurance of safe operation of nuclear power facilities in the future, provide a basis for safety culture in JSC OKB "GIDROPRESS" as a company rendering services of the operating organization responsible for designing (development of RP), engineering and manufacture of equipment etc. To make safety culture principles a reality the Company elaborates and approves annually the Plan of implementation of Safety Culture Program. In the period from 2015 to 2017 the Company organized 39 events to implement its Safety Culture Program. In representatives of OKB "GIDROPRESS" took part in 10 meetings of the nuclear safety culture working group. For implementation of the Safety Culture Program in 2018 the Company plans 30 events related to: Improvement of regulatory documentation and management system in JSC OKB "GIDROPRESS" with respect to the safety culture; 2 Effectiveness means an extent to which planned activities are realized and planned results achieved (ISO 9000). 48

49 Promotion of safety culture principles among personnel; Coordination of safety culture-related activity and its introduction into everyday life of the enterprise; Monitoring of the safety culture status; Assessment (analysis) of the safety culture level. 3. Procurement Management JSC OKB GIDROPRESS carries out its procurement activities pursuant to the General Industry-Specific Procurement Regulations approved by ROSATOM and other regulations of ROSATOM issued in addition thereto or rules and guidelines or resolutions approved by ROSATOM s executive boards and enacted under the Procurement Regulations and applicable to all companies operating in the nuclear power industry. For the purpose of the higher transparency and publicity of the Company s procurement business the Company increases further the share of open competitive purchase procedures in strict compliance with the Procurement Regulations. These procedures are held online through the following e-commerce marketplaces: JSC Economy Development Center ( OJSC United Electronic Market Place ( LLC Fabrikant.ru ( These were selected by the Department for Methodology and Procurement Organization of ROSATOM for procurement of products and services by the companies operating in the nuclear power industry. The Annual Procurement Program of the Company and information related to tenders held by the same, applications filed and accepted or rejected as well as respective resolutions adopted before March 2016 were posted to and ROSATOM s corporate web-site Pursuant to Corporate Order No.146 of March 25, 2016 On Approval of the Procurement Regulations Federal Law No.223-FZ On Procurement of Products, Work and Services by Specific Legal Entities of July 18, 2011 shall not apply to JSC OKB GIDROPRESS. In this connection in 2017 the Annual Procurement Program of the Company and information related to tenders held by the same, applications filed and accepted or rejected as well as respective resolutions are posted to ROSATOM s website at The Company continues to seek reduction of the initial (maximum) contract prices by employing dedicated price regulating tools (re-bidding and pre-contractual negotiations with suppliers). Pursuant to the Regulations for Restructuring of Non-Core Real Property and Authorized Capital the Company disposed of its non-core real property. 69 category strategies were developed and approved in 2017 by the principal focus areas in relation to materials, equipment, work and services acquired by the Company. The aforesaid strategies allowed the Company to derive economic benefit of RUB 60,588, (Sixty million five hundred eighty eight thousand five hundred fifty five roubles 08 kopecks) VAT included. Procurement (over RUB 100,000), pcs. Method Sole supplier Tenders Total Procurement (over RUB 100,000 mln VAT included) Method

50 Sole supplier , Tenders , ,951.3 Total 1, , ,498.9 In 2018 it is planned to continue to dispose of its non-core real property owned by JSC OKB GIDROPRESS as provided by respective resolution of the Committee for Restructuring of Non-Core and Redundant Property of Companies managed by JSC Atomenergomash (see extract from Minutes No.4/2016/36 of the meeting of the aforesaid Committee held on April 14, 2016). (GRI 102-9, GRI 204-1) Supply chain shall mean efforts used by all the Company s employees engaged in the interaction with suppliers and vendors which are aimed at achieving its targets in terms of the Company s economic performance. The supply chain shall cover the Company in general and all its business operations from assessment of the need for procurement of respective products, work or services to delivery of finished products to either internal or external customers. The supply chain efficiency is ensured by way of performing annual audits of the Company s business units which are meant to identify bottlenecks followed by the development and implementation of a program aimed at eliminating the same. The aforesaid measures taken on a continuous basis allowed the Company to satisfy its needs for products, work and services promptly and in full in 2017 with proper prices, quality and reliability and ensure efficient use of the Company s funds. JSC OKB GIDROPRESS engages a great number of suppliers to satisfy the needs of its customers for respective products, work and services. Any individual or legal entity complying with the requirements listed in the procurement documentation may become the Company s supplier. 4. Finance Management The Company s finance is managed as provided by the industry-specific financial policy of ROSATOM in view of applicable industry practices and tools designed to ensure financial viability and higher efficiency of the Company s business. The Company s finance is managed by information systems of the Corporate Processing Center (CPC) and Distributed Planning and Budgeting System (DPBS). CPC is designed to support financial operations. On the information system platform CPC fulfils the following specific functions to manage: accounts, non-financial transaction payments, intragroup loans, financial transactions and settlements. DPBS is a planning and budgeting system which incorporates a distributed financial and economic planning and performance assessment system as well as consolidation and reporting subsystems. As part of the analytical reporting system dedicated documents and tools were made available to compare target and actual data and a package of analytical reports enabling system users to generate optional reports with the relevant analytical sequences. Dedicated tools are available which can be used to compare intragroup sales as well as specific algorithms and reports designed to consolidate data in the trial balance format broken down by the companies. In 2017 the financial and economic division of the Company was being reorganized followed by a split of functions related to financial resource management and cost control and assessment. As a result, the foregoing measures contributed to the Company s financial stability and liquidity. 50 KIRILL KOMAROV, First Deputy Director General for Corporate Development and International business of ROSATOM:

51 " to ensure reliable and continuous production of electricity we shall further invest into nuclear engineering technologies " 5. Investments and Upgrade The principal objective pursued through investments is to ensure availability of the most efficient options of capital investments aimed at improving competitiveness and economic strength of a company. As such, the Company maintains and continuously improves its manufacturing facilities, so that these comply with the requirements of the quality assurance programs. In its investment business the Company adheres to the Corporate Regulations for Interaction of the Company s Business Units and Investment-Related Functions approved by the Company which describe its investment planning process and procedures designed to monitor compliance and implementation of investment projects. Moreover, the Company carries out its investment business in view of the following: 1. Federal Law No.39-FZ On Investment Activity in the Russian Federation Pursued in the Form of Capital Investments of February 25, 1999; 2. Federal Law No.317-FZ On State Atomic Energy Corporation Rosatom of December 1, 2007; 3. State Program for the Development of the Nuclear Power Industry Complex of the Russian Federation approved by Resolution No of the Russian Government of June 2, 2014; 4. Rosatom s Strategy approved by Resolution No.65 of the Supervisory Board of Rosatom of October 31, 2014; 5. Rosatom s Program for Innovative Development and Retrofitting 2020 (with regard to civil purposes) approved by Resolution No.27 of the Supervisory Board of Rosatom of April 11, 2011; 6. Global Industry Investment Policy of Rosatom and its Affiliates approved by Resolution No.1/402-P of Rosatom of April 16, 2013; 7. Global industry-specific regulations (i.e. guidelines, instructions, rules, standards etc.) developed by Rosatom for the purpose of centralizing management and supervisory functions in the context of development of investment activities in the industry. All investment decisions are made by the Company in strict compliance with the aforesaid documents and approved by the Company s Director General. The internal funds are the principal source of financing the investment projects implemented. In June 2017 successful operation of the industry-wide system of investment portfolio management (Sirius) designed to automatically consolidate data with regard to implementation of projects being part of the portfolio was continued. In 2017 twelve investment projects or groups of investment activities were financed by the Company with the aggregate amount of investments totaling RUB mln. Investments in Innovations Successful implementation of two innovative projects focused on the development of design and reactor safety analysis methods with employment of state-ofthe-art computer codes and CFD simulation techniques represented the key event for the Company within its investment activity in This is aimed to reduce the reactor design period and at the same time ensure compliance with licensing requirements applicable to any contractual work performed abroad. The project "Development of a system coupled computer code to support designing and safety analysis of state-of-the-art and innovative reactor designs" to be 51

