CHAPTER 4
CORPORATE GOVERNANCE

4.2 Governing bodies

4.2.1 General Meeting of Shareholders

On 27.06.2016 the Company held its Annual General Meeting of Shareholders in Moscow where it approved the annual report, annual accounting (financial) statements, profit distribution at the end of 2015, declared dividends, elected new Board of Directors and the Audit Committee, approved by the auditor of the Company. The Company has also decided to pay remuneration to members of the Board of Directors, approved amendments to the Articles of Association, the Regulations on the Procedure for Convening and Holding Meetings of the Council and the Directors of the Company, the Regulation on the Audit Committee of the Company, the Regulations on remuneration and compensation to members of the Audit Commission, the Regulation on payment of remuneration and compensation to members of the Board of Directors and also approved the interested party-transactions.

Materials of the meeting, including the Minutes.

4.2.2 The Board of Directors

The Board of Directors consists of 13 directors. The Board of Directors acts on the basis of the Regulations on the Procedure for Convening and Holding Meetings of the Board of Directors of PJSC RusHydro25, approved by the General Meeting of Shareholders on June 27, 2016. (Minutes of the annual General Meeting of Shareholders of PJSC RusHydro No.15 of June 29, 2016)

In 2016, there were two members of the Board of Directors – the board elected by the annual General Meeting of Shareholders on June 26, 2015 and the board elected on June 27, 2016. Out of 13 members of the Board of Directors, 8 members of the Board of Directors acted in each of these boards, 5 members of the Board of Directors were elected in 2016.

The liability of the Board of Directors’ members is insured annually.

BOARD OF DIRECTORS COMPOSITION ON 31.12.16

Yury Trutnev – Chairman of the Board of Directors

Birth year: 1956. Education: Perm Polytechnic Institute (mining engineer)
Experience over the past 5 years:

  • 2004-2012 – Minister of Natural Resources and Environment
  • 2012-2013 – Assistant to the President of the Russian Federation
  • Since 2013 – Deputy Chairman of the Russian Government – Presidential Plenipotentiary in the Far Eastern Federal District
  • Member of the Supervisory Board of the State Corporation «Rosatom»

Nominated by (2016): Russian Federation
Status: Representative of the Russian Federation, voting on directives. Membership in the Board of Directors: since 2015
Committees: Committee for the Development of Energy in the Far East

Artem Avetisyan – Member of the Board of Directors during 2016

Birth year: 1976. Education: Finance Academy under the Government of the Russian Federation (estimated activity «Finance and Credit»)
Experience over the past 5 years:

  • Since 2011 – the director of the direction of the «New Business» ANO «Agency of strategic projects for the promotion of new initiatives»
  • 2014-2016 – Vice-President of «NEO Centre»
  • 2015-2016 – President of «Commercial Bank» Uniastrum

Nominated by (2016): Russian Federation
Status: Representative of the Russian Federation, voting on directives. Membership in the Board of Directors: since 2015
Committees: Investments Committee

Maxim Bystrov – Member of the Board of Directors during 2016

Birth year: 1964. Education: Moscow Civil Engineering Institute. VV Kuibyshev (hydraulic engineering structures and river hydro power plants) All-Russian Academy of Foreign Trade, (the world economy)
Experience over the past 5 years:

  • 2010-2013 – Deputy Plenipotentiary Representative of RF President in the North Caucasian Federal District
  • Since 2013 – Chairman of the Board of JSC «ATS», Since 2014 – Chairman of the Board and Member of the Supervisory Board of the Association «NP Market Council»
  • He is a member of the BoD JSC Resorts of the North Caucasus, JSC UES;
  • Chairman of the Board of Management Company Airport Mineralnye Vody

Nominated by (2016): Russian Federation
Status: Recognized by the Board of Directors as an independent director. Membership in the Board of Directors: since 2013
Committees: Audit Committee, Personnel and Remuneration Committee, Investment Committee

Pavel Grachev – Member of the Board of Directors since 27.06.2016

Birth year: 1973. Education: St. Petersburg State University, jurisprudence, lawyer; University of Trieste, jurisprudence, Doctor of law.

Experience over the past 5 years:

  • 2011-2013 – Head of Representative Office
    ALPINA KAPITAL EI.S.E.L. LIMITED «(Republic of Cyprus), Moscow
  • 2013 – CEO of JSC «Fund for Development of the Far East and Baikal Region»
  • 2013- 2016 – member, Board of Ditrectors, Polyus Gold International Limited
  • 2013-2014 – Acting CEO Polyus Gold International Limited
  • 2014 – Chairman of the Board of Managing Directors
    Representative offices of NGO Nafta Moscow (Cyprus) Limited (Republic of Cyprus) Moscow
  • 2014-2016 – President of JSC Polyus
  • Since 2016 – CEO, member of the Board of Directors of LLC «MC Polus»
  • Since 2014 – Chief Executive Officer of Polyus Gold International Limited

Nominated by (2016): Russian Federation
Status: Independent Director. Membership in the Board of Directors: since 2016
Committees: The Strategy Committee, the Committee for the Development of Energy in the Far East

Sergey Ivanov – Chairman of the Board of Directors Deputy during 2016

Birth year: 1961. Education: Moscow Engineering Physics Institute (theoretical nuclear physics)
Doctor of Economic Sciences, Professor, Corresponding Member of the Russian Academy of Sciences

Experience over the past 5 years:

  • 2012-2015 – CEO of LLC Lenset
  • 2015-2016 – CEO of JSC Corporation Nechernozemagropromstroy
  • 2011 – 2016 – CEO of JSC «Erko»
  • Since 2016 – CEO, member of the BoD of the LLC RT Kapital

Nominated by (2016): Russian Federation
Status: Recognized by the Board of Directors as the Independent Director. Membership in the Board of Directors: since 2015
Committees: Audit Committee, Personnel and Remuneration Committee, Committee on Reliability, Energy Efficiency and Innovation

Vyacheslav Kravchenko – Member of the Board of Directors during 2016

Birth year: 1967. Education: Moscow State University. University (jurisprudence)

Experience over the past 5 years:

  • 2010-2012 – CEO JSC United Energy Company
  • 2012-2013 – Chairman of the Management Board of ATS OJSC
  • 2012-2013 – Chairman of the Management Board of NP Market Council
  • From 2013 – Deputy Minister of Energy of the Russian Federation
  • Chairman of the Board of Directors of JSC SO UES
  • Member of the Board of Directors of PJSC MOESK, PJSC IDGC of Siberia, PJSC Rosseti
  • Member of the Supervisory Board of NP Market Council
  • Member of the Board of Trustees of NIU MPEI

Nominated by (2016): Russian Federation
Status: Representative of the Russian Federation, voting on directives. Membership in the Board of Directors: since 2014
Committees: Committee on Reliability, Energy Efficiency and Innovation, Committee for the Development of Energy in the Far East

Vyacheslav Pivovarov – Member of the Board of Directors during 2016

Birth year: 1972. Education: State Academy of Management Sergo Ordzhonikidze (World Economy). American University in Paris (Applied Economics) Stanford University, MBA

Experience over the past 5 years:

  • Since 2011 – President of Altera Capital LLC
  • Member of the Board of Directors of GeoProMining Investment Ltd (Cyprus)

Nominated by (2016): Russian Federation
Status: Independent Director. Membership in the Board of Directors: since 2013
Committees: Audit Committee, Personnel and Remuneration Committee, Investment Committee

Nikolay Podguzov – Member of the Board of Directors since 27.06.2016

Birth year: 1974. Education: St. Petersburg State Technical University; Moscow State Institute of International Relations (University) of the Ministry of Foreign Affairs of Russia

Experience over the past 5 years:

  • 2010-2012 head of department, head of the management of CJSC VTB Capital.
  • 2012-2013 Deputy Director of the Department of Economics and Finance of the Government Office of the Russian Federation
  • Since 2013 he is Deputy Minister of Economic Development of the Russian Federation
  • Member of the Board of Directors of GC ASV, JSC Russian Railways, PJSC Rosseti and Member of the Supervisory Board of JSC AHML

Nominated by (2016): Russian Federation
Status: Representative of the Russian Federation, voting on directives. Membership in the Board of Directors: since 2016
Committees: The Strategy Committee

Nikolai Rogalev – Member of the Board of Directors since 27.06.2016

Birth year: 1962. Education: Moscow Power Engineering Institute (Thermal Power Plants)

Experience over the past 5 years:

  • 2012 – deputy of Manager of the Energy without Borders Foundation,
  • 2013 – Acting Rector of FGBOU IN «NIU MPEI»
  • Since 2013 – the Rector of the State Educational Establishment of Higher Professional Education in the NIU MPEI
  • 2001-2013 Head of Department Department (part-time) FGBOU IN NIU MPEI
  • Since 2016 – President of the NP «Scientific and Technical Council of the Unified Energy System»
  • Member of the Board of Directors of PJSC Rosseti

Nominated by (2016): Russian Federation
Status: Representative of the Russian Federation, voting on directives. Membership in the Board of Directors: since 2016
Committees: Committee on Reliability, Energy Efficiency and Innovation; Strategy Committee; Committee on Investments

Alexey Chekunkov – Member of the Board of Directors since 27.06.2016

Birth year: 1980. Education: Moscow State Institute of International Relations, (economist)

Experience over the past 5 years:

  • 2011-2013 Director of LLC «UK» RFPI
  • 2013-2014 First Deputy CEO of OOO Kada-Neftegaz
  • Since 2014 – CEO of JSC «Fund for the Development of the Far East and Baikal Region»
  • He is a Member of the Supervisory Board of ALROSA (PJSC), ANO Agency for the Development of Human Capital in the Far East, ANO Agency of the Far East on attraction of investments and export support, Member of the Board of Directors of the JSC Corporation for the Development of the Far East

Nominated by (2016): Russian Federation
Status: Member of the Board of Directors. Membership in the Board of Directors: since 2016
Committees: Committee on Energy Development of the Far East; Committee on Reliability, Energy Efficiency and Innovation; Committee on Investments

Sergey Shishin – Member of the Board of Directors during 2016

Birth year: 1963. Education: Higher School of the KGB Border. University KGB Russian Academy of Public Administration under the President of the Russian Federation (state and municipal administration)

Experience over the past 5 years:

  • Since 2007 – Senior Vice President of JSC Bank VTB, Member of the Supervisory Board of JSC «RRDB»

Nominated by (2016): Russian Federation
Status: Member of the Board of Directors. Membership in the Board of Directors: since 2011
Committees: The Strategy Committee

Andrey Shishkin – Member of the Board of Directors during 2016

Birth year: 1959. Education: Moscow Institute of Petrochemical and Gas Industry. THEM. Gubkin (promteploenergetik-engineer)

Experience over the past 5 years:

  • 2010 – 2012 – Deputy Minister of Energy of the Russian Federation
  • Since 2012 – vice-president, since 2015 – also a member of the Management Board of PJSC NK Rosneft
  • Since 2015 – General Director of LLC RN-Active
  • Since 2016 – President, Chairman of the Management Board, Deputy Chairman of the Board of Directors of PJSC ANC Bashneft
  • Member of the Board of Directors of OJSC Tyumen Energy Retail Company, RN-CIR LLC, United Shipbuilding Company JSC, National Oil Consortium LLC; RIG Research Pte. Ltd, Saras S.p.A., Chairman of the Board of Directors of JSC DCCS, JSC TsKB Lazurit

Nominated by (2016): Hydroinvest JSC
Status: Member of the Board of Directors. Membership in the Board of Directors: since 2014
Committees: Committee on Reliability, Energy Efficiency and Innovation; The Strategy Committee

Nikolay Shulginov – Member of the Board of Directors since 27.06.2016

Birth year: 1951. Education: Novocherkassk Order of the Red Banner of Labor Polytechnic Institute named after Sergo Ordzhonikidze (electricity supply of industrial companies and cities); Candidate of Technical Sciences

Experience over the past 5 years:

  • 2004-2015 – Deputy Chairman, First Deputy Chairman of the Management Board of JSC System Operator of the Unified Energy System
  • 2008-2012 – Member of the Board of Directors of PJSC «Mosenergo»
  • Since 2008 – Member of the Supervisory Board of NP «Scientific and Technical Council of the Unified Energy System»
  • Since 2015 – Member of the Board of Trustees of the Higher Education Federal State Educational Institution of Higher Education National Research University MEI,
  • Member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, Member of the Board of Trustees of the Federal State Autonomous Educational Institution of Higher Education «Siberian Federal University» (SFU),
  • Chairman of the Board of Directors of RAO Energy Systems of the East, Member of the Board of Directors of PJSC Rosseti, Member of the Supervisory Board of NP «Hydropower of Russia» and Association NP «Council of the market for the organization of an effective system of wholesale and retail trade in electrical energy and capacity»

Nominated by (2016): Russian Federation
Status: Representative of the Russian Federation, voting on directives, Chairman of the Management Board – CEO. Membership in the Board of Directors: since 2016
Committees: The Strategy Committee

MEMBERS OF THE BOARD OF DIRECTORS FUNCTIONED UNTIL JUNE 27, 2016

Evgeny Dod – Representative of the Russian Federation, voting on directives

1973 year of birth. Education: Moscow Aviation Institute – State Technical University (economics and management at the enterprises of mechanical engineering). Candidate of Economic Sciences

Nominated by (2015) Russian Federation
Membership in the Board of Directors: Since 2010

Victor Zimin – Representative of the Russian Federation, voting on directives

1962 year of birth. Education: Tomsk State University of Architecture and Civil Engineering (cars and motor-car economics).

Nominated by (2015) Russian Federation
Membership in the Board of Directors: Since 2010

Larisa Calanda – Member of the Board of Directors

1964 year of birth. Education: Sverdlovsk Institute of Law (Law). Postgraduate Institute of Philosophy and Law of the Academy of Sciences of Belarus.

Nominated by (2015) Russian Federation
Membership in the Board of Directors: Since 2014

Denis Morozov – Representative of the Russian Federation, voting on directives

1973 year of birth. Education: Moscow State University. University (economics, law); The Swiss Banking School; Harvard Business School (Management); School of International Relations and Public Management at Columbia University (public administration, management of economic policy). Candidate of Economic Sciences.

Nominated by (2015) Russian Federation
Membership in the Board of Directors: Since 2013

Alexander Osipov – Representative of the Russian Federation, voting on directives

1969 year of birth. Education: Rostov-on-Don Institute of National Economy (Economic informatics and automation); Stavropol State University (jurisprudence); Academy of National Economy under the Government of the Russian Federation (financial management organisation).

Nominated by (2015) Russian Federation
Membership in the Board of Directors: Since 2015

Evaluation of the Board of Directors

In 2016, a remote evaluation (self-assessment) of the Board of Directors elected in 2015 was conducted. The evaluation was conducted with the involvement of the Association of Independent Corporate Directors «(AICD) – an organization not affiliated with the Company.

The average self-assessment of the work of the Board of Directors in nine areas is defined as 4.1 points on a five-point system, which, according to the methodology of the NCSA, is characterized as a «Mature Level».

During the evaluation, an action plan for 2016-2017 corporate year was drawn up and implementation of the action plan for improving the activities of the Board of Directors was noted in the following areas:

  • increase in the number of informal meetings of members of the Board of Directors and meetings of the Board of Directors (held on a full-time basis);
  • consideration of strategic directions of activity by the Board of Directors (at meetings of the Board of Directors held on a full-time basis);
    consideration by the Board of Directors of issues related to the risk management system;
  • consideration of the possibility of inclusion of the following issues into the agenda of the Board of Directors:
    – outcomes of the external evaluation of the Board of Directors,
    – a report on the implementation of this plan of measures to improve the
  • effectiveness of the work of the Board of Directors and committees;
    consideration of the possibility of inclusion of the following issues into the agenda:
    – consideration of the Company’s reports on the implementation of the directives of the Government of the Russian Federation on optimization of the Company’s operational and capital expenditures (in particular, directive No. 4750-P13 of July 4, 2016).

The results of the evaluation and the plan of measures to improve the work of the Board of Directors were considered by the Board of Directors of the Company on June 23, 2016

Conflict of interest

In accordance with the Code of Corporate Ethics of PJSC RusHydro approved by the Board of Directors on 21.05.2012 (Minutes No. 152) and the Code of Corporate Ethics of PJSC RusHydro approved by the Board of Directors on April 7, 2016 (Minutes No. 235), members of the Board of Directors must refrain from actions that will lead or are potentially capable of leading to a conflict of interest, and in the event of a conflict of interest, a member of the Board of Directors must notify the Company thereof. The obligation to notify on a fact of a conflict of interest (from June 27, 2016) is also contained in the Regulations on the Procedure for Convening and Holding Meetings of the Board of Directors.

In 2016, one notification from a member of the Board of Directors, Alexander Osipov, was received on the fact of a conflict of interest in the voting on the issue of «Preliminary approval of the projects of investment programs of PJSC» RusHydro «for 2016 (adjustment) and for 2017 – 2019 in order to disclose information on the projects of investment programs of PJSC RusHydro in accordance with the Resolution of the Government of the Russian Federation of January 21, 2004 No. 24».

According to Alexander Osipov, a member of the Board of Directors, the conflict of interests was expressed in the fact that he held a position in the Ministry of the Russian Federation for the Development of the Far East, which, in accordance with the normative legal acts of the Russian Federation, considers the investment programs of the electric power industry subjects (including JSC RusHydro) so that he abstained from the voting on this issue.

In 2016, there were no other notifications from members of the Board of Directors on their conflict of interest.

REPORT ON PERFORMANCE OF THE BOARD OF DIRECTORS

The Board of Directors of PJSC RusHydro is a collegial body whose main task is strategic management. In addition to the strategy, the Board of Directors implements corporate governance, investment and business planning, performance management, innovation development, risk management, audit and control, ensures sustainable development, including social policy, charity and environmental aspects. The Board of Directors is also involved in some of the most important operational issues requiring regular supervision, such as reliable operation of the Company’s facilities, approval of individual transactions, management of subsidiaries, and others.

In 2016 the Board of Directors held full-time meetings 6 times, also held 10 absentee voting. 177 issues were considered.

