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Report on evaluation of compliance with the principles of JSC " Samruk -Energy" Corporate Governance Code . Astana, 201 4. Corporate governance Code Principles .

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Report on evaluation of compliance with the principles of JSC "Samruk-Energy" Corporate Governance Code

Astana, 2014

corporate governance code principles
Corporate governance Code Principles
  • JSC “Samruk-Energy” Corporate governance code was approved by resolution of Sole shareholder of “Samruk-Energy” joint-stock company (appendix to the order No.165-P dated November 12, 2007).
  • The main principles of the Code are:
  • the principle of protecting rights and interests of shareholders;
  • The principle of efficient management of the Company by the Board of Directors;
  • The principle of efficient management of the Company by the Management Board;
  • The principle of independent activity of the Company
  • The principle of transparency and fairness of information disclosure on the activities of the Company;
  • The principle of legality and ethics;
  • The principle of efficient dividend policy;
  • The principle of efficient human resources policy;
  • The principle of the environment protection;
  • The policy of regulation of corporate conflicts and conflict of interests;
  • The principle of responsibility
1 the principle of protecting rights and interests of shareholders
1. The principle of protecting rights and interests of shareholders

Exercising fundamental rights of the Sole shareholder (the JSC "National Welfare Fund" Samruk-Kazyna") is carried out in accordance with the Charter of JSC" Samruk - Energy "(hereinafter - the Company) which clearly defines its relationships with the Company.

Information about the Company activity is submitted to JSC "National Welfare Fund" Samruk-Kazyna“ in full and allows to make informed and fair decisions.

Two members of the Board of Directors of the seven are representatives of JSC "National Welfare Fund" Samruk-Kazyna ".

The register of Company's shareholders is kept by an independent registrar JSC "Unified Registrar of Securities". Registrar, having the necessary technical means, allow the JSC "National Welfare Fund" Samruk-Kazyna“ to provide reliable and efficient registration of proprietary rights to the Company.

In 2013, there were no appeals of shareholders to public authorities to protect their rights and legal interests.

