1.3.

Sustainable development management

1.3.1. Connection between Company Strategy and UN Sustainable Development Goals

RusHydro shares the understanding of sustainable development definition, formulated by the UN:

According to the World Commission UN of Environment and Development, «Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs».

The Company sticks to the understanding of corporate social responsibility (hereinafter referred to as CSR), formulated in the standard ISO 26000. According to the standard, social responsibility is the responsibility of an organization for the impacts of its decision and activities on society and environment, through transparency and ethical behavior that:

  • contributes to sustainable development, including health and welfare of society;
    takes into account expectations of the stakeholders;
  • is in compliance with applicable law and consistent with international norms of behaviour;
  • is integrated throughout the organization and applied in its relationships.

In its turn, the corporate social responsibility of the Company is the business management practice that implements the principles and guidelines for achieving sustainable development. The concept of CSR includes three aspects of needs, known as the «triple bottom line»: economic prosperity and efficient production, development of both social and cultural systems, environmental protection and minimization of environmental impact.

Corporate social responsibility is the important Company value and it is reflected in the mission of PJSC RusHydro:

  • efficient use of water resources;
  • creating conditions for ensuring the reliability of the Unified Energy System of Russia;
  • creating conditions for the social and economic development of the Far East regions by ensuring the availability of energy infrastructure.

RusHydro Group sees its primary social responsibility in the uninterrupted supply of electricity to the population. It correlates with one of the Company’s strategic goals, which is in reliable and secure operation of the Company’s facilities considering the economic feasibility of funds allocated to mitigate risks.

To achieve these objectives, the Group implements a large-scale work, which is based on a balanced management of economic, social and environmental aspects of its activities.

The RusHydro Group business and UN Sustainable Development Goals

The activities of RusHydro Group in CSR are aimed at achieving the number of sustainable development goals (SDGs) adopted by the United Nations in September 2015.

Sustainable Development Goals and the RusHydro Group Responsibility

GoalThe RusHydro Group Responsibility
Good health and well-being
  • Development and maintenance of a stable operation of the labor protection, industrial and fire safety systems
  • Employee’s insurance of workers for accidents at work and occupational diseases
Quality education
  • Development of employees’ professional competences
  • Promotion of the development of secondary and higher education through cooperation with the universities
Clean water and sanitation
  • Creation and operation of treatment facilities
  • Control and reduction of polluted water discharges
Affordable clean energy
  • Guarantee of energy security in the Russian Federation
  • Increase in energy efficiency
  • Increase of the renewable energy sources share in the energy balance
  • Development of alternative renewable energy generation
Decent work and economic growth
  • Maximization of value/cost for the state, shareholders, society and employees
  • Responsible human resource management
  • Employment of the population and decent wages
Industry, innovation and infrastructure
  • Implementation of the Complex Modernization Program
  • Conducting R&D by the RusHydro Research and Development Complex
  • Construction of new power facilities for meeting the population’s demand for energy
  • Development of the Far East energy infrastructure
Sustainable cities and communities
  • Guarantee of reliable and safe operation of production facilities
  • Emergency prevention and control
  • Construction and financing of social infrastructure facilities
  • Relief measures in the event of natural disasters or other calamities
Responsable consuption and production
  • Development of a cautious approach to resource exploitation among consumers, including the younger generation
  • Safe production, quality control of generating facilities during the construction and operation phases
  • Efficient utilization of energy and water resources
Climat action
  • Compliance with environmental legislation
  • Minimization of the impact on the environment, including the climate
  • Minimization of air emission (for companies of RAO ES of the East)
Life below water
  • Conservation and restoration of fishery resources of water bodies
  • Water efficiency
  • Clear waste from water bodies banks
Life on land
  • Compliance with environmental legislation
  • Efficient use of environmental resources
  • Protection of biological diversity
Peace, justice and institutions
  • Fight corruption
  • Compliance with legal requirements
  • Transparency of business
  • Timely settlement of taxes
Partnerships for the goals
  • Meaningful cooperation with stakeholders
  • Environmental cooperation
  • Increase in transparency and accountability

1.3.2. Interaction with the stakeholders

RusHydro Group has an impact on a wide range of stakeholders and intends to build a mutually beneficial long-term cooperation with all of them.
The list of stakeholder groups engaged by the organization is defined biennially by the survey among the Company management.

In 2016, the Map of the key stakeholder groups of RusHydro Group was updated. For this purpose, the heads of the Company departments and their deputies (16 in total) were asked about the degree of influence of each of the stakeholder group on the Company’s activities and the degree of impact of the Group’s activities on each of the stakeholder groups (on a scale from one to three). Stakeholder groups at the upper right corner of the Map above the cut line were recognized as the key stakeholders.