The number of meetings of the Board of Directors

Composition since 27.06.201610.08.1620.09.1607.10.1611.11.1622.11.1623.12.1626.12.16
In absentiafull-timeIn absentiafull-timefull-timefull-timeIn absentia
Avetisyan A .D.4/7 VV V V
Bystrov M. S.7/7VVVVVVV
Grachev P.S.7/7VVVVVVV
Ivanov S. N.7/7VVVVVVV
Kravchenko V. M.7/7VVVVVVV
Pivivarov V. V.7/7VVVVVVV
Podguzov N.R.6/7VVVVVV 
Rogalev N.D.7/7VVVVVVV
Trutnev Y. P.7/7VVVVVVV
Chekunkov A.O.7/7VVVVVVV
Shishin S.V.7/7VVVVVVV
Shishkin A.N.6/7V VVVVV
Shulginov N.G.7/7VVVVVVV
Composition since 26.06.201519.02.1625.02.1630.03.1604.04.1607.04.1612.05.1631.05.1606.06.1623.06.16
full-timeIn absentiaIn absentiaIn absentiafull-timeIn absentiaIn absentiafull-timeIn absentia
Avetisyan A. D.4/9  V  VVV 
Bystrov M. S.9/9VVVVVVVVV
Dod E. V.6/9 VV VVVV 
Zimin V.M.9/9VVVV VVVV
Ivanov S. N.9/9VVVVVVVVV
Calanda L. V.8/9VVVVVVVV 
Kravchenko V. M.9/9VVVVVVVVV
Morozov D. S.9/9VVVVVVVVV
Osipov A. M.8/9VVVVV VVV
Pivivarov V. V.9/9VVVVVVVVV
Trutnev Y. P.8/9VVV VVVVV
Shishin S. V.8/9VVVVVVVV 
Shishkin A. N.7/9VVVVVV V 

Attendance and participation of the Board members in the activities of the committees

AttendanceParticipation in committees
Visited%The Strategy CommitteeThe Audit CommitteeThe Committee on the Human Resources and RemunerationThe investment CommitteeThe Reliability, Energy Efficiency and Innovation CommitteeThe Development of Energy in the Far East Comittee
Composition since 31.12.2016
Trutnev Y.P.15/1693,75
Avetisyan A.D.8/16502/4
4/14
Bystrov M.S.16/1610012/169/1114/142/2
Grachev P.S.*7/71008/8
Ivanov S.N.16/1610016/1611/113/4
Kravchenko V.M.
16/161004/5
Pivivarov V.V.
16/1610016/1611/1114/14
Podguzov N.R.*6/785,716/7
Rogalev N.D.*7/71008/81/12/2
Chekunov A.O.*7/71006/60/1
Shishin S.V.15/1693,7511/12
Shishkin A.N.
13/1681,258/120/1
Shulginov N.G.*7/710011/12
Board members, whose membership was terminated at 27.06.2016
Dod E. V.6/966,66
Zimin V.M.9/91008/8
Calanda L. V.8/988,885/8
Morozov D. S.9/9100
Osipov A. M. 8/988,881/40/8

Agenda of the Board of Directors meetings on the most significant issues (quarterly)

1 Quarter

  • Election of a member of the Management Board
  • Preliminary approval of the investment program
  • Environmental policy
  • Questions of the Committees
  • Charity program and report
  • Changes to the standard Collective Agreement of the branches
  • Transactions and priority projects

2 Quarter

  • Approval of the Strategy
  • Report on the implementation of the Strategic Plan
  • Business plan – report for 2015 and 1 quarter of 2016
  • Investment program – report for 2015 and 1 quarter of 2016
  • KPI – report for 2015 and 1 quarter of 2016
  • Preparation of the AGM
  • Questions of the Committees
  • Board Report
  • Amendment of the Corporate Governance Code
  • Initiate cost audits
  • Evaluation (self-assessment) of the Council’s activities
  • The price of the auditor’s services
  • Transactions and Priority Projects

3 Quarter

  • Election of a Chairman and work plan
  • Questions of the Committees
  • Consolidated business plan of the Group
  • Business plan – report for the 2nd quarter of 2016
  • Investment program – a report for the 2nd quarter of 2016
  • KPI – a report for 2nd quarter of 2016
  • Initiation of the development of an innovative development program
  • Transactions and Priority Projects

4 Quarter

  • Long-term development program for 2016-2020
  • And the report for the first half of 2016
  • Business plan for 2017
  • Business plan – report for the 3rd quarter of 2016
  • Investment program of 2017
  • Investment Program – Report for the 3rd quarter of 2016
  • KPI 2017
  • KPI – Report for the 2nd quarter of 2016
  • KPI – Report for the 3rd quarter of 2016
  • Plan of measures to optimize costs
  • Innovative Development Program and Report
  • Placement of shares and «Non-Deliverable Forward»
  • Typical Collective Agreement of the branches for 2017-2019
  • Transactions and Priority Projects

The issues considered by the Board of Directors

See the Minutes of the meetings of the Board of Directors on the following website and in Appendix No. 7 to the Annual Report

THE BOARD OF DIRECTORS DEVOTED 6 MEETINGS TO THE COMPANY’S STRATEGY AND STRATEGIC TRANSACTIONS

In course of its meeting on 06.06.2016 the Board of Directors approved the Development strategy of the RusHydro Group for the period until 2020, with a perspective of up to 2025. At the meeting, the report on the implementation of the Strategic Plan of PJSC RusHydro for the period up to 2015 and the prospect until 2020 was reviewed. The Board of Directors was held in the form of a joint presence.

In accordance with the Directives of the Government of the Russian Federation, the Long-term Development Program of the RusHydro Group was amended at the meeting on October 7, 2016.

The Board of Directors at its meeting on 22.11.2016 approved the updated Long-term development program of the RusHydro Group for the period 2016-2020. At the meeting, the report on the implementation of the Long-term Development Program for the first half of 2016 was reviewed.

At its meeting on December 23, 2016, the Board of Directors of the Company approved target values ​​and methodology for calculating key performance indicators of the Long-Term Incentive Program of PJSC RusHydro for the first cycle for 2017-2019.