52 implemented from 2016 to 2020 with capital spending sights totaling RUB mln was financed in the reporting year 2017 to the amount of RUB 73.9 mln. The KPI of the project were attained in 2017, i.e. "Manufacturing of fuel rod simulators with indirect heating (for studies at the reflooding test facility)" and "Development and software implementation of parallel calculations technique in CFD-module". The project "Introduction of CFD methods to support reactor plant designing and safety analysis" to be implemented in the period of with capital spending sights totaling RUB mln was financed in the reporting year 2017 to the amount of RUB 13.5 mln, as well as contracts to the amount of RUB mln were concluded in 2017 for product delivery or work execution in These are challenging projects as they are meant to ensure design and engineering support of the Company in pursuing the Rosatom s goal, i.e. boosting its share at the international markets. Introduction of State-of-the-Art Automation Techniques In 2017 the Company continued to implement a group of investment activities "Introduction of State-of-the-Art Automation Techniques" with the total amount of financing RUB mln and RUB 18.8 mln financed in the reporting year. The group of investment activities is aimed at efficient maintaining and upgrade of manufacturing facilities of JSC OKB "GIDROPRESS" with regard to computers, i.e. expansion of available computing capacities based on multiprocessor cluster systems designed to ensure calculation justification using CFD codes and upgrade of service hardware systems. This group of investment activities allow it to reduce the time frame required to perform any respective work or render any of the services offered by the Company and thus improve its competitiveness in the long term. Upgrade of the Center for Automated Data Processing and documentation copying facilities developed using CAD systems is meant to ensure higher reliability of processing and printout of design documentation delivered to the customers and improve performance of existing reproducing engineering systems. Upgrade of the corporate computer network shall allow it to create a high-speed and fail-safe communication environment which guarantees proper quality of transfer of top priority engineering traffic (CFD codes: ANSYS CFX, STAR-CMM+ and other computer codes) with ultimate performance. Upgrade of VVER NPP Technical Support Center and related communication equipment shall allow the Company to expand functional capabilities thereof when holding emergency response trainings for dedicated teams responsible for emergency response at the nuclear power plants as well as related expert teams and upon any accident promptly simulate the existing environment and transfer related information using the aforesaid hardware. Investment in Maintenance of Fixed Assets and Development of the Company s Infrastructure and Support Functions In 2017 JSC OKB GIDROPRESS continued to implement the group of investment activities aimed at developing and maintaining its infrastructure. Thus, the Company used its best efforts to upgrade the Company s fixed assets and managed to replace its ventilation and air conditioning equipment, to buy processing equipment and create an automated energy metering system. In 2017 the Company continued to monitor the results of the investment project implemented in 2015 and aimed at modernizing its manufacturing facilities (Retrofitting of Manufacturing Facilities Operated by JSC OKB GIDROPRESS designed to increase output of CPS SHEM-3 drives up to 270 pcs per annum). At year-end the Company satisfied the industry demand in full, thus certifying that the aforesaid investment project had been successfully implemented and its objectives achieved as appropriate. 52

53 6. Risk Management The existing risk management system of the Company is integrated into the general management system and is part of the operations performed by the Company s business units. The system provides for assignment of risk owners, i.e. top managers, each of them being responsible for any specific business area where any respective risk may arise as well as for the development and implementation of a risk management program and further monitoring activities. The existing risk management system has been introduced pursuant to Rosatom s regulatory documents and guidelines having regard to establishment of a corporate risk management system introduced in compliance with GOST R ISO (Risk Management. Principles and guidelines). A list of risks and tools designed to manage the same is not subject to disclosure herein (GRI ). Corruption Risks In 2017 measures to prevent and fight corruption were taken pursuant to the Anticorruption Program approved by the State Atomic Energy Corporation Rosatom for and Anticorruption Program introduced by JSC OKB GIDROPRESS. In order to protect economic interests of JSC OKB "GIDROPRESS" and prevent different corruption practices and conflict of interests in 2017 considerable attention was given to inspections of procurement and contractual activities, as well as checks related to candidates for various positions in JSC OKB "GIDROPRESS" including those related to corruption risks. Total number and percentage of the Company's units assessed for corruption-related risks and significant risks identified (GRI 205-1) To identify specific processes and business operations in the Company's activities where there is the highest risk of corruption offences which may be committed by the Company s employees, the assessment of corruption risks of the processes was organized in JSC OKB "GIDROPRESS" to determine the critical sectors of processes subject to corruption to the maximum extent. The corruption risks were assessed in 17 business units (sections) included into the Company's organizational structure that was 100 % of the total number of the Company's units. As a result, the Map of Corruption Risks in Processes of JSC OKB "GIDROPRESS" was made with description of eventual corruption schemes and measures which could be taken to either prevent or mitigate corruption risks. Communication and training about anti-corruption policy and procedures (GRI 205-2) Information having regard to existing documents and other relevant data related to anti-corruption activities is posted to the corporate web-site of the Company (Anticorruption Section) to ensure transparency of measures which are meant to prevent and fight corruption. In 2017 specific emphasis was put on training the Company s personnel in prevention and fighting corruption as a tool designed to prevent corruption and generate among the Company s employees bias against corruption. Confirmed incidents of corruption and actions taken (GRI 205-3) No corruption offences were recorded in JSC OKB "GIDROPRESS" in Internal Control and Audit The internal control and audit function in JSC OKB "GIDROPRESS" is realized by the Section of internal control and audit, and its experts report directly to the 53

54 Company's Director General. Functional management of the Section's activities is provided by the Internal Audit Directorate of JSC Atomenergomash. The Section carries out its activities considering International Professional Standards for Internal Audit and is governed by principles of independence, objectivity, competence and professional conduct. The key directions of audit activities include expert analytical studies, audit, inspections and analysis of compliance with Procurement Regulations. To carry out these activities a Plan of audits (compiled every half of a year) is drawn that includes information on the inspection period and time scheduled for each audit. When drawing the Plan of audits in accordance with the approved order the Director General and top managers have the right to make up a proposal to carry out an audit. In the reporting year the Section of internal control and audit carried out 8 audit activities. Based on the results of these audits proposals and recommendations were prepared for the respective business units of the Company. An organized control office showed that 94,7 % of the total number of recommended assignments made according to the inspection results were carried out in The results of the Company audits conducted by the State Supervision and Regulatory Authorities with respect to activities of the Section of internal control and audit in 2017 showed that there were no considerable violations or shortcomings. Audit activities of the Section of internal control and audit in 2018 were aimed at providing efficient interaction with the Company's managers and business units to change impression about the internal audit service, thus making it possible to reveal actual problems and timely propose the problem-solving methods. 54

55 VI. SUSTAINABLE DEVELOPMENT Sustainable development shall mean a system of consistent and interrelated measures related to economical, environmental and human resources management activities based on the values and aimed at achieving strategic objectives of the Company subject to compliance with applicable concepts of safety and competitiveness of its products, rational use of resources and development of competences of the Company s personnel. 1. Human Resources Management Any up-to-date and ambitious company, in particular operating in the nuclear power industry, shall consider personnel its core assets. These are highly qualified and motivated employees seeking to generate and efficiently implement innovations. Availability of such human resources shall allow the Company to be confident about its decent future. JSC OKB GIDROPRESS management considers preservation and enhancement of its talent pool and in particular those possessing critical knowledge and skills its primary strategic goal in terms of implementation of the Company's and ROSATOM strategy. For the purpose of achieving its primary goal (ensuring competitiveness and safety of the Company's products) the following shall be the principal objectives to be pursued by OKB GIDROPRESS in the field of human resources management: Ensuring availability of highly qualified employees, including but not limited to, retention thereof; Establishing a proper talent pool training and development system; Efficient training and development of personnel (first and foremost, providing for proper conditions for transferring knowledge and skills to a new generation of the Company's experts); Developing and encouraging creative initiatives of the Company's personnel and meeting their research and development needs; Increase in labour productivity; Higher efficiency of JSC OKB GIDROPRESS in terms of human resources management. The key problems typical of high tech industries which the Company's management faces permanently when addressing the challenges related to human resources management are as follows: Shortage of experts and workers of proper qualification at the labour market; Non-popularity of engineers and technicians; Poor training provided by the relevant higher education establishments; Impact by the Moscow City labour market; Impact by the demographic crisis in the late 1990s and early 2000s. In view of the negative impact of the foregoing factors the Company's management upholds the following position for the purpose of achieving its strategic goals in terms of human resources management: Development of the Company's human resources; Ensuring higher efficiency of its business by way of increasing labour productivity; Intensifying its relations with scholars, students and graduates of the higher education establishments; 55