Stakeholders Map

Stakeholders map

Mechanisms of interaction with the key stakeholders of RusHydro Group

StakeholdersStakeholders’ interestsMain mechanisms of interaction
Federal, regional and municipal authorities
  • Guarantee of a reliable and uninterrupted power supply
  • Support for the development of the presence regions
  • Development and modernization of the electric power industry
  • Development of renewable and alternative energy sources
  • Agreements on social and economic cooperation with the constituent entities of the Russian Federation
  • Contributions to the development of the presence regions
  • Public hearings on plant construction projects
  • Work in joint committees, commissions, expert groups on the fuel and power sector development issues
Shareholders and investors
  • Economic efficiency
  • Company’ business continuity
  • Transparency of business processes
  • Meetings of the shareholders and other corporate events
  • IR-presentations and IR-events
  • Publication of reports
Employees
  • Professional development and career advancemen
  • Safe working conditions
  • Respectable remunerations
  • Personnel development
  • Social support for employees
  • Information and communication through internal channels
  • Interaction with trade union organizations
Regulatory and supervisory authorities
  • Compliance with the requirements of Russian and international legislation
  • Submission of reports
  • Development of proposals to improve legislation
Business partners, suppliers and contractors
  • Fair competition and responsible conduct on the market
  • Transparency of activities, including transparency of procurement activities
  • Forums, exhibitions, conferences, dialogs
  • Open and competitive procurement procedures
  • Joint projects
Customers and consumers
  • Reliable electricity supply
  • Improvement of the products and services quality
  • High standards of service
  • On-line consultation on the retail companies’ websites
  • «Whistleblowing Line»
  • Mobile service centres
  • Virtual reception office
  • Contact centre
  • Personal accounts of consumers’ guaranteeing suppliers
  • Development of client offices
Environmental non-governmental organizations
  • Development and modernization of the electric power industry
  • Compliance with the environmental protection legislation
  • Transparency of business
  • Cooperation with specialized Russian and international organizations
  • Cooperation with NGOs
Higher education institutes and other educational establishments
  • Target training
  • Development of sectoral science
  • Development of innovative technologies, including those reducing negative impact on the environment
  • Cooperation in the field of scientific and research activities
  • Training, retraining and development of personnel
  • R&D orders

On July 26, 2017, Public hearings on the 2016 Report of RusHydro Group were held. The various groups of stakeholders participated in the event. Representatives expressed their views on the completeness and materiality of the information presented in the report and gave their recommendations for the report improvements. (See Appendix 2. Minutes of Public Hearings on Corporate Social Responsibility and Sustainability Report of RusHydro Group for the year 2016, Appendix 3. Accounting for the Recommendations of Stakeholders Expressed at the Public Hearings).

Interaction with key stakeholder groups in 2016

INVESTORS

The Company has been actively interacting with the participants of the stock market and have been working on improvement of the information disclosure. In early 2017, RusHydro moved to the first level of securities listing. Within the framework of the interaction with the investment community, the following activities have been implemented in 2016:

  • More than 200 individual and group meetings with the managers of the largest international and Russian investment funds;
  • Four quarterly conference calls with management for analysts, investors and rating agencies;
  • А visit of a group of investors and analysts to one of the most advanced hydroelectric power plants of the Company – Boguchanskaya HPP (in June 2016);
  • Analyst and Investor Day with the participation of analysts, portfolio managers and media (December 2016).

The main topics for discussions were the Group’s strategic priorities and future plans. The updated Strategy of RusHydro Group was explained and the mechanism was developed by the Company to address the high debt burden of RAO ES of the East by attracting 55 billion of rubles into the share capital from Bank VTB (PJSC), as well as conclusion of a five-year forward contract.

Read more about the refinancing of debt on loans and borrowings of RAO ES of the East in 2016 Annual Report of PJSC RusHydro.

Moreover, during the reporting period, the Company continued working with analytical agencies specializing in assessing the compliance of public companies with the criteria of environmental, social responsibility and corporate governance practices (ESG):

  • Robeco SAM (developer of DJ Sustainability Index – Dow Jones Sustainability Index);
  • MCSI (one of the world’s leading providers of information and indexes on shares and debt market tools, it is also the developer of
    ESG-related indexes family);
  • Evalueserve (FTSE Low Carbon Economy project developer, which assesses the business in terms of its contribution to the reduction of greenhouse gas emissions),
    Sustainalytics (independent agency responsible for the analysis of public companies in terms of ESG criteria);
  • CDP (Carbon Disclosure Project, a global project aimed at disclosing the reports on greenhouse gas emissions by public companies);
  • Russian Union of Industrialists and Entrepreneurs (RUIE) – RusHydro is included into the sustainability and corporate social responsibility indices «Responsibility and Transparency» and «Sustainable Development Vector».

In January 2017, the stocks of the RusHydro Group were included into the index FTSE4Good Emerging (developed by an independent agency FTSE Russel) for tracking the value of shares of companies which demonstrate strong Environmental, Social and Governance (ESG) practices.

GOVERNMENT AUTHORITIES

RusHydro Group cooperates with federal and regional government authorities of the Russian Federation.

The key objectives of government relations are development of partnership to enhance the competitiveness of national and regional economies, social development of the regions on the basis of statutory compliance and transparency of the Group’s activities.