The Board of Directors decided to increase Authorized Capital by an additional issue of 40.429 billion rubles, and approved a strategic deal for the non-deliverable forward for shares of PJSC RusHydro aimed at attracting financing for refinancing debts of the subsidiaries of RAO “ES of the East” Holding. These issues were considered at the meetings on 22.11.2016, 26.12.2016 and 27.02.2017.

The strategic deals – the sale of the dams of the hydropower plant of the Angarsk cascade and the sale of a significant controlled company ESKB LLC, the Board of Directors approved at meetings on October 7, 2016 and 11.11.2016, respectively.
The sessions of 06.06.2016, 22.11.2016 and 23.12.2016 were held in the form of a joint presence. Information on the Strategy is presented in section 2.1. Strategy of the RusHydro Group.

THE BOARD OF DIRECTORS DEVOTED 9 MEETINGS TO THE BUSINESS PLANNING AND INVESTMENTS

The Business Plan and the Investment Program of the Company for 2017 are approved at the meeting on December 23, 2016. At the meeting, the Business Plan of the Company, including the Company’s Investment Program for 2018-2021, as well as planned data on investment objects of PJSC RusHydro and new construction sites of subsidiaries, taken into account for calculating the performance of the members of the Management Board of PJSC RusHydro «Implementation of capacity schedules and a plan for financing and development, %» were considered for the year of 2017.

The Consolidated Business Plan, including the Consolidated Investment Programof the RusHydro Group for 2016-2020 was considered and taken into account at the meeting on September 20, 2016.

The meetings were held in the form of a joint presence.

The Board of Directors preliminary approved the project of the Company’s Investment Program for 2016 (adjusted) and for 2017-2019, and reviewed the project of the Investment Program of the RusHydro Group for 2016 (adjusted) and for 2017-2019 at the meetings on April 7, 2016 and March 30, 2016, respectively.

The report on the implementation of the Business Plan and the Investment Program of the Company in 2015 was considered at a meeting on 06.06.2016 in the form of a joint presence.

The reports on the execution of the Business Plan and the Investment Program of the Company in the 1st quarter, half-year and the third quarter of 2016 were considered respectively on May 31, 2016, September 20, 2016 and December 26, 2016.

The Board of Directors quarterly reviewed the issue of the construction of 4 facilities in the Far East (Yakutskaya TPP-2 (1st stage), stage 2 of Blagoveshchenskaya TPP, TPP in Sovetskaya Gavan, Sakhalinskaya TPP-2 (Phase 1), approved a change in the management model for the construction of these facilities, approved changes to the agreement on the provision of budgetary investments, which previously attracted state budget funding for these facilities.

In addition, the Board of Directors in 2016 approved the Regulation on the business planning system of PJSC RusHydro, the Regulation on the accounting of investment projects included in the list of investment projects of the RusHydro Group, approved a report on the implementation of a public technological and price audit for 2015 of projects, being implemented and planned for implementation under the Investment Program of PJSC RusHydro, and a list of investment projects, being implemented and planned for implementation under the Investment Program of PJSC RusHydro, for conducting a public technological and price audit in 2016-2017, considered the implementation of certain investment projects of the Company.

Information on performance and investments is presented in sections 2.3 Financial results and 2.4 Investments.

THE BOARD OF DIRECTORS DEVOTED 8 MEETINGS TO THE MANAGEMENT OF EFFICIENCY, INNOVATIONS AND KEY INDICATORS.

By virtue of the decision of the Board of Directors as of 23.06.2016, an independent audit of the Company’s costs was initiated and a cost optimization plan was developed for subsidiaries.

The costs optimization strategy based on the results of an external independent audit of the Company’s costs taking into account the subsidiaries was approved at the meeting on 22.11.2016 in the form of a joint presence. The strategy was taken into account when forming the Business Plan, which includes the Investment Program for 2017.

The KPIs, including the target values ​​and methodology for calculating and evaluating the annual key performance indicators of the members of the Management Board of PJSC RusHydro, the target values ​​and methodology for calculating and evaluating the KPI for the Long-Term Incentive Program of PJSC RusHydro for the first cycle for 2017-2019 was approved at the meeting on December 26, 2016.

At its meeting on October 7, 2016 the Board of Directors adjusted the previously approved key performance indicators for 2016.

The Board of Directors considered the report on the implementation of the KPI of the Company in 2015 at the meeting of 06.06.2016.

Reports on the performance of key indicators of the Company in the 4th quarter of 2015, 1 – 3 quarters of 2016 were considered respectively on 06.06.2016, 31.05.2016, 07.10.2016 and 26.12.2016.

In 2016, the Board of Directors launched a new innovative development program of the RusHydro Group for 2016-2020 with perspective prospect of up to 2025 and approved it at the meeting on November 22, 2016 after approval of the report on the implementation of the Innovative Development Program of PJSC RusHydro for 2011-2015 with a prospect of up to 2021 for 2015.

The Board of Directors approved the Regulations on the procurement of products for the needs of PJSC RusHydro on June 23, 2016, approved by the Board of Directors of PJSC RusHydro and amended during 2016. The Board of Directors also delivered a number of orders to the management aimed at improving the efficiency of procurement activities.
The annual comprehensive procurement program of PJSC RusHydro for 2017 was approved at the meeting on December 26, 2016.

The reports on the implementation of the Annual comprehensive procurement program of PJSC RusHydro for 2016 were considered simultaneously with the approval of reports on the implementation of the Company’s Business Plan.

Information on measures to improve operational efficiency is presented in Section 2.3 Financial Results.

Information on procurement is provided in section 3.2.2 Procurement management.

Information about innovations is presented in section 2.5 Innovative development.

THE BOARD OF DIRECTORS DEVOTED 11 MEETINGS TO THE CORPORATE GOVERNANCE

In addition to the standard annual issues, related to the preparation of the Annual General Meeting of Shareholders, formation of Committees and consideration of reports on their activities, election of the Chairman and Vice-Chairman, planning of their work, consideration of the Board’s report, the Board of Directors in 2016 considered the issue of recognizing two directors as independent, reviewed the results of the evaluation (self-evaluation) of the Board of Directors, elected to the Board Kazachenkov A.V., considered the new organizational structure of the Company, approved the amendments to the Corporate Governance Code and the new edition of the Regulations on the Committees, the Regulation on the Corporate Secretary, decided to terminate the relationship with the former registrar and approved JSC VTB Registrar as a new registrar.