56 Promoting a positive image of JSC OKB GIDROPRESS at the regional market. The human resources management initiatives are based on the following principal strategies: Compliance with applicable law of the Russian Federation; High level of safety culture; Compliance with the corporate and professional code of ethics; Higher social security. The human resources management system is regulated by the Company's local rules and regulations (15 pcs). The overall personnel costs totaled RUB 2,662 mln in 2017, thus by 4 % higher vs 2016 (RUB 2,570 mln), in 2015 RUB 2,310 mln. The amount of costs per employee in 2017 totaled RUB 1.8 mln, thus by 3 % higher vs 2016 (RUB 1.7 mln), RUB 1.5 mln in However, labour efficiency of the Company's personnel amounted to RUB mln per employee, thus by 18 % higher as compared with 2016 (RUB mln), RUB mln in Principal Personnel Specifications The average headcount of the Company s personnel amounted to 1,480 employees in 2017, where (GRI 102-8): Management (16 %); Experts and officers (60 %); Workers (24 %). The average headcount does not include: employees accepted under labour contracts; women on maternity leave and child rearing leave; part-time employees. Average Headcount of the Company s Personnel by Categories, persons. Category Management Experts and officers Workers Average Headcount of the Company s Personnel by Activity Types, persons. Activity type D&E, R&D Designer Supervision Manufacturing equipment for NPPs These activity type data do not include employees that refer to neither of the aforesaid business areas (for example, managerial personnel and personnel of other ancillary proceedings). The Company s personnel are engaged in a single region at the registered office thereof. The portion of managers hired in the local population is 98 %. (GRI 202-2). Due to the requirement for designer supervision of construction, upgrade and operation of reactor plants designed by JSC OKB GIDROPRESS at least 10 employees are sent annually on a business trip to the sites. 56

57 The Company's employees are engaged under employment contracts. Over 97 % of the Company's employees have made employment contracts which are effective perpetually. Fixed-term employment contracts are primarily needed when engaging and adapting talented full-time students. Headcount by Employment Contracts and Patterns (GRI 102-8) Perpetual Fixed-term Year Overall headcount perso persons % ns % Share of Women in the Overall Number of the Company s Managers in percent Staff Structure classified by Sex and Age, persons (GRI 405-1) under over 50 Manage Expert Worke Manage Experts Worker Manage Experts Workers ment s rs ment s ment Year wo wo wo wo wo wo wo wo wo me me me me me me me me me me me me me me me me me men n n n n n n n n n n n n n n n n n The share of employees graduated from the higher professional educational establishments totals 74.7 %. Recently, as a result of the policy pursued by ROSATOM and activities carried out by the Company's human resources the foregoing share increased. Share of Employees Graduated from Specialized Higher Educational Establishments, % Some employees hold the degree of D.Sc. or Ph.D. in Technical or Economic Sciences. Number of Employees Holding Academic Degrees, persons. Degree Ph.D D.Sc A negligible trend towards reduction of the average age of the Company's employees has been observed in the recent three years. Such a slow renewal is primarily due to low turnover resulting from strict requirements to qualification of engineers and technicians and operating staff, restrictions in employment and large number of the preretirement and retirement age personnel possessing critical knowledge and skills. 57

58 Average Age by Staff Categories, years Staff category Workers Experts Management Overall The Company's management is renewed most considerably primarily due to the requirement of using up-to-date technologies when performing the relevant duties and ensuring high technical and management mobility and increasing restrictive requirements to operating efficiency of all business processes. As a rule, rotation of the Company s managers is supported by its own talent pool. The share of managers appointed from the Company s talent pool is equal to 99 % (GRI 202-2). In 2017 the Company s headcount increased by 4 employees and as of January 1, 2018 totalled 1,544 employees (vs 1,540 employees as of January 1, 2017). In 2017 the Company employed 83 new officers (5.37 %) whereof 14 newcomers just graduated from the higher educational institutions. In general, the Company s headcount increased by 29 young specialists (under 35 years of age) (GRI 401-1). In employees were discharged from employment net of optimization, whereof: 24 employees resigned; 12 officers retired; 10 employees were dismissed for other legal grounds 3 ; Expiration of an employment contract 33 persons. The staff turnover (i.e. employees who resigned or retired) was equal to 5.35 % in Employee Turnover by Age and Sex net of Headcount Optimization (GRI 401-1) Category Number of Number of Number of Turnover, employees Turnover, employees Turnover, employees % dismissed, persons % dismissed, persons % dismissed, persons Overall, Where: Men Women Breach of workplace discipline Under 30, Where: Men Women , Where: Men Women Over 50, Where: Discharge from employment according to Article 83 of the RF Labour Code. Discharge of an employment contract due to circumstances independent of the parties' will (other legal grounds): Death, disablement, RF military draft. 58

59 Category Turnover, % Number of Number of employees Turnover, employees Turnover, dismissed, % dismissed, % persons persons Number of employees dismissed, persons Men Women Breach of workplace discipline No complaints were filed, processed or settled using dedicated corporate procedures in the reporting period in relation to existing labour practices (GRI 103-2). Remuneration The Company s remuneration plan complies with the Corporate Regulations for Remuneration (the Regulations ). The aforesaid Regulations were developed in view of the Unified Remuneration Scheme approved by ROSATOM and introduced for the purpose of harmonizing the existing remuneration plans available in ROSATOM companies. The main purpose of the Unified Remuneration Scheme consists in providing interdependence of remuneration and employee's performance (KPIs). The existing remuneration scheme guarantees suitable wages in the region. The average remuneration of the Company's employee (RUB K) is the highest one in Podolsk and Podolsk District. The average remuneration payable by the Company is 3 times higher than the average remuneration in Russia (RUB K per month in 2017 according to the Federal State Statistics Service) and 8.9 times higher than the poverty level in the town and in the vicinity thereof (RUB K per month) (GRI 202-1). Pursuant to the Industry, nuclear power and research and development sectoral agreement for the Company fixed the minimum monthly salary of the 1st grade worker in the amount of RUB K per month. The average salary payable to any employee shall include the following: Basic salary or pay; Indexation payment; Integrated commercial incentive; Operating bonus; Annual bonus payable upon assessment of KPIs; One-time bonuses payable for specific achievements; Extra pays and charges as provided by applicable labour law. The basic salary is determined depending on the position (grade) held as provided by the remuneration matrix. The integrated commercial incentives are fixed in view of the qualification, performance and potential of any respective employee. Any operating bonus is accrued for achievement of targets set with due regard to the actual scope of work completed and adherence to applicable timeframes. Average Remuneration by Employee Categories, K RUB Staff category Workers Experts Management Average remuneration Correlation of the Company s Performance with Remuneration payable to the Management 59

60 As from 2010 annual bonuses payable to the Company's management are based on KPI assessment. KPIs of the Company s Director General are assessed through KPIs of managers of various levels, thus allowing it to pursue the Company's and ROSATOM strategic objectives. KPIs are set in the relevant KPI maps. The main purposes of KPIs are as follows: Establishing the system of targets and assessment thereof; Ensuring higher efficiency of strategic objective pursue; Setting targets and remuneration of each key employee of the Company, respectively; Ensuring higher efficiency of production collaboration of the Company's personnel in order to achieve the KPIs set; Providing for higher efficiency of the existing management system of the Company. In 2017 KPIs were set for all managers of the Company up to the Head of Section (86 employees). In addition to financial, economic and production KPIs certain targets were set in order to assess performance in terms of sustainable development. In particular, these included the lost time injury frequency rate (LTIFR) compared vs the previous 3-year period, involvement. The procedure used to set and assess KPIs is based on the Unified Industry Regulations (Managing Performance of ROSATOM Employees and its Companies) enacted by the Company. The KPI assessment procedure includes execution of all the relevant reports and holding discussion with the immediate manager as to the achievement of KPIs set and his or her feedback. The Director General's KPI assessment is performed by the CEO of JSC Atomenergomash and KPIs of his Deputies are assessed by the respective functional managers. Number of Managers with KPIs set, persons The amount of bonuses paid for the achievement of KPIs set in 2017 totaled RUB mln. KPI Bonuses, mln RUB As a result of introduction of KPIs the Company's managers became more focused and improved their performance when pursuing primarily strategic objectives set by the Company and ROSATOM due to availability of interrelated targets set for the managers and key employees and incentives applied to the managers with KPIs set as appropriate. Moral Incentives The Company has always applied moral incentives based on government and industry awards and badges as well as regional and municipal awards and incentives enjoyed by the Company. Employees making considerable contributions to the Company s development are entered annually into its Book of Honour. The State Atomic Energy Corporation ROSATOM continues to keep with this tradition by introducing various corporate badges, certificates of merit, acknowledgements and recognition letters. Recently, a four-level system of moral incentives was introduced, in particular: Government and state awards and titles of honour; Corporate badges, certificates of honour, acknowledgements and recognition letters; Municipal awards; 60

