3. KEY PERFORMANCE RESULTS

3.1 Situation in Power Industry 3.2 International Activities 3.3. Generating Capacities. Developing Generating Potential 3.4. Ensuring Safety of Russian NPPs 3.5. Radiation Effect on Personnel and Population 3.6. Environmental Impact 3.7. Financial Results 3.8. HR Policy, Occupational Safety and Health 3.9. Innovation Management. Knowledge Preservation and Transfer 3.10. Social Policy. Developing Areas of Presence. Charity 3.11. Investment Program

3.1 Situation in Power Industry

The Rosenergoatom is one of the largest power industry companies worldwide and the only operator of Russian NPPs.

Producing more power than other largest power generating companies in Russia, it is second largest in terms of installed capacity worldwide.

MAJOR TRENDS IN GLOBAL ECONOMY AND MACROECONOMIC SITUATION IN RUSSIA

The global economy grew 3.1% in 2015, which is 0.3 percentage points lower than in 2014. At the same time, it is expected to grow 3.4% in 2016 and 3.6% in 2017. The anticipated growth acceleration in the coming two years (despite the ongoing deceleration in China) is primarily stipulated by the forecast gradual rise in the countries that currently encounter economic difficulties, particularly in Russia, Brazil and some Middle Eastern countries 1 .

Growth in the volume of global trade decreased from 3.4% in 2014 to 2.6% in 2015. It is forecast to return to the level of 2014 in 2016 and further grow to 4.1% in 2017 2 .

The economic situation in Russia in 2015 was shaped under the influence of deteriorating external economic conditions, basically the drop in oil prices, preserved economic sanctions imposed by the EU and USA, continued downside trend in investment activities, and large-scale capital outflow. The GDP index was negative and decreased by 3.7% versus 2014 3 . Consumer and investment demand continued to drop.

The industrial production index in 2015 decreased by 3.4% versus 2014 4 . Meanwhile in 2015, according to the calculations by the Russian Economic Development Ministry the production of main types of primary fuel and energy sources increased versus 2014 by 0.8% due to a considerable upsurge in coal production (104.5% versus 2014), and NPP generated power (108.2% versus 2014) under a continued downside trend of natural gas production and power generation by hydropower plants 5 .

According to various forecasts 6 , the Russian GDP may decrease from 0.8 to 2.1% in 2016. Moreover, it is expected that the Russian GDP may increase by more than 0.9% in 2017. Such a forecast is reasoned by low oil prices and pressure on the Russian currency, rather high level of inflation. The economic recovery will be slow.

Slow down of the Russian economic growth enhances the urgency of new business lines development in the Russian Federation and abroad.

The main risk for economic prospects of the Concern is related to higher geopolitical tension. For additional information refer to Section 4.3 — Risk Management.

POWER AND CAPACITY MARKET

The total installed capacity of the Concern’s nuclear power plants is 26.242 GW 1 comprising 11.5% of the total capacity of Russian UES in 2015. For additional information refer to Section 3.3 — Generating Capacities. Developing Generating Potential.

In terms of installed capacity of NPPs and the number of operating power units the Concern holds the second place in the world among leading global companies operating NPPs (1st place — EDF, France).

The share of NPP generated power in Russia increased from 17.2 to 18.6% in 2015. In 2015 power generation in Russia totaled 1,049.9 bln kWh which is 0.2% more than in 2014. Russian UES power plants generated 1,026.8 bln kWh or 0.2% more than in 2014 2 .