After the reporting date, at the meeting of 01.18.2017 the Management Board of Directors has increased the number of members of the Board by up to 6 people and has elected Markin V. I. to be a board Management Board member since 15.02.2017.

Apart from the foregoing, the Board of Directors considered audit issues in 2016, including the selection and recommendation of the auditor’s candidacy to the General Meeting of Shareholders, approved the remuneration of the auditor, approved the new version of the Internal Audit Policy, the Code of Ethics, the Anti-Corruption Policy, the Conflict of Interest Policy, the Environmental policy . It also considered the Charity and Sponsorship Program and the report on its implementation, approved the transactions of the Company and its subsidiaries, approved the Regulation of remuneration and compensation for the RusHydro Management Board members and the new edition of the Regulation of long-term motivation of PJSC RusHydro.

The list of issues considered by the Board of Directors other than those recognized as confidential is provided for in the form of the texts of the Minutes in Appendix No. 7.

4.2.3 The Committees of the Board of Directors

The Board of Directors of PJSC RusHydro has six committees: the Strategy Committee, the Audit Committee, the Investment Committee, the Personnel and Remuneration Committee, the Reliability, the Energy Efficiency and Innovation Committee and the Far Eastern Energy Development Committee.

The Audit Committee shall assist the Board of Directors in monitoring of the financial and business activities of the Company. The key function of the Committee is to monitor financial reporting, functioning of the internal control system, risk management, corporate governance, system of notification of dishonest actions, as well as to ensure the independence and fairnessof internal audit and external audit.

Information on internal audit is given in section 4.3 Audit and control.

The list of issues considered by the Audit Committee in 2016, in addition to those recognized as confidential, is given in Appendix No. 8.

1st half of 2016

CompositionKey issues
Independent members of the Board of Directors:

Ivanov S.N.
Bystrov M.S.*
Pivovarov V.V.
  • Compliance with insider information requirements
  • Annual report
  • Auditor’s reports for the year 2015
  • Auditor’s candidacy for 2016
  • Auditor’s opinion on the implementation of the Long-term Development Program in 2015
  • Opinion of the Audit Commission
  • Report on the implementation of the schedule of control activities
  • Report of the Audit Committee
  • Results of the procurement activities in 2015, corruption risks analysis
  • Evaluation of the effectiveness of the risk management system
  • Report of the RAS auditor, 9 months

2nd half of 2016

CompositionKey issues
Independent members of the Board of Directors:

Ivanov S.N.*
Bystrov M.S.
Pivovarov V.V.
  • Analysis of corruption risks in capital construction projects
  • Proposals to improve the effectiveness of the Long-term Development Program
  • Compliance with insider information requirements
  • Plan of the audit schedule for 2017
  • Report on the execution of the plan of the audit schedule.
  • Auditor’s plans for 2016
  • Auditor’s report for 6 months, 2016
  • Strategic risk management plan in 2016-2017
  • Internal Audit Policy
  • Registrar of the Company
  • Non-financial report

The Personnel and Remuneration Committee (nominations) functions for developing recommendations on the formation of a professional composition of the Company’s management bodies and effective and transparent practice of their remuneration. The main task of the Committee is the preliminary analysis and development of recommendations to the Board of Directors on issues within their competence.

Detailed information on remuneration to management bodies, control bodies and the auditor is provided in section 4.4 Report on remuneration to management bodies, control bodies and the auditor.

The list of issues considered in 2016 by the Committee for Personnel and Remunerations (nominations), other than those recognized as confidential, is given in Appendix No. 8.

1st half of 2016

CompositionKey issues
Independent members of the Board of Directors:

Pivovarov V.V.
Bystrov M.S.*
Ivanov S.N.
  • Election of Board Member
  • Additional agreement (typical) to the collective agreement of the Company’s branch for 2014-2016
  • Report on the results of the committee
  • Payment of remuneration to members of the Board
  • Regulation on remuneration and compensation of the Board of Directors in a new edition
  • Short-term and long-term motivation system of the Management Board and Chairman of the Management Board;
    the relationship between motivation and the Company’s Strategy (together with the Strategy Committee)

2nd half of 2016

CompositionKey issues
Independent members of the Board of Directors:

Pivovarov V.V.
Bystrov M.S.*
Ivanov S.N.
  • Regulations on the Corporate Secretary
  • Election of the Corporate Secretary
  • Organizational structure
  • KPI of members of the Management Board for 2017
  • Typical collective agreement of the branch for 2017-2019
  • Interested party transactions
  • Short-term and long-term motivation system of the Management Board and Chairman
    of the Management Board
  • Report of the Committee

The Strategy Committee functions to ensure effective work of the Board of Directors on the issues of strategic development of the Company.

Detailed information about the Strategy is given in section 2.1. Strategy of the RusHydro Group.

Information on the members of the Strategy Committee and the list of issues considered by the Committee in 2016, in addition to those recognized as confidential, are given in Appendix No. 8.

1st half of 2016

CompositionKey issues
Members of the Board of Directors:
Avetisyan A.D., Osipov A.M., Shishin S.V., Shishkin A.N.

Members of the Executive Bodies:
Shulginov N. G., Rizhinashvili D.I.

Committee members:
Auzan A.A.*, Zadvornov I.A., Mamin V.V., Nikonov V.V., Rusakov M.V., Olkhovich E.A., Snikkars P.N.
  • Implementation of the Strategic Plan for the period up to 2015 and for the future until 2020
  • Approval of the Group’s development strategy for the period until 2020, with a perspective up to 2025
  • System of motivation of the Company’s management; (Together with the Committee for Personnel and Remuneration)
  • Report of the Committee

2nd half of 2016

CompositionKey issues
Members of the Board of Directors:
Grachev P.S., Podguzov N.R.*, Rogalev N.D., Shishin S.V., Shishkin A.N., Shulginov N.G.