61 Certificates of honour and acknowledgements by JSC OKB GIDROPRESS. The prompt incentives which correspond to the employee's performance and his or her title promote involvement in the achievement of corporate objectives and enhance interest in the higher personal performance and that of the Company and ROSATOM. In 2017 employees of JSC OKB "GIDROPRESS" were awarded: State awards Awarded, persons Russian Federation Government Prize in the field of science and engineering 1 Awards of the State Atomic Energy Corporation ROSATOM Awarded, persons Award pin For Contribution to the Nuclear Power Industry 5 of the 2nd class Award pin "Academician I.V. Kurchatov" of the 2nd class 1 Award pin "Academician I.V. Kurchatov" of the 3rd class 1 Award pin "Academician I.V. Kurchatov" of the 4th class 2 Certificate of honour 6 Certificate of acknowledgement 6 Recognition letter 3 Diploma Man of the Year in Rosatom, industry nomination prize 1 winner JSC Atomenergomash Awarded, persons Certificate of honour issued by JSC Atomenergomash 12 Certificate of acknowledgement issued by JSC Atomenergomash 15 The Moscow Region Governor Awarded, persons Moscow Region Governor Prize in the field of science and 1 innovations among young researches and specialists Podolsk Administration, 2017 Awarded, persons Honour badge "Faithful to Podolsk " 1 JSC TVEL, 2017 Awarded, persons Corporate Prize Laureate 1 Companies of ROSATOM, 2017 Awarded, persons Certificate of honour 3 Diploma for Participation in the Industry Contest/ /Scientific and Practical Conference of Young Specialists 4 Awards of the Company Awarded, persons Entry in the Book of Honour 4 Certificate of acknowledgement issued by JSC OKB GIDROPRESS 329 Certificate of honour issued by JSC OKB GIDROPRESS 41 Bonus payment for participation in the Scientific and Technical Conference Contest 6 At present the Company has 6 employees awarded the Merited Designer of the Russian Federation Title of Honour and 19 employees holding various state awards. 61

62 62 Talent Pool The Company annually generates a talent pool comprising those who may be appointed to the executive officers and act as senior or mid-level managers. Related activities include the following: Selecting employees (or candidates) with high qualification and leadership skills; Candidate career planning; Developing the candidate development program; Implementing the candidate development and career plan. Availability of at least one qualified candidate per each office in the Company s management is deemed critical for assessing efficiency of the talent pool development. For practical training purposes to the extent of skills and knowledge any respective candidate has to possess in order to be appointed to any respective office the following forms and methods are employed: Acting as a manager for the duration of his or her unavailability; Practical management training programs by dedicated courses at the industry training centres; Participating in arranging and holding meetings and conferences at the national and international level; Attending business meetings, negotiations and discussions. Training of the Company s talent pool under industry-specific programs (Rosatom s Heritage, Rosatom s Capital and Rosatom s Talents) is deemed an important phase in training the Company s managers of various levels. Number of employees included in the industry talent pool (persons) Level Rosatom s Heritage Rosatom s Capital Rosatom s Talents Share of employees appointed to vacant offices from the Company s talent pool in % Personnel Training The personnel training and development system operated by JSC OKB GIDROPRESS provides for an integrated approach to the permanent development of workforce for the purpose of achieving and maintaining high performance in terms of manufacturing safe and competitive products. Training is organized with due regard to the objectives and in compliance with the Company's and ROSATOM strategy, state of the art, management technologies and arrangements. The Company considers investments in personnel training as a precondition of sustainable development in the long term, establishment of a common set of values and higher value of workforce. Generally, in 2017 the Company spent RUB mln for training and development of its personnel. In 2015 and 2016 respective expenses totaled RUB mln and RUB mln (accordingly). The foregoing reduction in expenditures related to personnel training and development was due to participation in the industry PORA program with flexible training format which provided for the use of free-of-charge remote programs developed on the basis of industry training centres. Training is provided using the following approaches (GRI 404-2): External training;

63 Internal training. External training involves industry advanced training institutes and other establishments rendering educational services. Internal training provides for the following: Annual training at the Company's premises as provided by the existing technical training programs; Training sessions by teams held at the Company's premises in accordance with previously approved training programs. For the purpose of developing professional and technical skills and corporate competences the Company renders assistance in and promotes the following: Attending international, industry and local research and development conferences, workshops, round tables and consultations; Undergoing training at the higher educational institutions and obtaining a second university degree as an off-campus student; Attending the Company s externship and working on PhD as a postgraduate degree seeker; Sharing best practices related to technical issues at the meetings of research and development committees or subcommittees or briefing sessions; Self-education. Personnel training and development is regulated by the following principal rules and regulations of the Company: Corporate Regulations for Personnel training; Corporate Regulations for Certification of Managers and Specialists in Nuclear Power Safety; Company regulations for Quality Management System and Certification of Welders; Company regulations for Quality Management System and Certification of inspectors. Pursuant to the foregoing documents the following is made available: Technical training plans developed per business unit; Occupational health training programs per each category of employees; Welder training and certification programs approved by the parent material organization; Inspector training and certification programs (various inspection methods) approved by the parent material organization. In 2017 training was provided by various fields, personnel categories and lines of the Company's business. As such, the Company cooperated with specialized training centres (Rosatom Technical Academy, Rosatom Corporate Academy, JSC NIKIMT-Atomstroy, JSC NPO CNIITMASH etc.), advanced training institutes, academies and other organizations and held training sessions using its proprietary internal training programs. 335 workers and 366 managers and specialists were trained in employees attended various courses, workshops and training sessions at the industry educational centres. 38 managers and specialists have passed pre-certification training and certification under the rules of Rostechnadzor. 176 employees engaged in operation and maintenance of hazardous manufacturing facilities were made subject to regular knowledge assessment. Number of Employees Trained throughout the Year, persons. Personnel category Workers Management Experts

64 Total: employees were trained in the framework of the annual technical training at the Company's premises using its internal training programs in and 1146 employees were trained using the internal training programs in 2015 and 2016, respectively. Average Number of Hours per Employee Trained per Annum by Personnel Categories, hour (GRI 404-1) Personnel category Workers Management Experts Total: employees were trained free-of-charge under remote training programs (State-of-the-Art Knowledge Management Technologies employed by Rosatom, RPS Base Training Session, Methods for RPS Project Implementation etc.) to implement the PORA industry program to the extent having regard to personnel training. 618 employees were trained to apply RPS methods for the Company to become the RPS Leader. This training was provided by a local trainer through remote courses with the on-site training by representatives of the Rosatom Production System Training Centre of the Rosatom Corporate Academy. All TOP-1000 managers of the Company were trained in basic RPS methods as part of the project "Leaders are training leaders". In 2017 JSC OKB GIDROPRESS continued training sessions for the students of the Department Nuclear Reactors and Facilities of the Bauman Moscow State Technical University.. These are trained under the agreement made by and between the Bauman Moscow State Technical University. and JSC Atomenergomash and providing for strategic partnership of the aforesaid two organizations to the extent having regard to training researchers and engineers and performing joint research work in the field of power and special purpose nuclear reactors and plants. The Company s experts participated as lecturers in the training sessions attended by specialists from the states seeking to introduce nuclear power into their economies based on the Rosatom Technical Academy in Obninsk. Personnel Assessment As from July 2010 JSC OKB GIDROPRESS has participated in the project implemented by the State Atomic Energy Corporation ROSATOM and related to annual assessment of performance of its employees. The Company applies the Unified Industry Regulations for Managing Personnel Performance of ROSATOM and its Group Companies. 86 managers (Heads of Sections and lower levels) were made subject to the annual Record performance assessment in 2017 (GRI 404-3). The employee s professional competences are also assessed through certification procedures (i.e. evaluation of performance of any relevant employee by applying standards applicable to any respective office). Certification is regulated by the local standard act of the Company and Labour Code of the Russian Federation. Certification results shall be supported by any relevant document issued by a standing certification committee attaching recommendations as to reasonableness of qualification or category modification or appointment to another position in the Company. Annual assessment of professional status of its personnel is carried out in compliance with the applicable Evaluation Regulations developed in the Company. 64