2 1 the principle of efficient management of the company by the board of directors
2.1 The principle of efficient management of the company by the Board of Directors
  • The activity of the Company’s Board of Directors is regulated by Provision on the Board of Directors.
  • The Board of Directors carries out overall management of the Company’s activity, except for matters falling within the exclusive competence of the Sole shareholder and the executive body.
  • The Board of Directors held 13 meetings and considered 146 items in 2013.
  • The activity of the Company’s Board of Directors is based on the following principles:
  • Maximum respect and promote the interests of Shareholder and the Company;
  • Protect Shareholders’ interests and responsibility for Company’s activity.
  • The Company’s Board of Directors consists of six directors, three of them are independent directors. Independence criteria are defined by the legislation of the Republic of Kazakhstan as well as international best practices in corporate governance.
  • In order to facilitate the effective performance of functions of the Company’s Board of Directors, three committees under the Board of Directors were established for consideration of the most important issues and preparation of recommendations :
  • The Audit committee
  • Remuneration and nomination committee
  • Strategic planning committee
  • In 2013,10 meetings of the Audit committee were held where 38 items were considered as well as 10 meetings of the appointment and remuneration committee (28 items) and 6 meetings of Strategic planning committee (8 items).
  • Internal Audit Service was established in order to present the Board of Directors independent and objective information intended for efficient management of the Company by introducing a systematic approach to the improvement of risks management, internal control and corporate governance systems.
  • The Internal Audit Service is supervised by the Audit Committee.
2 2 the principle of effective management of the company by the management board
2.2. The principle of effective management of the Company by the Management Board
  • Company’s current operations is managed by collegiate body in the form of the Management Board chaired by the Chairman of the Board.
  • The Board performance is aimed at ultimate serving the interests of shareholders as well as carrying out tasks of the Company and implementation of its strategy.
  • Company’s Management Board held 12 meetings and considered 233 matters in 2013.
  • The activity of the Management Board is regulated by the Regulations on the Management Board approved by resolution of the Company’s Board of Directors in 2012 in new edition.
  • The order and timing of meetings of the Board, responsibility of the Management Board members were revised according to Regulations, as well as basic functions of the Managemetn Board secretary were covered.
  • The main principles of the Management Board activity are:
  • Honesty, integrity, intelligencce, diligence, regularity.
  • Pursuant to resolution of the Management Board, Assets and liabilities management Committee and the Loan Committee merged into one Committee – Loan Committee
  • It was also decided to merge two committees “Risks Committee” and “Management system and corporate governance Committee” into one Committee with the change of name “The risks and management system Committee”
  • Strategic planning Committee was established.
  • To date the following consultative-advisory bodies (CAB) have been established and operate under the Company’s Management Board:
  • The committee for planning and operations evaluation (CPOE)
  • Loan committee
  • Investment-innovation Council (IIC)
  • Risks and management system Committee (RMSC)
  • The Committee for strategic planning (CSP)
  • 91 meetings of CPOE were held, at which 91 items were considered, 4 meetings of the Loan committee (4 items), 14 meetings of IIC (47 items), 3 meetings of RMSC (7 items) and 16 meetings of CSP (21 items) were held in 2013.
3 the principle of independent activity of the company
3. The principle of independent activity of the Company
  • The Company operates as a separate legal entity.
  • The Company is guided by resolutions of the Fund and the Board of Directors in carrying out its activity.
  • The Company seeks to ensure the availability of market relations with shareholders and the presence of commercial basis in them.
  • A loan agreement between Eurasian Development bank and “First wind power plant” LLP was signed in 2013 to finance the “Construction of 45 MW wind power plant” at “Yereimentau city area” project, where the Company provided a guarantee in favour of creditors for the liability of its subsidiary. The project is strategic in the light of ‘green energy’ development in the Republic of Kazakhstan. Also, the Company provided “Shardarinskaya HPP” JSC as a guarantee in favor of the European Bank for reconstruction and Development with respect to “Shardarinskaya HPP modernization” project.
  • The Company placed three year bonds worth 3 million tenge with a yield of 6% per annum on Kazakstan Stock Exchange (KASE). Insurance and pension companies of Kazakhstan have become main investors.
  • International rating agency Standard &Poor’s affirmed long-term credit rating at “BB+” “negative” outlook, short-term rating at “B” and national scale rating at “kzAA-”
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4. The principle of transparency and fairness of information disclosure on the activities of the Company
  • The Company shall provide timely disclosure of accurate information about all material facts relating to its operations, including its financial position, performance, ownership structure and management of the Company and other information according to the best practices of corporate governance. This information is published on the official website of the Company.
  • In 2013, according to the recommendations of an external consultant, in order to comply with the content of the Company's website following the best international practice of disclosure, as well as in connection with the restructuring of the Company, the Board approved a new version of the Rules of preparation and placement of informational materials on the web-site of “Samruk-Energy” JSC (Minutes No.6 dated 12 June 2013).
  • Additionally, the Company’s Information Security Policy was developed and approved.
5 the principle of legality and ethics
5. The principle of legality and ethics
  • The relationship between the sole shareholder, member of the Board of Directors and the Management Board are based on mutual trust, respect, accountability and control.
  • The Company operates in strict accordance with the laws of the Republic of Kazakhstan, the generally accepted principles of business ethics and internal documents of the Company.
  • The Company conducts its business recognizing the supremacy of the Constitution, laws and other regulations with respect to internal documents of the Company avoiding the decision-making at the personal discretion of the officers and other employees of the Company.
  • The Company has a Code of Business Conduct. The objectives of the Code of Conduct is to improve, organize and regulate the relations of the Company aimed at improving the effectiveness of corporate governance and the promotion of successful interaction with employees, customers, suppliers, business partners, shareholders, stakeholders and the public authorities through the use of common standards and norms of business behavior. In accordance with the Code, Company's employees have an obligation to respect the rules of the Code.
  • In 2011, the Company introduced the position of the Ombudsman, whose responsibility is to promote the introduction, implementation and interpretation of the Code of Conduct, as well as the collection and review of information about its abuse.
  • In 2012, the Company appointed Ombudsman ShalinErgenSansyzbaevich - corporate secretary.
  • According to information from the Ombudsman, appeals of non-compliance and / or violations of the Code of Conduct, norms of the legislation of the Republic of Kazakhstan and the internal regulations of the Company have not been reported in 2013.
6 the principle of efficient dividend policy
6. The principle of efficient dividend policy
  • The Company approved the dividend policy which includes a formalized procedure for determining the amount of dividends as well as the general principles of dividends payment.
  • The dividend policy is available on the Company's website and is available for study of shareholders, potential investors and the public of the Republic of Kazakhstan.
  • In 2013 following the Company’s performance results, the Fund has approved the payment of dividends in the amount of 2 813 667 thousand tenge. The amount of paid dividends does not contradict the principles of efficient dividend policy.
7 the principle of efficient hr policy
7. The principle of efficient HR policy
  • Personnel policy is an integral part of the overall strategy of the Company and is being implemented in accordance with the principles of consistency and integrity , proactivity and flexibility, social partnership.
  • One of the main tasks of HR policy is to create a unified system of selection and appointment of personnel which allows to effectively plan human resource requirements and make timely selection of specialists with the necessary knowledge, skills , business and personal qualities.
  • The Company has implemented the principle of open competitive selection for the vacant positions which allows to attract the best-trained and talented professionals . The basic principle of competitive selection is transparency in tendering procedures , the emphasis on professionalism and competence of the candidate .
  • In addition, in order to ensure the needs of the Company for qualified personnel, the Company carry out activities on an ongoing basis aimed at developing and improving professional development of the staff . Intercompany training centers for professional training, retraining and skills upgrading of employees operate in the Company’s group.
  • The Company has implemented a system of evaluation of executive employees based on key performance indicators which allows to monitor the degree of achievement of the strategic goals of the organization . A project on introduction of performance efficiency management system is being implemented; it allows to set individual targets for employees agreed with the directions of business processes as a whole, form personal development plans and employee motivation to increase performance efficiency.
  • The Company pays great importance to the social climate in the workplace. According to the research on Company’s staff involvement conducted by independent experts, employee engagement index for the Head office of the Company in 2013 was noted as positive and amounted to 69 % ,Satisfaction Index - 74 %, loyalty index - 70 %, the index of initiatives support - 54 %. Employee engagement index for the Company’s group of companies is also in the positive zone and made 63%
  • In addition, within the VIII International Conference "Human Resource Management : HR- Trends of III millennium " held on 14 March 2013 , the Company was awarded the diploma of the third degree in the category “ The best employers of Astana and Almaty city" ( Best Company employer in "two capitals" ) , as the company that realizes t the importance of human resources to create better working conditions for its employees.
8 environment protection principle
8. Environment protection principle
  • As one of the largest electric power companies in Kazakhstan, the Company is aware of its important role in processes of sustainable development. Protection of the environment and resource management play an important role in the activity of the Company, its subsidiaries and affiliates.
  • The Company has adopted environmental policy. This policy contains the basic principles in the field of environmental protection, as well as the goals, objectives and direction of environmental policy.
  • In 2012 the Company and its subsidiaries and affiliates did not have cases related to penalties imposed for non-compliance of environmental legislation of the Republic of Kazakhstan in conducting its activity.