Members of the Executive Bodies: Rizhinashvili D.I.

Committee members:
Auzan A.A.*, Zadvornov I.A.*, Mamin V.V., Nikonov V.V., Olkhovich E.A., Rusakov M.V., Snikkars PN
  • Implementation of the Long-term development program of the RusHydro Group in the first half of 2016
  • Cost optimization strategy
  • The Group’s long-term development program for 2016-2020
  • Alienation of ESKB LLC- a significant subsidiary*
  • Refinancing of RAO ES EAST, PJSC – a significant subsidiary
  • The additional issue of shares of the Company and the Transaction «Non-Deliverable Forward»
  • Transactions in the process of de-fogging the project of the Boguchansky Energometallurgical Association
  • Sale of dams of the HPP of the Angarsk cascade
  • Report of the Committee

The Investments Committee was established for consideration of new investment projects and investment programs, as well as improvement and development of the Company’s investment policy.

Detailed information on investments is given in section 2.4 Investments.

Information on the members of the Committee on Investments and the list of issues considered by the Committee in 2016 are given in Appendix No. 8.

1st half of 2016

CompositionKey issues
Independent members of the Board of Directors: Bystrov M.S.*, Pivovarov V.V.

Members of the Board of Directors: Avetisyan A.D., Zimin V.M., Kalanda L.V., Osipov A.M.

Members of the Executive Bodies: Kirov S.A., Rizhinashvili D.I.

Committee members: Dr. Berndt K.A., Bugrov A.E., Mantrov M.A., Milyutin D.V., Podgorny A.Y., Snikkars P.N.
  • Progress in the implementation of priority projects
  • Regulation on the business planning system
  • Public technological and price audit
  • Regulation on the procedure for recording investment projects included in the investment program
  • Procurement Regulations
  • Adjustment of the investment program for 2016
  • Report on the implementation of the Business Plan and Investment Program
  • Report on the KPIs
  • Consolidated Business Plan for 2016-2020
  • Consideration of transactions of the Company and controlled entities
  • Report of the Committee

2nd half of 2016

CompositionKey issues
Independent members of the Board of Directors: Bystrov M.S.*, Pivovarov V.V.

Members of the Board of Directors: Avetisyan A.D., Chekunkov A.O., Rogalev N.D.

Members of the Executive Bodies: Kirov S.A., Rizhinashvili D.I.

Committee members: Domnich V.A., Zhuravlev S.I., Milyutin D.V., Podgorny A.Yu., Skulkin V.S., Tikhonova M.G.
  • Progress in the implementation of priority projects
  • Business plan for 2017-2021
  • Purchasing Program 2017
    • Report on the implementation of the Business Plan and Investment Program
  • Report on the KPIs
  • Model of construction management in the Far East
    Annual comprehensive procurement program
  • Consideration of transactions of the Company and controlled entities
  • Report of the Committee

The Committee for Reliability, Energy Efficiency and Innovation unctions to ensure the effective work of the Board of Directors in matters of the Company’s technical policy, reliable and safe operation of the Company’s hydraulic facilities, energy conservation policies, innovation policy, environmental policy and other issues within the competence of the Committee.

Detailed information on innovations is presented in Section 2.5 Innovative Development.

Information on the members of the Committee on Reliability, Energy Efficiency and Innovation and a list of issues considered by the Committee in 2016 are given in Appendix No. 8.

2016 year

Composition in the first half of 2016Composition in the second half of 2016Key issues
Independent members of the Board of Directors: Ivanov S.N.

Members of the Board of Directors: Kravchenko V.M.

Members of the Executive Bodies: Bogush B.B., Rizhinashvili D.I.

Committee members:
Bolgov MV, Vishnevsky Yu.M.*, Gorbenko Yu.V.*, Zavizenov K.V., Kudryavy V.V.*, Milensky E.D., Tolstoguzov S.N., Frolov K.E.*, Shkatov V.A.
Members of the Board of Directors: Rogalev N.D.*, Chekunkov A.O., Shishkin A.N., Kravchenko V.M.

Members of the Executive Bodies: Bogush B.B., Rizhinashvili D.I.

Committee members: Vikhansky A.E., Tolstoguzov S.N., Vishnevsky Yu.M., Frolov K.E., Karpukhin N.I., Fedorov M.P., Gromov R.E.
  • Approval of the Environmental Policy
  • Program for implementing the Environmental Policy
  • Measures to improve the Reliability and Efficiency of the Electric Power Industry of the Far East
  • Report on the implementation in 2015 of the program of innovative development for 2011-2015 with a prospect of up to 2021
  • The program of innovative development of the RusHydro Group for 2016-2020 with aprospect of up to 2025
  • Method for calculating and evaluating the performance of the KPI «Accident rate»
    Report of the Committee

The Committee for the Development of the Energy of the Far East is functioning with the aim of effective work of the Board of Directors on the development of the power industry of the Far Eastern Federal District in terms of the responsibility of the Company and its subsidiaries.

Information on the members of the Committee for the Development of Energy in the Far East and the list of issues considered by the Committee in 2016 are listed in Appendix No. 8.

2016 year

Composition in the first half of 2016Composition in the second half of 2016Key issues
Members of the Board of Directors: Trutnev Yu.P.*, Osipov A.M., Chekunkov A.O., Kravchenko V.M.

Members of the Executive Bodies: Shulginov N.G., Kazachenkov A.V.

Committee members: Zadvornov I.A., Korneychuk A.V., Molsky A.V., Nikonov V.V., Pilenyks D.V., Tolstoguzov S.N., Tupikin V.V.		Members of the Board of Directors: Trutnev Yu.P.*, Chekunkov A.O., Grachev P.S., Kravchenko V.M.

Members of the Executive Bodies: Kazachenkov A.V.