65 2. Social Policy The Company provides several key social programs as part of implementation of Rosatom s Global Social Welfare Policy: Voluntary medical insurance of employees; Voluntary insurance against industrial accidents and diseases; Sanatorium-and-spa treatment for employees and child recreation; Provision of welfare payments to employees in truly difficult situations; Support of retirees; Social benefits for employees; Arrangement of mass cultural and sporting events; Catering service; Corporate pensionary fund. These social programs are aimed at social benefits provided by applicable law of the Russian Federation to ensure convenient working conditions, involve and retain talented specialists and newcomers, as well as professional workers (GRI 401-2). In 2017 the budget of the Company s social welfare expenditures totaled RUB 50.9 mln. Social welfare expenditures, mln RUB Description Amount Amount Persons Voluntary medical insurance Insurance against industrial accidents and occupational diseases Health resort treatment and recreation for the benefit of employees children Mass cultural and sporting events Veteran and retiree support Social benefits Other Total In 2018 the budget of the Company s social welfare programs is expected total RUB 52.8 mln. The provided social benefits package ensures the leading regional positions of the Company as the employer and supports a high level of its social, economic and production development. The existing Bargaining Agreement expands the range of guarantees and benefits available to employees pursuant to applicable law of the Russian Federation and applies to all employees of the Company (GRI ). Corporate Culture In November 2017 JSC OKB "GIDROPRESS" took part in All-Russian charity activity "Present a book to a child! organized by the Russian State Children Library. The Company's employees collected more than 1800 different types of publications. The books were sent to the Lenin State Farm Library. In December 2017 members of the youth commission arranged fund-raising for a widow with multiple children in extremely difficult everyday and financial situation. They managed to collect more than RUB mln. In 2016 they organized an action "Please, live" aimed at fund-raising to save the life of Ivan Koledov, 15-year boy from Podolsk. The Company's employees collected and gave to his parents RUB 82, In 2015 an action "Life is not a trifle" was held in JSC OKB "GIDROPRESS" as part of activities of the "Life Line" charity fund for severely ill children. Small coins kept at 65

66 home or work place in money boxes or pockets were collected. The collected sum totaled RUB 36,000 were handed over to the charity fund. Over many years employees of JSC OKB "GIDROPRESS" participate in voluntarily in donor activities. Arrangement of volunteer donor actions became one of the important aspects of corporate culture development. Number of donors and blood donation events Persons Donation events Youth Policy One of the top priority goals pursued by the Company consists in employment and training of young professionals within the framework of the corporate program of Rosatom which provides for efficient alternation of generations including various methods of engagement of newcomers. The Company carries out system work with high schoolers and students based on career guidance, cooperation with dedicated higher educational establishments and efficient use of reservation of young professionals by the Company. The work with high schoolers includes the following: Doors Open Days for the high schoolers; Issuing referrals to the dedicated higher educational establishments for the purpose of targeted enrolment; Number of schoolers that have participated in career guidance events 220 persons. Number and Share of Employees under 35 years of Age in the Overall Headcount Year Share in headcount, % The high place held by the Company in the employer appeal rating leads to reduction in staff turnover. It reduces the share of Company's employees under 35 years of age (of the total headcount), in spite of the annual employment of young specialists. Share of Employees under 35 years of Age by Categories, % Staff category 2017 Workers 10.8 Experts 80.0 Management 9.2 The Company has been continuously cooperating with professional higher educational institutions (MPEI, Bauman Moscow State Technical University, MEPhI) as follows: Participating in the Doors Open Day and more recently Vacancy Fairs held by the higher educational establishments; Involving students under practical training and externship programs; Employing senior students for one year with an individual schedule; Participating in the Career Day event held by ROSATOM. 66

67 Number of Students involved under Practical Training Programs in the Company, persons The Company employs experts for the benefit of its principal business units primarily from those graduating from the aforesaid higher educational establishments. In average, the share of such graduates amounts to 70 % of the overall number of newcomers. In 2017 the Company employed 13 graduates thereof. Number of Graduates of Professional Higher Educational Institutions employed by the Company, persons Share of Design Engineers graduated from Professional Higher Educational Institutions and employed by the Company, % A differentiated salary which depends on the qualification level (bachelor, specialist or master) and working experience any respective employee holds his or her office in the Company or any other entity operating in the nuclear power industry is one of the most efficient tools used by the Company to engage talented newcomers. The Company s management promotes upward move in the career of any efficient newcomer for the purpose of retaining and involving the same in the self-guided work with the higher level of responsibility. Thus, in employees under 35 years of age enjoyed career promotion. Number of Employees under 35 who Enjoyed Career Promotion, persons For the purpose of pursuing the objective of development and promotion of creative work by the Company's personnel and meeting their research and development needs JSC OKB GIDROPRESS annually holds a Conference of Young Specialists that is attended by young professionals making their presentations and answering the questions of both experienced and qualified experts of the Company and the best technicians and researchers representing other entities of the industry. In the reporting 2017 JSC OKB GIDROPRESS held the 19th annual industry Scientific and Technical Conference of Young Specialists in nuclear power plants. The Company has its own externship (post-graduate program) where young professionals may develop their skills and maintain their theses. For the purpose of ensuring professional and psychological adaptation and retention of young professionals the following approaches are used: One year practical training under the supervision of a tutor; Certification with availability of higher remuneration and assignment of the next grade; Participation in the annual conference for young professionals; Externship of JSC OKB GIDROPRESS. 11 newcomers attended practical training sessions under the supervision of highly qualified tutors in the reporting Training and certification of young professionals is provided pursuant to the applicable rules and program approved by the Company. For the purpose of accomplishing large-scale nuclear industry development projects and as part of programs providing for training of specialists of majors needed the 67

68 Company takes part in implementation of the Corporate Program for Establishment and Development of the National Nuclear Research University (MEPhI). The Company's employees were engaged as lecturers by MEPhI. The Company s young professionals extensively participate in mass cultural and sports activities thereof. 4. Occupational Health and Safety (GRI 402-1) As provided by the sectoral agreement the Company has been investing in projects aimed at improving working conditions and occupational safety at least 0.5 % of its manufacturing costs for three years now. In the reporting 2017 these projects amounted to 1.07% of the manufacturing costs. The management of JSC OKB "GIDROPRESS" considers minimization of the negative effect of manufacturing processes on personnel health as the main aim in the field of occupational safety and health. Health and Safety Related Expenses, mln RUB Forecasted, Health and Safety Arrangements The Company s business having regard to occupational health and safety is detailed in the Company's Annual Report 2016 (p.103). The Company continuously improves its working and occupational health conditions. 68 On-the-job Injuries (GRI 403-2, 403-3) No workplace accidents were registered by the Company. Occupational Diseases and Disability In 2017 (like in 2015 and 2016) no occupational diseases were registered by the Company. Employees are released from the work related to impact of one or another dangerous and harmful factor during manufacturing if there are contraindications observed during medical examination. Personnel Radiation Exposure The Company uses sealed ionizing radiation sources only. The individual radiation survey of the Company s personnel is provided pursuant to Program of In-Process Radiation Safety Control in the Company s business units No and, in particular, Regulations of personal dosimetry in the Company s business units No When personal dosimeters are given out and returned the respective records are made in a Dosimeter Log. Employees' individual doses are recorded in the Dosimeter Log and Individual Effective-and-Equivalent Dose Record Card for personnel working with induced ionizing radiation sources in the Company's premises. No cases of exceeding the individual effective dose of 50 msv/year were recorded in According to the records during last 5 years the cumulative individual effective dose did not exceed 100 msv. The average annual effective radiation dose of Company's personnel was 0,09 msv in The collective dose was 0,00069 person- Sv/year. Results of periodic medical examination in 2017 showed no acute poisoning and occupational diseases. There are no employees subject to personal radiation risk exceeding 10-3 in Personnel Radiation Risk Specifications Item Annual average effective radiation dose, msv Number of accidents with radiation doses exceeding 0 0 0