Managers of PJSC RusHydro take part in the work of the following commissions and working groups under the President and the Government of the Russian Federation on the development of fuel and energy complex and social and economic development of the regions of the Russian Federation:

  • Presidential Commission on development strategy of fuel and energy complex and environmental safety;
  • Government Commission on development of electric power industry;
  • Government Commission on fuel and energy complex and energy efficiency improvement of the economy;
  • Government Commission on social and economic development of the Far East and Baikal regions;
  • Government Commission on social and economic development of the Northern Caucasia Federal District;
  • State Commission on development of the Arctic;
  • Government Commission on safety of power supply (federal headquarters);
  • Inter-agency working group preparing suggestions intended to improve efficiency, of the activities of power industry organizations;
  • Government Commission of Ministry of the Russian Federation for the Development of the Far East;
  • Working group on sustainable operation of water utilization systems and hydro-meteorological activities of the Russian Federation;
  • Government Commission on the natural resource use and environmental protection.

Besides, the work is carried out with the relevant and other committees of the Federal Assembly of the Russian Federation on matters affecting the activities of PJSC RusHydro.

In 2016, specialists of PJSC RusHydro participated in parliamentary hearings, «round tables» and a number of advanced meetings of the Russian Federal Assembly committees with the participation of representatives of the federal authorities of the Russian Federation and the authorities of the RF constituent entities, as well as representatives of energy companies, on matters directly related to the Company’s activities, including on the following draft laws:

  • «On Amendments to Articles 51, 55 of the Urban Development Code of the Russian Federation»;
  • «On Amendments to the Federal Law «On Electric Power Industry in terms of changing the tariff setting mode in the Far Eastern Federal District»;
  • «On Heat Supply» and on amendments to separate legislative acts on improving the system of relations in the field of the heat supply».

As a result of the participation of the RusHydro’s representatives in the activities of the Federal Assembly of the Russian Federation, the Company has submitted comments and suggestions, which were taken into account while finalizing the relevant draft legislation.

The Company does not transfer money for the political goals.

REGIONAL AUTHORITIES

Recognizing the need for mutually beneficial cooperation with regional and municipal authorities aimed at sustainable social and economic development of the regions and increase in the efficiency of its activities in the regions, the Company enters into cooperation agreements with territorial authorities.

As of 31.12. 2016, the agreements on cooperation of RusHydro Group were concluded with the authorities of the following regions:

  • Dagestan Republic,
  • Khakassia Republic,
  • Kamchatka Region,
  • Amur Region,
  • Volgograd Region,
  • Irkutsk Region,
  • Moscow Region,
  • Sverdlovsk Region.

The Group is convinced that sustainable contacts with territorial authorities in the implementation of regional programs of social and economic development and investment projects of PJSC RusHydro will serve as a guarantee of successful operations in the regions.

BUSINESS (INTERNATIONAL) PARTNERS

Development of international activities is one of the RusHydro Group’s priorities.

The main objectives of the Company international activities are:

  • attracting investments, advanced and innovative technologies and equipment to support the RusHydro’s projects;
  • expanding the RusHydro’s presence on foreign markets taking into account its unique long-term accumulated experience in the field of design, construction and operation of hydropower facilities.

RusHydro Group focuses on long-term and mutually advantageous cooperation with foreign partners that is in the best interests of the stakeholders. The main directions of international activities are:

  • representation of the interests of RusHydro Group and the Russian power industry in political, industrial and business areas;
  • bilateral cooperation with foreign energy companies and energy equipment producers, including development of joint ventures and nationalization of products on the territory of Russia;
  • cooperation with intergovernmental organizations and sectoral and business associations;
  • attraction of foreign investments to the RusHydro’s projects;
  • exchange in experience, innovations, and new technologies in hydropower, thermal power, RES, and heat supply;
  • foreign market promotion of the competences of the RusHydro’s scientific and design project on hydropower and RES;
  • monitoring of processes in the global energy industry.

In the reporting year, the Company continued cooperation with the largest foreign companies, and also concluded a number of new agreements. The largest world generating and engineering companies and the power equipment producers including Mitsui, KOMAIHALTEC, Kawasaki Heavy Industries and Sojitz, Voith Hydro, GE, PowerChina and ZHEFU are the main partners of RusHydro.

Together with the Japanese companies Mitsui, KOMAIHALTEC, Kawasaki Heavy Industries and Sojitz, the possibilities of joint implementation of projects in the field of development of HPPs, PSPs, wind and geothermal power facilities, as well as production of liquefied hydrogen, are being explored. The cooperation with Voith Hydro on the project of nationalization of products and modernization of the equipment of the hydroelectric power plants and modernization of Saratovskaya HPP is continuing. As part of the comprehensive modernization of the PJSC RusHydro’s assets in the field of thermal generation in the Far East of Russia, the cooperation with energy companies and power equipment manufacturers from Japan, China, the United States and other countries is carried out.

In the field of hydropower and RES, in 2016, the RusHydro’s engineering organizations successfully completed the contracts on provision of design services at facilities in Turkey and Vietnam. In reporting year, a number of contracts and agreements on provision of engineering services were concluded within implementation of some energy projects, namely, design of the technical water supply system of the Kudankulam NPP in India and design of the Rogunskaya HPP in Tajikistan.