Comments

Activities

  • ESPs were installed (at 6 power units of Ekibastuz GRES-1), ash collection ratio 99.6% and higher
  • Low emission burners were applied to reduce emissions of nitrogen oxides to 500 mg/m3 at a rate according to technical rules – 650 mg/m3 and in the future reduce to 200 mg/m3 by NOx restoration methods
  • For coal fired power plants, were transferred to combustion of mixture ekibastuz coal and relatively low ash content coals (shubarkol, maikuben and etc)
  • Emulsifiers of second generation were installed at CHPs (Almaty CHP-2, 3).
  • Ash collection ratio - 99,4%
  • Reduction of air emissions
  • Reducing the discharge of pollutants into water bodies
  • Reduction of industrial wastes generation

Reducing the negative impact of the Company’s group of companies on the environment

  • Construction of wind farms in Yereimentau district of Akmola region
  • Construction of wind farms in Shelek corridor of Almaty region
  • Construction of a solar power plant in Kapshagay city - commissioned.

Reducing the negative impact of the Company’s group of companies on the environment

  • Construction of WPP
  • Solar energy development
  • Polluting emissions capture
  • Development of technologies for capturing greenhouse gases
  • Disposal of ashes
  • Optimization of water waste
  • Absorption methods of sulfur dioxide and nitrogen oxides (SOX, NOX) capture
  • Carbon Capture and Storage – CСS
  • Development of producing units for disposal of ash damps
  • Reduced water consumption and waste water treatment

consideration of other

promising directions

  • There were no significant fines imposed for noncompliance with environmental laws of the Republic of Kazakhstan during operations of the Company and its subsidiaries and affiliates
9 the policy of regulation of corporate conflicts and conflict of interests
9. The policy of regulation of corporate conflicts and conflict of interests
  • Members of the Board of Directors and the Management Board as well as employees of the Company shall perform their professional duties in good faith and reasonably with due care and diligence in the interests of the Company and its shareholders, avoiding conflicts of interest and corporate conflicts.
  • The Company has approved a Policy on settlement of corporate conflicts and conflict of interests.
  • The Company has implemented a "hot line" to gather confidential communications.
  • A list of affiliated persons is kept in the Company in order to regulate the conflict of interests.
  • Amendments regarding formalization of the process of annual confirmation by the Board members of their relationship with other companies as well as membership in the board of directors of other companies were made in Regulation on the Board of Directors of the Company in 2013, thereby tracking situations involving a conflict of interest .
  • Policy for the settlement of corporate conflicts and conflicts of interests in the Company contains a provision that a member of the Management Board as well as other employees of the Company, appointment or approval of which is carried out by the Board of Directors has the right to work under an employment contract in other organizations only with the consent of the Company’s Board of Directors .
  • During 2013, the Company has not documented cases of corporate conflicts and conflicts of interests.
10 the principle of responsibility
10. The principle of responsibility
  • The Company recognizes the rights of all stakeholders and seeks to work with them to develop its activity and ensure sustainable development.
  • In order to increase transparency to stakeholders, the Company annually presents and publishes on its website a report on sustainable development (application level «B») in accordance with the Guidelines for Reporting GRI 3.1.
  • In case if the rights of employees, partners and third parties are violated, the Company shall pay compensation in accordance with the current legislation of the Republic of Kazakhstan.
  • In 2013, the violation of rights of employees, partners and third parties have not been fixed.