69 the limits set by applicable rules and regulations, pcs Maximum individual external body radiation dose, msv Share of the employees being subject to personal dosimetry and registered in ARMIR system, % Share of employees being subject to negligible risk, % Share of employees being subject to lifetime risk, % Industrial Safety The Company is a business entity operating hazardous production facilities registered by the Central Department of the Federal Service for Environmental, Technological and Nuclear Supervision. More detailed information on activities in the field of industrial safety in the Annual Report No incidents (accidents) were recorded on the facilities. No non-compliances with safety requirements and status of respective remedial work were identified upon external audits by Rostechnadzor. 5. Environmental Safety and Compliance KIRILL KOMAROV, First Deputy Director General for Corporate Development and International business of ROSATOM: " lack of electricity from nuclear power plants ultimately causes harm to the environment and prevents from achieving the targets set to fight climatic changes. Other kinds of energy are either environment-unfriendly (fossil fuel sources) or immature (renewable sources) due to unstable generation " Precautionary Principle (GRI ) Precautionary principle shall apply to avoid any damage which may be caused to the environment, even if any information evidencing any respective damage caused by any business whatsoever is not available. Environmental Management Designing reactor plants is the principal business of JSC OKB GIDROPRESS. As such, the Company s business has minor impact on the environment within and adjacent to its premises. Legal Framework: Environmental Policy of JSC OKB GIDROPRESS ; Regulations of environmental management system (RD 1.162); Uniform Industry Environmental Policy of the State Corporation ROSATOM and its companies; Environmental Policy of JSC Atomenergomash; Certificate ISO certification is planned for 2018; No positive or negative conclusions were made by experts in the course of environmental impact assessment in the reporting period. Pursuant to applicable law of the Russian Federation the Company developed all necessary environmental normative-technical documents that were approved by regulatory authorities: a buffer area design where all hazards (i.e. noise, electromagnetic radiation, atmospheric emission) having impact on the residential development were described. Pursuant to the schedule duly approved, ecological monitoring of the relevant hazards is provided. Timely waste disposal is performed by dedicated companies. 69

70 Pursuant to applicable law the Company pays to the RF budget for the negative impact on the environment. The Company has no production related to use of radioactive substances. No fines and nonfinancial penalties were imposed on the Company for violation of environmental laws (GRI 307-1). Environmental 4 Protection Costs, mln RUB Forecasted, In 2017 measurements designed to identify the content of nitrogen oxides, dust, lead, chrome and manganese oxides in the air were made at the boundaries of the buffer area of JSC OKB "GIDROPRESS". No excess of the maximum permissible concentration in air pollution measurement results was identified. JSC OKB GIDROPRESS promptly pays for the negative impact it has on the environment. Energy Consumption (GRI 302-1) Target: reduction of utility consumption by 5 % under similar conditions vs actual consumption in 2015 (status: failed) Products manufactured by the Company are referred to long lead items. Shipments of goods are nonuniformly distributed during a year, thus resulting in errors in power consumption calculation. In 2017 this factor was 4,7 %, i.e. close to the target value. Power Supply Expenditures, mln RUB Forecasted, Power Consumption, GJ Forecasted, 2018 Total Total Heat Electric power Gas Total Total Savings, GJ (GRI 302-4) Forecasted, 2018 Total Total Heat Electric power Gas Total Total No other utilities were consumed in Water Consumption (GRI 303-1) The Company pursues the policy of sustainable use of natural resources, including but not limited to, efficient consumption of water supplied for production and business purposes. The public water supply of Podolsk city is its principal source of potable water supply. Process water is supplied by PJSC ZiO-Podolsk. No water supply sources are located in the protected areas or represent any hazard in terms of biodiversity preservation. 4 They are calculated as a sum of graphs "Annual current operating expenses, K RUB", "Environmental protection service payment, K RUB", and «Key asset capital repair costs related to environment protection" as per 4-OS form. 70

71 Water Consumption, K m 3 Source Public water supply Underground water Surface water Total Waste Water, K m 3 (GRI 306-1) Receiving facilities Sewage system operated by Vodokanal Municipal Unitary Enterprise Air Emissions Legal Framework (basic regulatory documents) Federal Law No.7-FZ of January 10, 2002 Environmental Protection ; Federal Law No.89-FZ of June 24, 1998 Wastes of production and consumption ; Federal Law No.96-FZ of May 04, 1999 Atmospheric Air Protection ; Production Ecological Monitoring Program of JSC OKB "GIDROPRESS" Pursuant to applicable law of the Russian Federation the Company developed draft regulations for maximum permissible air emissions and obtained Permit No. 54/515 MO of July 17, 2015 authorizing the same to discharge harmful substances in the air valid till May 12, Data regarding harmful air emissions is made available based on instrumental measurements made by dedicated companies at the specific sites of the Company. The Company s office premises have no fixed sources of air emissions. The stationary sources of air emissions include hot water boiler, main and auxiliary equipment maintenance sites, welding areas, machinery of the manufacturing site, metal heat treatment spaces, gas cutting areas, carpenter shop, painting area, test benches and labs. The non-stationary sources of air emissions are represented by parkings. The calculations made available hereinbelow were performed based on data obtained with respect to specific sites. NO 2, SO 2 and Other Significant Contaminant Air Emissions, t (GRI 305-7) Gas Forecast ed, 2018 NO SO Volatile organic compounds Hazardous air pollutants Solid particles Other JSC OKB "GIDROPRESS" is not an emission point of greenhouse gases and ozone-depleting substances. Nowadays the Company operates the equipment using ozone layer safe hydrochlorofluorocarbons (freon-22) as refrigerant in the air conditioning systems. The equipment with hydrochlorofluorocarbons is now at the end of its service life specified by the Manufacturer and upon the life expiry it will be replaced with the equipment using other ozone layer safe substances. Waste Disposal (GRI 306-2) Pursuant to the applicable law of the Russian Federation the Company developed draft regulations for waste generation and applicable disposal limits and 71

72 obtained Permit No.56/642 of April 8, 2014 authorizing it to generate and dispose of waste within the limits prescribed. Dedicated companies duly licensed to perform this kind of work are involved to remove and dispose of the waste generated as a result of the Company s business. These contractors render the Company their services under respective agreements made therewith. The calculations made available hereinbelow were performed based on the acceptance certificates delivered by the contractors. Total Waste Weight, t Waste type Forecaste (planned) (actual) d, 2018 Hazardous Non-hazardous In 2017 there was a sharp increase in hazardous wastes because class IV wastes were referred to hazardous wastes. Increase in the total wastes is related to increase in the production output. Share of Wastes by Disposal Method, t/ % Disposal method Approximate share of waste processed using this method, % Reusable Landfills

73 VII. COMMUNICATIONS. 1. External and Internal Communications External Communications in 2017 (GRI 417-3). Press releases and 114 publications Online communications Corporate web-site: Number of the web site sessions: ,000; ,000; ,400; ,770; Web site users from over 124 countries worldwide. The corporate web site is continuously visited by representatives of principal competitors of JSC OKB GIDROPRESS and a great number of other companies. Exhibitions The Company took part in 5 exhibitions (2 exhibitions held abroad): NDExpo 2017, ATOMEXPO 2017 ATOMEX 2017, 12th China International Exhibition on Nuclear Power Industry (CIENPI 2017) (Beijing, China), Power Bangladesh International Expo 2017 (Bangladesh, Dacca). Conferences 90 employees of the Company attended 23 conferences in Russia. 45 employees of the Company attended 45 conferences outside Russia. In April 2017 JSC OKB GIDROPRESS hosted the International Scientific and Technical Conference of Young Specialists in Nuclear Power Plants. It was attended by over 100 experts representing various organizations. In May 2017 JSC OKB "GIDROPRESS" held the International Scientific and Technical Conference "Safety Assurance of NPP with VVER". It was attended by over 240 experts of 14 countries. Visits Organized visits: Over 135 foreign specialists from 8 countries worldwide visited the premises of JSC OKB GIDROPRESS. 484 employees of the Company visited 19 countries. Local collaboration As part of implementation of a project of JSC Atomenergomash for celebration of two professional holidays in September 2017 (Engineering Industry Day and Nuclear Industry Day) the Company placed billboards on the territory of Podolsk City to congratulate its citizens. This action promoted popularization of careers in engineering and nuclear power industry and had a favourable effect on the image of the machine-building division and JSC OKB "GIDROPRESS". The Company's activities are closely related with the city life and play an important role in its social and economic development. 73