Main business-to-business documents signed in 2016

AgreementArea of cooperationAdvantages
Agreement on technological cooperation between PJSC RusHydro and Mitsui & Co., Ltd (02.09.2016)Cooperation in the field of joint development of strategic cooperation for implementation of new projects using technologies and expertise of the Japanese sidePossibilities of attraction of investments and modern international technologies
Memorandum of Understanding on the implementation of cooperation projects between PJSC RusHydro and Mitsui & Co, Ltd (16.12.2016)Cooperation and joint implementation of potential projects mainly in the field of thermal, hydro, wind, geothermal energy and production of liquefied hydrogenPossibilities of attraction of investments and modern international technologies
Memorandum of Understanding on Acquisition of Treasury stocks of PJSC RusHydro between PJSC RusHydro, Mitsui and Japan Bank for International Cooperation (JBIC) (02.09.2016)Implementation of acquisition of treasury stocks of PJSC RusHydroFund raising for implementation of projects within the territory of the Russian Federation
Memorandum of Intent between PJSC RusHydro, Mitsui and KOMAIHALTEC Ink (16.12.2016)Implementation of potential joint wind energy projects (within the framework of the RES Development Program). For this purpose, the Parties intend to reduce the cost of RES projects by producing wind power plants (WPPs) or WPPs element (elements) on the territory of the Russian FederationAttraction of investments and modern international technologies
Agreement between PJSC RusHydro, Kawasaki Heavy Industries, Ltd and Sojitz Corporation on cooperation to expand the use of GTUs during implementation of projects in the Far Eastern Federal District (16.12.2016)Cooperation to expand the use of GTUs during implementation of projects on the territory of the Far Eastern Federal District. According to this agreement, Kawasaki undertakes to certify the GTU's manufactured equipment in accordance with the Russian standards, and establish together with Sojitz a service company in the Far Eastern Federal District in 2017 to maintain this equipmentAttraction of modern international technologies and equipment
Declaration of intent on cooperation in the field of RES development between PJSC RusHydro, the Republic of Sakha (Yakutia) and the New Energy and Industrial Technology Development Organization of Japan (NEDO) (16.12.2016)Cooperation in the implementation of mutually beneficial Russian-Japanese projects in isolated energy areas of the Russian FederationPossibilities of attraction of modern international technologies
Memorandum on modernization of hydroturbines at Saratovskaya HPP between PJSC RusHydro, Voith Hydro and LLC VolgaGidro (16.06.2016)Optimization of 10% of the contractual value of production operations, performed at PLC VolgaGidro. Modernization of 21 hydroturbines and hydroelectric unit No. 24 of Saratovskaya HPP («turn-key»)Attraction of modern international technologies and equipment

RUSHYDRO’S PARTICIPATION IN INTERNATIONAL ORGANIZATIONS

One of the mechanisms of the development of the RusHydro Group’s international business is participation in the work of intergovernmental commissions on trade, economic, scientific and technical cooperation between the Russian Federation and foreign countries with the subsequent establishment of working contacts with foreign business partners. PJSC RusHydro pays a considerable attention to participation in the activity of international power organizations. RusHydro has its representatives in a number of non-profit partnerships and international organizations-members of such organizations as:

  • Global Sustainable Electricity Partnership;
  • International Hydropower Association;
  • Russian-Chinese Business Council;
  • World Energy Council (where the participant is the RusHydro Group’s subsidiary company JSC Lengidroproject);
  • International Commission on Large Dams (where the participant is the RusHydro
  • Group’s subsidiary company JSC Vedeneyev VNIIG).

Moreover, the Company cooperates with international government organizations and integration associations including Eurasian Economic Union (EEU), CIS Electric Power Council (CIS EPC), Asia Pacific Economic Cooperation (APEC), Shanghai Cooperation Organization (SCO), BRICS, etc.

RUSHYDRO’S MEMBERSHIP IN RUSSIAN INDUSTRY ORGANIZATIONS

RusHydro Group is a member of Russian industry associations and non-profit partnerships:

  • Association NP Market Council;
  • Association of land and real estate owners and investors (NPASIN);
  • Hydropower of Russia Non-Commercial Partnership;
  • Russian Union of Industrialists and Entrepreneurs (RUIE);
  • NPP Power Industry Veterans Council;
  • Innovation and R&D Directors Club (iR&Dclub);
  • NP EnergoStroyAlyans;
  • Science and Engineering Board of UES;
  • All-Russian association of electric power industry employers;
  • NP Russian heat supply;
  • Association of suppliers of last resort and of supply (retail) companies (GPIESK);
  • Association EnergyProject;
  • SRO of Design engineers;
  • SRO NP Interregional union of special design engineering (NP SPETSPROYEKT);
  • National Association of Procurement Institutions (NAIZ);
  • Employers’ Union of Khabarovsk Krai (SRHK);
  • NP Union of Energy Engineers (NP SIE);
  • The Corporate Educational and Scientific Centre of the Unified Energy System (membership recalled in 2017).