Committee members: Zadvornov I.A., Kachaev S.V., Molsky A.V., Nikonov V.V., Olkhovich EA, Pilenyks D.V., Tolstoguzov S.N., Tupikin V.V.
  • Results of the Eastern Economic Forum – 2016

  • Energy supply status for the territories of advanced development and infrastructure facilities of the gas transmission system «The Power of Siberia»
  • Progress in the implementation of priority projects in the Far East
  • Debt financing of RAO ES EAST, PJSC

CORPORATE SECRETARY

Natalia Kovaleva

Year of birth: 1972
Education: Irkutsk State University, 1996, lawyer
Position: Deputy Director of the Department of Corporate Governance and Property Management, Corporate Secretary
Appointment to the Corporate Secretary: 11.11.2016

From 01.2016 to the present:

  • Deputy Director of the Department for Corporate Governance and Property Management of PJSC RusHydro, Corporate Secretary of PJSC RusHydro;
  • Adviser to the First Deputy Director General of PJSC RusHydro;
    From 07.2010-12.2015 Director of the Corporate Governance Department of PJSC «MOESK».

Combining positions: Member of the Board of Directors / Deputy Chairman of the Board of Directors for a number of RusHydro Group companies.

Does not own shares of the Company, also indirectly. The Company and the Group companies did not issue loans to Natalia Kovaleva.

4.2.4 Members of the Management Board – Corporate governance and Chairman of the Management Board – CEO*

шульгинов

Nicholay Shulginov

Born in 1951. Education: Novocherkassk Red Banner of Labour Polytechnic Institute. Sergo Ordzhonikidze (Power supply of industrial enterprises and municipalities)& PhD in Technical Sciences

Experience over the past 5 years and participated in the management bodies of other organizations as of 31.12.2016:

  • 2004-2015 – Deputy Chairman, First Deputy Chairman of the Management Board of JSC System Operator of the Unified Energy System
  • 2008-2012 – Member of the Board of Directors of PJSC «Mosenergo»
  • Since 2008 – Member of the Supervisory Board of NP «Scientific and Technical Council of the Unified Energy System»
  • Since 2015 – Member of the Board of Trustees of the Higher Education Federal State Educational Institution of Higher Education National Research University MEI, Member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, Member of the Board of Trustees of the Federal State Autonomous Educational Institution of Higher Education «Siberian Federal University» (SFU), Chairman of the Board of Directors of RAO Energy Systems of the East, Member of the Board of Directors of PJSC Rosseti, Member of the Supervisory Board of NP «Hydropower of Russia» and Association NP «Council of the market for the organization of an effective system of wholesale and retail trade in electrical energy and capacity».

Membership on the Management Board since 2015.
Shareholding: Does not own company shares. Did not purchase or sell company shares in the reporting period. Availability of loans from the Company and the Group companies: No. Membership in committees in BD: Strategy Committee.

богуш

Boris Bogush

Born in 1952. Education: Saratov Polytechnic Institute (Mechanical Engineer), Academy of National Economy under the Government of the Russian Federation (the company’s management development).

Experience over the past 5 years and participated in the management bodies of other organizations as of 31.12.2016:

  • Since 2007 – Managing Director, Head of Business Unit «Production», First Deputy CEO of PJSC RusHydro – Chief Engineer. He is a member of the BoD of «VolgaGidro», a member of the Board of Trustees, Foundation «Awareness», a member of the Supervisory Board of NP «Hydropower of Russia».

Membership on the Management Board since 2010.

Shareholding: Share of the Issuer’s ordinary shares owned – 0.004241 %.
Did not purchase or sell company shares in the reporting period.

Availability of loans from the Company and the Group companies: No.
Membership in committees in BD: Reliability Committee, Energy Efficiency and Innovation.

казаченков

Andrey Kazachenkov*

Born in 1980. Education: St. Petersburg State University of Engineering and Economics (economics and management at engineering enterprises, «Management»); University of Wisconsin, Madison, USA (MBA degree).

Experience over the past 5 years and participated in the management bodies of other organizations as of 31.12.2016:

  • From 2009 to 2015, the adviser to the Chairman of the Board; Deputy Chairman of the Management Board, First Deputy Chairman of the Management Board of PJSC «FGC UES»
  • Managing Director, Head of Business Unit «Production», First Deputy CEO, Member of the Board of Directors of RAO ES EAST, PJSC.

Membership on the Management Board: Since 2016
Shareholding: Does not own company shares
Did not purchase or sell company shares in the reporting period
Availability of loans from the Company and the Group companies: No
Membership in committees in BD: Committee for the Development of Energy in the Far East

киров

Sergey Kirov

Born in 1976. Education: Perm State Agricultural Academy. DN Pryanishnikova (economics and management of agricultural production).
Regional interdisciplinary retraining center at Perm Technical University (Economics and Management).

Experience over the past 5 years and participated in the management bodies of other organizations as of 31.12.2016:

  • 2010-2014 – CEO of «RusHydro IT service»
  • Since 2010 – Director for Economy, Deputy CEO for Economy, Investment and procurement activities, First Deputy CEO of PJSC RusHydro
  • 2010 – 2014 – Member of the BoD of «RusHydro IT service».

Membership on the Management Board: Since 2015
Shareholding: Does not own company shares
Did not purchase or sell company shares in the reporting period
Availability of loans from the Company and the Group companies: No
Membership in committees in BD: Investment Committee

рижинашвили

George Rizhinashvili

Born in 1981. Education: Lomonosov Moscow State University. MV University (economics) Ph.D.

Experience over the past 5 years and participated in the management bodies of other organizations as of 31.12.2016:

  • Since 2009 – Member of the Board, First Deputy CEO of PJSC RusHydro
    2010-2014 – Member of the Supervisory Board of NP «Corporate research and training center of UES»
  • He is a member of the Board of Trustees Foundation «Awareness».

Membership on the Management Board: Since 2009
Shareholding: Share of the Issuer’s ordinary shares owned – 0.014193 %
Availability of loans from the Company and the Group companies: No
Membership in committees in BD: Reliability Committee, Energy Efficiency and Innovation, Strategy Committee, Investment Committee

Report on the activities of the Board

In 2016, 64 meetings of the Board were held (12 of them were held in preasentia), on which more than 455 issues related to the Company’s current activities were considered. In addition, all issues, submitted for consideration by the Board of Directors, were preliminarily discussed.

Attendance of meetings by the members of the Management Board exceeds 80 %. The Chairman of the Management Board – CEO took part in all meetings.

The results of the activities of the Management Board are reflected in this Annual Report.

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4.3 Audit and control