74 Project "Bread is the staff of life!" The Company provided informational support of the project "Bread is the staff of life!". The project's author - Alexander Danilenko, Veteran of Labour and Chairman of the Company's Council of Veterans became one of 25 Podolsk laureates of the "Our Moscow Region Annual Prize of "Initiative" category by the Moscow Region Governor. The prize is awarded to the best social important projects aimed at development of the Moscow region. Internal Communications in 2017 Industry publications: Rosatom s Country AEM News Federal Internet mass media: Atominfo.ru Site of the Russian Nuclear Community Industry Internet mass media: Rosatom.ru Site of JSC Atomenergomash Infoscreens Project Information Day 34 publications 39 publications 68 publications 19 news breaks related to production and social welfare 2 Information Days held Over 600 visitors each Management feedback (Q&A session); over 70 queries were reviewed Non-financial recognition Congratulatory posters, certificates of honour and acknowledgement and greetings were produced, issued and posted to the Company s intranet for the achievements and success in professional activities, welfare work and sports shown by the Company s personnel. Moreover, accomplishments of the entire team were highlighted. In 2018 JSC OKB "GIDROPRESS" will continue to develop its internal and external communication channels. The principal goal to be pursued in 2018 is to hold the 20th International Scientific and Technical Conference of Young Specialists in Nuclear Power Plants. 2. Stakeholder Engagement in Preparing the Report The system of interrelations with each group of stakeholders affects and will affect significantly the Company's activities, therefore consideration of their interests in strategic planning is the crucial condition of sustainable development. Development of forms and methods of engagement with stakeholders, analysis and consideration of their requests allows the Company to timely react to the possibilities of risks connected mainly to stakeholder engagement of social and reputation character. The main groups of stakeholders and their interests are presented in the Annual Report 2016 ( стр.114). In the reporting year the Rank Map was updated upon interviewing top and middle managers of the Company and representatives of the main groups of stakeholders. 74

75 Index of Stakeholders influence onto the Company Stakeholder Rank Map GRI (102-40, ) Shareholders Customers Personnel Supervisory bodies Competitors Management of JSC OKB GIDROPRESS Foreign partners Suppliers Local population Expert community Higher Educational Institutions Mass media Local bodies self-government Non-governmental organizations Index of Stakeholders dependence on the Company Approaches to stakeholder engagement Principles of interaction with stakeholders (GRI ): Consideration and response means the Company considers the main stakeholders' needs and requirements and timely responds to the grounded needs and proposals; Significance principle means the Company engages its stakeholders for issues being significant for the Company and its stakeholders; Mutual benefit implies the Company seeks in its activities to establish partnership and mutually beneficial relations with the stakeholders. JSC OKB "GIDROPRESS" continues to build the effective and sustainable public reporting system. As part of implementation of the Plan on further development of the public reporting system for 2017 the activities were carried out: Activities Improvement of regulatory and methodological framework Development of the Company s personnel Execution of the report Results Updated corporate standard "Public Reporting Committee. Establishment and Operating Procedures" STP Performed study and analysis of best practices employed in execution of annual reports both in Russia and abroad; participation in the workshops related to public reporting. Ensured higher involvement of representatives of stakeholders in the execution of the report; improvement of quality of information collected pursuant to applicable international standards for integrated reporting. 75

76 Stakeholder engagement Surveys and enquiries Promotion Identified new stakeholders (including an international organization representative); continued partnership relations with principal stakeholders. Performed questionnaire surveys of stakeholders and top managers of the Company to identify material business topics to be disclosed in the report and mutual influence of the Company and its stakeholders; defining top priority topics of the report. The report was distributed among main groups of stakeholders (addressed mailing, forums, exhibitions, meetings with business partners, world-wide web etc.) The report was registered by the Russian Union of Industrialists and Entrepreneurs and entered into the National Register and Library of Corporate Nonfinancial Reports ( GRI Sustainability Disclosure Database In "Expert" Rating Agency Contest the report's rating is 4*(very high quality). Plans for 2018: further improvement of the public reporting system Activities Targets Improvement of regulatory Update of Corporate Standard "Public Integrated and methodological Annual Report. Execution and Content" STP 193- framework Development of the Participation in the workshops related to public Company s personnel reporting. Execution of the report Improvement of quality of reporting information through studying and analysis of best practices employed in execution of annual reports and use of the results in the next reporting period. Stakeholder engagement Ensuring higher involvement of representatives of stakeholders in the execution of the report by means of search of new forms of interaction. Surveys and enquiries Follow-up of questionnaire surveys of stakeholders and top managers of the Company. Promotion Participation in the contests related to public reporting. The responsibility for execution of the public annual report is imposed on the Chairman of the Public Reporting Committee of JSC OKB "GIDROPRESS". This Report was executed in compliance with the basic version of GRI SRS. With regard to information disclosure the trends in presenting the analysis of the target and actual data, forecasts and development prospects were preserved, a business model was presented, and data on assets were given. The process of the report execution, including formation of the map of priority topics is presented on p. 100 (Appendix 1). The approach to execution of the report was decided to be discussed and related public consultations held without any physical meeting with stakeholders. Based on the work results representatives of the stakeholders provided a public acknowledgement of the Report. Company s Feedback to Proposals and Recommendations of its Stakeholders (GRI ) JSC OKB GIDROPRESS delivered evidence of the progress made in public reporting and establishment of interaction with its stakeholders. We do believe it is a 76

77 good practice that interaction commenced prior to execution of the Report. Concerns of the Company s partners as to identifying more stakeholders were accounted for at the initial stage when proper arrangements were made to commence the public reporting campaign in The new representatives of stakeholders (one of the relevant higher education establishments - MEPhI and international organization - WANO) were involved in the report execution. Stakeholders were involved in the development of a concept and determination of material topics. As such, the top priority topics were defined and updated. As part of the Report execution process the Company s stakeholders were granted an opportunity to deliver their proposals and recommendations as to disclosures made in the Report and development of the public reporting system in general. The Company s feedback in relation to concerns expressed by the Company s stakeholders made itself evident in the fact that the final version of the Report specified some data which was updated and added as appropriate (see Appendix 2 hereto, Consideration of Stakeholders Concerns). Moreover, JCS OKB GIDROPRESS assumed an obligation to ensure further improvement of its public reporting system. As part of execution of the Report the Company proved to be ready to consider proposals and concerns of its stakeholders. JSC OKB GIDROPRESS will continue to introduce consistently responsible corporate behaviour principles in its business through development of its public reporting system and interaction with the Company s stakeholders. PUBLIC ACKNOWLEDGEMENT (DRAFT) (GRI ) Background Information JSC OKB GIDROPRESS proposed us to review the Company s integrated Annual Report 2017 (the Report ) in terms of its completeness and materiality of disclosures made therein to the extent having regard to the most significant issues from the point of view of the Company s stakeholders. As such, we and our representatives were delivered respective materials and information for review (the draft Report). Report Assessment Procedure We do comply with ethic requirements as to the independent and unbiased judgement and hereby express our own expert opinion and not that of any of the companies we represent. We hereby certify and guarantee that no reward has been paid to us by JSC OKB GIDROPRESS for our involvement in the public acknowledgement process. This public acknowledgement procedure involves assessment of the format, structure and content of the Report as well as materiality and completeness of disclosures made herein and the Company s feedback to proposals and comments made available by its stakeholders. We all give similar positive estimate of the format and scope of disclosures made in the Report. JSC OKB GIDROPRESS has executed an information-bearing and well-structured document which is consistent with our expectations. It is especially important that the Report has been executed voluntarily and represents a good example of implementation of transparency and openness principles by JSC OKB GIDROPRESS. Notwithstanding that such Report has been executed by the Company for the second time, it shows a high level of information disclosure and the Company s readiness to conduct an open dialogue with its stakeholders in relation to any issue having regard to its focus areas, including reactor plant designing and safe operation thereof. We have to note that JSC OKB GIDROPRESS seeks to interact effectively with its stakeholders. We are not aware of any fact which may challenge faithful representation of details made available herein. We do believe that the Report specifies all the necessary information as to the Company s activity results in the reporting period and its contribution to implementation of the strategic goals pursued by ROSATOM. Due to its integrated nature the Report covers all the socially significant issues and business areas of the Company as of 2017 and specifies all the necessary information related thereto, including sustainable development, strategy and future plans. In view of the foregoing and assessment performed as appropriate we may hereby summarize as follows. 77