PJSC RusHydro participation in the development of occupational standards

Representatives of PJSC RusHydro are members of the Council on Qualifications in the Electric Power Industry (ESPC). The Company is actively engaged in the development of occupational standards for the electric power industry and creation of the national system of qualifications.

The major work on the development of occupational standards for hydropower industry was carried out in 2014 and 2015. With the participation of PJSC RusHydro, 14 occupational standards were developed and approved. One of them was approved in 2016.

The branch of PJSC RusHydro, Corporate Hydropower University of RusHydro (KorUnG), conducts the development and introduces training programs based on the occupational standards for hydropower industry approved by the Ministry of Education of the Russian Federation.

In 2017, PJSC RusHydro is planning to continue work on professional and public accreditation of training programs on the basis of occupational standards, as well as to update the already approved occupational standards, which must be happening every three years.

In 2016, RusHydro Group sponsored and actively participated in the East Economic Forum, which was an efficient platform for establishment and strengthening of relations with foreign partners, in particularly, with Asia-Pacific countries, and attraction of the investors to the Far East energy infrastructure development projects. Another traditional international platform for RusHydro’s presence is the St. Petersburg International Economic Forum.

Charters, principles and initiatives supported by the Company

TitleYear of associationCountries where the document is used
Declaration on Water Reservoirs for Sustainable Development (ICOLD)2012International document
Social Charter of Russian Business (Russian Union of Industrialists and Entrepreneurs)2013Russia
Anti-corruption Charter (Russian Union of Industrialists and Entrepreneurs)2013Russia
Concept of Long-term Economic Development of the Russian Federation until 20202008Russia
Assessment Methods for the Compliance of Hydropower Projects to the Sustainable Development Criteria (IHA)2011International document
Russian Federation Power Sector Tariff Agreement for 2016-20182016Russia

SUPPLIERS AND CONTRACTORS

As one of the main generating companies of the country, RusHydro Group is a large customer of goods, works and services. The Group purchases high quality products, this allows it to ensure reliability and sustainability of its operations. In addition, the Company seeks to attract small and medium-sized businesses. In 2016, the Company implemented measures aimed at increasing transparency and centralization of the procurement system. (Read more about the Company’s procurement activities in 3.1.2. Procurement management).

In 2016, the major event on interaction with suppliers was the conference «Supplier’s Day», which was held on October 28 in Moscow. Its goal was to familiarize the market participants with the RusHydro’s procurement system, the basic requirements for suppliers, the future directions of purchasing under the new conditions. Among the participants were representatives of the Ministry of Energy of the Russian Federation, the Ministry for Development of the Russian Far East, the Federal Antimonopoly Service of Russia and the Federal Corporation for the Development of Small and Medium Enterprises, as well as more than 300 representatives of domestic and foreign companies – current and potential partners of the Group.

Requirements for suppliers and contractors

In the process of procurement, PJSC RusHydro imposes requirements on suppliers and contractors for labour protection and environmental safety.

The contracts on PJSC RusHydro cooperation with contractors must specify the requirements for compliance with existing environmental and sanitary-epidemiological norms, as well as technical regulations for the waste management.

For example, «Specifications for management of the production and consumption waste» was adopted at the branch of PJSC RusHydro «Votkinskaya HPP», that defines the environmental responsibility of contractors in this area.

EMPLOYEES

Human capital is one of the key resources of the Group. Being a responsible employer, RusHydro provides decent wages and social guarantees to the employees, interacts with trade union organizations, regularly conducts training and evaluation of the personnel.

Read more in 5.1 Human resources development

HIGHER EDUCATION INSTITUTES AND OTHER EDUCATIONAL ESTABLISHMENTS

PJSC RusHydro actively interacts with institutions of secondary and higher education in terms of preparation and selection of future personnel.

In accordance with the Cooperation Agreement signed between PJSC RusHydro and the Moscow Power Engineering Institute (MPEI), the Hydropower Engineering and RES department is established in the MEI.

In addition, the Group has a Corporate Elevator system, which includes projects for school and university students.

Read more in 5.1 Human resources development

CUSTOMERS AND CONSUMERS

Development of the retail energy sales business to ensure quality services and uninterrupted power supply to the consumers is one of the RusHydro’s strategic development trends. The Group’s energy supply (retail) activities are consolidated under the management of the subsidiary PJSC «Energy Supply Company RusHydro» (ESC RusHydro). The electricity is supplied through the controlled retail companies (PJSC Krasnoyarskenergosbyt, PJSC RESK and JSC Chuvashskaya Power Supply Company and PJSC FEEC).

There is a United Call Center, a platform that all customers (individuals) of the RusHydro energy retail companies can address. This platform allows to control quality of the operators’ work and makes the customers’ communication with energy retail companies more comfortable. Also, the call center is used to work with non-payers: they receive a reminder from the operators or in an automatic call mode.