78 Materiality of Information We believe that JSC OKB GIDROPRESS adhered to all applicable international standards having regard to assessment of materiality. Having interviewed its top managers and representatives of its stakeholders and identified all material business areas JSC OKB GIDROPRESS managed to disclose related information in the Report in proper detail and in full. The information disclosed herein is material both for JSC OKB "GIDROPRESS" and its stakeholders. The most important information for understanding of the Company s outlook is made available in the sections dedicated to its strategic development, unique competitive advantages and growth prospects, higher efficiency of finance management, risks, personnel, impact on the economic and social environment, safety and environmental protection when implementing its numerous projects. Completeness of Disclosures The disclosures made by the Company in the Report are deemed sufficient both in terms of compliance with international public reporting standards and consideration of comments given by the Company s stakeholders as part of engagement provided during execution of the Report. We believe that reduction in the Report's scope, provided that all material information has been disclosed, corresponds to the best international reporting practices and affords an opportunity to build a complete picture as to the Company s business. This year the Company made great efforts to meet the principle of brevity. The Report's references to data available on the Company's website, to the previous Annual Report and other sources allow obtaining all the necessary information. A part of the Report is presented in the form of diagrams, tables and plots, this favourably lead to the reduction in the reporting information scope and made the Report convenient for its readers. By and large we believe that compliance with the principles of materiality and brevity allowed the Company to adequately disclose all the relevant topics. (GRI ) Deputy CEO for Strategy and Development, JSC Atomenergomash K.Y.Tolstov Adviser of Department for communications of Rosatom S.S. Golovachev Head of Department of Reactor Buildings BKP-1, JSC ASE EC S.V.Gureev JSC ATOMPROEKT Chief Expert S.A.Petrov CEO of Operating Experience Programme, WANO MC Director General of the Chamber of Commerce and Industry of Podolsk Urban District Deputy Chief Editor, Podolsky Rabochiy Newspaper S.N.Kezin V.I.Balabukh N.F.Rzhevskaya 78

79 Chairman of the Trade Union Committee JSC OKB GIDROPRESS O.N.Bakhus 79

80 VIII. APPENDICES Information on the Report Appendix 1 Principal Report Parameters This publicly available Annual Report for 2017 (hereinafter referred to as the Report ) discloses the Company's financial and other performance for the period from January 1, 2017 to December 31, 2017 and the Company s development prospects. The Report was issued in Russian and English (GRI ). The Report shall be issued on an annual basis. The Report is the second integrated Report of JSC OKB "GIDROPRESS" (GRI ). The previous Report was issued in For usability the Report was published and its electronic format.pdf is available on the corporate site (GRI ). The Report 2016 of JSC OKB "GIDROPRESS" was entered into the National Register and Library of Corporate Non-financial Reports ( GRI Sustainability Disclosure Database In the annual rating of annual reports of RAEX rating agency (Expert-PA) the Report's Level is "4 stars" - very high quality of an annual report. Legal Framework The Report was executed in accordance with the following rules and regulations (GRI ). International Standards and Guidelines: AA1000 Standards by the Institute of Social and Ethical Account Ability; Sustainability Reporting Standards by Global Reporting Initiative (Global Reporting Initiative (GRI)); International Integrated Reporting Council (IIRC) Standards National standards and regulations of the RF for corporate reports and financial statements: Federal Law on Joint Stock Companies No 208-FZ of December 26, 1995 (revised on June 29, 2015). Statement of the Bank of Russia on Information Disclosure by Issuers of Securities" No. 454-P of December 30, Letter of the Bank of Russia on Corporate Management Code No /2463 of April 10, Federal Law on State Secrets No of July 21, Federal Law on Commercial Secrets No.98 of July 29, Federal Law on Information, Information Technologies and Protection of Information No. 149-FZ of July 27, Federal Law on Accounting No. 129-FZ of November 21, Regulatory documents of the State Corporation ROSATOM: Public Reporting Policy of the State Atomic Energy Corporation Rosatom; Public Reporting Standard of Companies of the State Atomic Energy Corporation Rosatom; Code of Ethics of the State Atomic Energy Corporation Rosatom. Public reporting regulatory documents of JSC OKB "GIDROPRESS": Corporate Standard STP "Public Integrated Annual Report. Execution and Content". Corporate Standard STP "Public Reporting Committee. Establishment and Operating Procedures". 80

81 GRI Guidelines Applicability This Report was executed in compliance with the basic version of GRI SRS Guidelines (GRI ). Limitation of Liability This Report includes certain anticipated estimates as to financial standing, economic and social indicators and development prospects of the Company. The likelihood of actual implementation of any relevant statement or estimate depends on economic, social and legal environment which does exist irrespective of the Company in the State Atomic Energy Corporation ROSATOM, Russia and abroad. The actual results may differ from estimates available as of the date hereof. The Company neither acknowledges nor guarantees that its estimated performance will ever come true. Thus, the Company shall not be held liable for any damage which may be caused to any individual or legal entity operating in reliance upon those anticipated estimates disclosed by the Company. Report Coverage This Report shall cover activities carried out by JSC OKB GIDROPRESS in the Russian Federation and abroad. Due to specific nature of the Company s business information related to its day-to-day operations to ensure the performance of state defense orders is not disclosed herein in view of applicable limitations related to nondisclosure of state and business secrets (GRI ). JSC OKB GIDROPRESS has no subsidiaries and branch offices. The Report specifies the Company s key indicators for the recent three years. The Company s financial performance has been assessed with related details disclosed herein as provided by applicable accounting rules and regulations in full force and effect in the Russian Federation. The Report discloses the Company s plans and goals for 2018 which have been specified prior to the date of approval hereof. No restatement of information or changes in coverage and boundaries of the disclosed topics were made as compared with the previous year (GRI , GRI ). Defining report content Procedure of materiality identifying (GRI , GRI 103-1) At the reporting campaign beginning, questionnaire surveys of stakeholders were performed by correspondence to identify the material topics, determine their priority and to agree on the Report's concept. All groups of stakeholders actively participated in questioning and discussions of the concept. To determine the relative priority of the material topics covered by the Report an analysis of the key events and activities which took place in the reporting period was performed, as well as of their impact on the Company's development strategy, efficiency and performance. Changes in the regulatory documents, the best practices employed in execution of annual reports and comments/ proposals of stakeholders were additionally analysed. The opinions expressed by the Company's stakeholders and top managers determined the way the top priority topic to be covered by the Report was selected and the principal focus areas were specified. The top priority topic of the Report is the contribution of activities of JSC OKB "GIDROPRESS" in 2017 to achievement of the ROSATOM's strategic goals. 81

82 Estimate of stakeholders List of material topics (GRI ) Detailed disclosure Sufficient disclosure (GRI, base level) Brief comment Estimate of JSC OKB ''GIDROPRESS'' Material topics of activity No. Topic No. Topic 1. Economic efficiency and financial performance * 13. Youth Policy 2. Market reach 14. Anticorruption practices 3. Procurement activities * 15. Production activity results 4. Power consumption * 16. Calculation analysis and experimental justification of design 5. Water consumption * 17. Innovations 6. Effluents and waste * 18. Risk management Compliance with environmental law Total environment protection expenditures 19. Intellectual property management 20. Investment activities 9. Occupational health and safety * 21. Efficiency improvement 10. Employment, personnel * 22. Quality Management 11. Human resource development 23. Safety Culture 12. Conditions and management of labour * * - GRI topics 82