The growing accounts receivable of the consumers remained one of the most relevant problems. The information on the offending organizations in terms of payment, as well as the planned outages are posted on the websites of energy retail companies, in order to attract public attention to the problem of non-payments for the electricity.

In order to stimulate the payment discipline of the consumers and to develop an effective dialogue between electricity suppliers and the consumers of electricity, housing and public utilities, a federal action «Reliable Partner» has been held in the Group since 2014. The RusHydro’s initiative is supported by the Ministry of Energy of the Russian Federation and by the Federation Council of the Federal Assembly of the Russian Federation.

Read more about the RusHydro Group’s responsibility for the product in. 3.1.4 Financial discipline and fair business practices.

PJSC RusHydro has a successful experience of cooperation with prospective energy-intensive industrial consumers, whose goal is to contract new generation and consumption facilities to hedge the risks of serious fluctuations in prices for electricity required for the operation of new enterprises during long-term period, as well as to implement joint investment projects.

Non-regulated contracts on purchase and sale of electricity and power between new generators and consumers can be an effective tool for raising borrowed funds under the terms of project financing. This practice is mutually beneficial for both producers and consumers of electric energy, as it allows to determine the price (the price formula) of electric energy in advance and fix it for a long period sufficient for the return of the investments and ensuring the accepted parameters of the economic efficiency of investment projects.

A database of potential consumers of electricity and power was created and agreements on cooperation with prospective energy-intensive consumers were signed as part of the ongoing work to contract the RusHydro Group’s generating capacities in the regions, where the new construction of generating facilities is planned, particularly, in the Far East regions.

There is a special section for potential consumers on the corporate website of PJSC RusHydro, where the Company offers industrial consumers to fill out an application with a description of the main characteristics of the existing or prospective enterprise with a view to discuss possible ways of cooperation.

Main agreements with potential energy-intensive industrial consumers signed in 2016

AdvantagesArea of cooperationAgreement
Agreement on cooperation No. 1010-224-24-2016 of 02.09.2016 between PJSC RusHydro and PJSC Polyus in the framework of East Economic Forum-2016The agreement is aimed at creation of conditions for mutually beneficial cooperation for reliable energy supply of the existing enterprises and promising projects of Polyus Group, as well as ensuring the efficiency of operation of the existing generating capacities of RusHydro Group and commissioning of the prospective onesTo ensure the capacity of the Ust-Srednekanskaya HPP, which is under construction in the Magadan Region by providing energy supply of the PJSC Polyus’s project for the development of the Natalka gold ore deposit, which is interlinked with the construction project of the Ust-Srednekanskaya HPP

1.3.3. Corporate Social Responsibility Management

The key issues of sustainable development are discussed at the meetings of the Board of Directors and the Company Management. An important role in the sustainable development management of RusHydro Group is played by the Committee for Reliability, Energy Efficiency and Innovation of the Board of Directors. It considers the issues of the long-term planning of the development of hydro-power and other RES-based generation, issues of the functional policies development (for example, technical policy, environmental policy, energy saving policy and energy efficiency policy), and corporate standards development in the field of technical regulation, etc.

The Company has adopted a number of corporate documents to regulate the CSR:

CSR AspectRegulatory Documents
Sustainable production
  • Development Strategy of RusHydro Group for the period until 2020, with a perspective for up to 2025
  • Long-term Development Program of RusHydro Group for 2016-2020
  • RusHydro Group Technical Policy
  • Provision on the working group for technical Regulation of PJSC RusHydro
  • Directive on the management of investments in the form of capital investments
  • Provision on Standardization System of PJSC RusHydro
  • Provision on the Internal Control System Management of PJSC RusHydro
Procurements
  • Provision on procurement policy for the needs of PJSC RusHydro
  • Provision on procurement policy for the needs of PJSC RAO ES of the East
  • Methods of evaluation of the goodwill and financial condition of the procurement procedures participants of PJSC RAO ES of the East
Business Ethics and Anti-corruption
  • Code of Corporate Ethics of PJSC RusHydro
  • Conflict of Interest Management Policy of PJSC RusHydro
  • Helpline of PJSC RusHydro
  • Provision on Insider Information of PJSC RusHydro
  • Anti-corruption Policy of PJSC RusHydro
  • Local normative documents (acts)
Environmental Impact
  • Environmental Policy of PJSC RusHydro
  • Environmental Policy of PJSC RAO ES of the East
  • Energy Saving and Energy Efficiency Improvement Programme of PJSC RusHydro for the period up to 2020
  • Policy of Energy Saving and Energy Efficiency
  • Improvement of RAO ES of the East
Occupational Safety and Health
  • RusHydro Group’s Labour Protection Policy
  • Occupational Health and Safety Policy of PJSC RAO ES of the East
Charity
  • Charity and Sponsorship Policy of PJSC RusHydro
  • Charity and Sponsorship Policy of PJSC RAO ES of the East
Innovation Development
  • The RusHydro Group Innovative Development Program for 2016-2020 with a perspective for up to 2025
  • RAO ES of the East Innovative Development Program for 2016-2020 perspective for up to 2025
  • Concept of the scientific and design complex reformation of PJSC RusHydro
Human Resources Management
  • Social Policy of PJSC RusHydro
  • Provision on the organization of the trainings for the employees of PJSC RusHydro
  • Provision on the performance appraisal of the personnel of the Branches of PJSC RusHydro
  • Provision on creation of the database of the candidates for the positions in PJSC RusHydro branches
  • Provision on the work with employee pool of PJSC RusHydro
  • Concept of pro-active human resources development «From the New School to the Workplace»

Implementation of the activities focused on sustainable development is performed by the Special Units in the area of their functional responsibility:

  • social responsibility – the Personnel Management Unit;
  • interaction with public authorities in the regions of presence and creation of the favourable social climate for the Company’s effective development – the Unit of interaction with public authorities and civil society, administrative support and international cooperation;
  • economic responsibility – the Unit of economic planning and investments, the Unit of production activities, the Unit of capital construction and engineering activities, the Unit of financial and corporate and legal administration;
  • generation of electric power, enhancement of energy efficiency and ecological responsibility – the Unit of production activities.

1.3.4. Business Ethics

Corporate Governance Code of PJSC RusHydro was updated in 2016 and represents the main document, which contains the Company’s ethical norms. The document contains the basic principles and rules of ethics, recommendatory ethical standards for employees and members of the Board of Directors, and is compulsory for familiarization to new employees. If the Code is violated by a member of the Management or the Board of Directors, the violation is subject to review by the Personnel and Remuneration Committee. If the Code is violated by new employees, the violation is reviewed in accordance with the procedure established by local regulatory documents (acts).

PJSC RusHydro Corporate Governance Code gives definition of conflict of interests for employees and members of the Board of Directors and specifies the obligation of the Board of Directors members to act within the Company interests, to avoid the conflict of interests and to inform annually about their affiliation. This practice aims at revealing and preventing of conflict of interests during decision-making at the Board of Directors level and it helps to implement the precaution principle at the Management and the Board of Directors level. In 2016, a revised Conflict of Interest Policy of PJSC RusHydro and Provision on the clearing of conflict of interest in PJSC RusHydro were adopted.

HELPLINE

Since 2012, Helpline has been permanently in operation in the Company web-site. It is a communication channel for applications of the PJSC RusHydro employees and third persons related to the issues of corruption and suppression of illegal actions. It concerns bribery, abuse of power, illegal use of official position against the Company’s interests to obtain benefits and emergence of conflict of interests.

In 2016, the revised Rules of Helpline operation and the Regulations for appeals reception, consideration and response preparation were approved. The new versions of the Rules contain the list of priority issues related to the reception and consideration of the appeals, adoption of appropriate measures (if necessary) and preparation of responses.

ANTI-CORRUPTION

Rejection of any form of corruption is one of the basic ethical principles of the Company. All the Company employees and members of the Board of Directors must meet the terms of the Russian legislation and international law in the field of anti-corruption efforts. All interactions of the RusHydro Group companies with the representatives of government bodies are taking place strictly within the framework of procedures and regulatory legal acts developed by the state structures, which makes possible to exclude informal relations that create conditions for corruption practices.

The regulatory framework of anti-corruption activities is based on:

  • Anti-corruption Policy;
  • Corporate Governance Code;
  • Conflict of Interest Management Policy;
  • Integrated Program on Anti-Corruption Activities (synchronized with the National Anti-Corruption Plan for 2016-2017);
  • Local normative documents (acts).

As of 31.12.2016, 51% of the subsidiaries of RusHydro Group (25 companies) adopted the Anti-Corruption Policy and the Conflict of Interest Management Policy. The rest 14% of subsidiaries (7 companies) have these documents under approval.

PJSC RusHydro systematically works to prevent and detect corruption at the RusHydro companies and to eliminate the corruption’s reasons. For implementation of the Integrated Program, the Chairman of the Management Board (the General Director of PJSC RusHydro) annually approves the plan of measures, records the targets for a year and the officials’ personal responsibility for achievement of these goals.

The major lines in anti-corruption activity are measures aimed at prevention of facts of corruption. Among them, there are detection and prevention of conflicts of interest, monitoring of corruption risks. Based on the results of risk analysis, the Company develops and introduces procedures for corruption management that comply with international requirements, and monitors their compliance. In-process monitoring of the Integrated Program compliance is performed by Internal Control and Risk Management Director – Chief Company Auditor.

PJSC RusHydro is a member of Anti-Corruption Charter of the Russian Business adopted by business community in 2012 in terms of implementation of National Anti-Corruption Plan.

In 2016, the main objective in the field of anti-corruption activities of the Company was implementation of a set of measures envisaged by the Anti-Corruption Charter of Russian Business and the Methodological Recommendations for the Development and Adoption by Organizations of Measures to Prevent and Combat Corruption (developed by the Ministry of Labour of the Russian Federation and approved by the Presidium of the Council under the President of the Russian Federation on Combating Corruption).

In 2016, PJSC RusHydro systematically included into its activities the development and implementation of comprehensive and consistent measures to prevent, eliminate (minimize) the reasons and conditions that generate corruption. In 2016, the Company adopted the complex Anti-Corruption Program of PJSC RusHydro.

Key actions of PJSC RusHydro in the field of combating corruption in 2016

DirectionMeasure
Improvement of the local normative acts base of RusHydro
  • The Management approved the Complex anti-corruption program of PJSC RusHydro (Minutes No. 967pr of 18.03.2016)
  • The revised Conflict of Interest Policy of PJSC RusHydro was approved by the Board of Directors on 07.04.2016 (Minutes No. 235 of 08.04.2016)
  • Anti-corruption policy of PJSC RusHydro was approved by the Board of Directors on 07.04.2016 (Minutes No. 235 of 08.04.2016)
  • The revised Rules of operation of the Helpline of PJSC RusHydro was approved (Order No. 296 of 25.04.2016)
  • The revised Rules for consideration of appeals and preparation of responses to the appeals from the Helpline was approved (Order No. 296 of 25.04.2016)
  • The revised provision on the clearing of conflict of interest in PJSC RusHydro was approved (Order No. 428 of 09.06.2016)
  • Provision on Commercial Secret of PJSC RusHydro is developed and is now under approval
Prevention of corruption
  • Informing of RusHydro employees and stakeholders on ethical principles, anti-corruption policy and intolerance of the Company against violators of ethical principles
  • Issue of thematic publications in the corporate newspaper «Vestnik RusHydro», on the website and in the Company’s blog
  • Publication of the «Questionnaire on Conflict of Interest» and limiting criteria on consideration of the appeals received by the Helpline on RusHydro’s website
  • Publication of Anti-corruption policy, Complex anti-corruption program, information on the results of anti-corruption activities, methodological materials on the external and internal websites of PJSC RusHydro
  • Development and coordination of posters and banners on anti-corruption topics for posting on the website and in the office building of RusHydro
Organization of work on verification of reports on the facts of corruption (unlawful actions)
  • Operation of the Helpline on the website (since 2012)
  • Updating the information on about the Helpline (In 2016, the revised Rules of operation of the Helpline and the revised Rules for consideration of appeals and preparation of responses to the appeals from the Helpline of PJSC RusHydro were published
  • Regular check of the mailboxes of the Helpline located in the halls of the offices for correspondence
  • Awareness raising of the Helpline’s employees and possible channels of appeal
Interaction with state regulatory bodies and law enforcement agencies in the field of combating corruption
  • The Department of Economic Security, Regime, Special Activities and Information Protection prepared and forwarded the requested materials as part of execution of 19 inquiries from the Investigative Committee of Russia. The materials were transmitted in full and within the time limits established by law
Prevention of illegal actions by employees
  • On-line course “Fraud Management» was developed and included into the system of distance learning. It describes actions for fraud management and corruption. Distance learning is included in the 2017 Work Plan of the Corporate Hydropower University of RusHydro (KorUnG)
  • As part of the agreements conclusion, 547 counterparties of RusHydro were inspected (there were no facts or signs of conflicts of interest)

In 2016, as part of the measures under the Integrated Program of Anti-Corruption Activities of PJSC RusHydro, employees of the executive office, branches and subsidiaries on the positions exposed to corruption risks were tested under anti-corruption legislation of the Russian Federation.

326 employees took part in the testing, including:

  • 83 employees of the Company’s executive office;
  • 136 employees of the Company’s branches;
  • 107 employees of the subsidiaries.

Since December 1st, 2016, the local regulatory documents (acts) of PJSC RusHydro (Anti-corruption Policy of PJSC RusHydro, Conflict of Interest Management Policy of PJSC RusHydro, Helpline of PJSC RusHydro) were introduced in PJSC RAO ES of the East.

In 2016, Helpline received 196 appeals, 95 of them were accepted for consideration (the rest were not considered as not meeting the criteria established by the Rules of Helpline operation), five of them are under consideration.

In 13 cases, measures of organizational impact were taken: preventive conversation, staff training, claim related work and improvement of activities. Based on the results of the official inspections / investigations on appeals to the «Helpline» one person was dismissed, four people were brought to disciplinary responsibility.

In 2016, no criminal cases related to corruption were brought against PJSC RusHydro and its employees. In 2016, there were no cases of non-renewal of contracts with business partners because of corruption-related violations and legal actions against the companies of the Group or their employees related to corruption practices.

Офис Малая Дмитровка 7

PREVENTION OF THE USE OF INSIDER INFORMATION

The Provision on Insider Information is in force in PJSC RusHydro. The document regulates the Company’s compliance with the Russian legislation on prevention of an illegal use of insider information and market manipulation. The Provision has been developed taking into account the international practices of corporate governance, including the requirements of the Disclosure and Transparency Rules of the UK Financial Conduct Authority.

The list of insider information is published at the corporate website in Russian and English languages. The Company publishes information related to the insiders in Russian language in newsfeed of the authorized information agency Interfax and in English in RNS newsfeed.

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