The main load in terms of satisfying demand for power in Russian UES in 2015 was on thermal power plants (TPPs) with the output of 614.1 bln kWh or 1.1% less than in 2014. Hydropower plants output in 2015 equaled 160.2 bln kWh (4.1% less than in 2014). NPPs generated 195.2 bln kWh 3 in 2015, which is 8.2% more than the amount of power produced in 2014. Power plants of industrial enterprises generated 57.5 bln kWh in 2015 (1.9% more than in 2014). 4

TOP 5 COMPANIES: NUMBER OF REACTORS, INSTALLED CAPACITY AS OF END OF 2015

OPERATOR COMPANY INT’L ABBREVIATION COUNTRY NUMBER OF UNITS NUMBER OF SITES INSTALLED CAPACITY, NET MW(E) INSTALLED CAPACITY, GROSS MW(E) GENERATION IN 2014 GWH (SUPPLY) GENERATION IN 2013 GWH (SUPPLY) GENERATION IN 2012 GWH (SUPPLY)
(AS OF DECEMBER 31, 2015)
1 Électricité de France EDF France 58 19 63 130 65 880 418 001,40 405 898,51 407 437,88
2 Rosenergoatom Concern JSC REA Russia 34* 10 25 443 27 206 168 521,82 (supply)
180 475,47 (generation)
161 087,30 (supply)
172 217,44 (generation)
165 773,95 (supply)
177 290,44 (generation)
3 Korea Hydro and Nuclear Power KHNP South Korea 24** 6 21 674 22 659 169 916,23 132 465,24 143 549,92
4 Exelon Corporation Exelon USA 22*** 13 21 746 22 912 182 161,63 147 422,71 145 175,47
5 NNEGC Energoatom NNEGC Ukraine 15 4 13 107 13 835 83 122,78 78 166,16 84 885,59

The share of electricity produced by thermal power plants in the total power output of Russian UES (without isolated systems) decreased from 61.7% in 2014 to 59.8% in 2015, hydropower plants — from 16.6 to 15.6%.

Power consumption by Russian UES decreased by 0.5% in 2015 versus 2014, which was reasoned by the temperature factor: in all three winter months of the previous year (January, February, December) the outside air temperature was considerably higher if compared to the similar indicators of the same months in 2014. 1

Over many years the Concern consistently keeps the leading position among Russian generating companies in terms of installed capacity and power generation.

FORECASTS AND DEVELOPMENT PLANS

Forecasts show that in case the specified objectives are met in the nuclear power industry and nuclear fuel cycle between 2015 and 2035, the share of NPPs in power generation will be increased by 2 to 4 percentage points (from 17 to 19–21%), and the nstalled capacity will grow 1.4 to 1.7 times with the respective dismantling of the power units built in the Soviet times. The share of nuclear generation in the total volume of primary energy production will grow from 3.0% to 3.5–3.9% between 2015 and 2035. 22

ACTUAL POWER BALANCE INDICATORS OF RUSSIAN UES IN 2015 *

MLN KWH, 2015 % VERSUS 2014
Electricity generation, total: 1 026 877,2 100,2
including CHPP 614 126,7 98,9
HPP 160 170,5 95,5
WPP 6,1 -
SPP 7,3 -
NPP 194 997,9 108,2
Captive power plants 57 568,7 101,9
Electricity consumption 1 008 250,8 99,4
Net electricity flow -18 626,4 168,0

CONCERN'S NPP OUTPUT SHARE OF GENERATED POWER IN 2015, BY RUSSIAN REGIONS (ENERGY SYSTEMS)

INDICATOR RUSSIA UOM EUROPEAN PART * CENTRAL UES VOLGA UES NORTHWEST UES SOUTH UES ** URALS UES EAST UES **
Power Generation at Concern’s NPPs 195,21 bln kWh 195,00 100,17 32,75 36,99 20,51 4,58 0,22
Power generation share of Concern's NPPs 18,6 % 24,6 42,3 31,1 36,5 22,7 1,8 0,5
Power generation in Russia *** 1049,9 bln kWh 791,55 236,97 105,37 101,28 90,2 257,73 47,7
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ELECTRICITY GENERATION BY MAJOR RUSSIAN PRODUCERS AND THEIR INSTALLED CAPACITY

COMPANY POWER GENERATION, BLN KWH INSTALLED CAPACITY, GW
2013 2014 2015 2013 2014 2015
Rosenergoatom Concern JSC 172,2 180,5 195,2 25,2 25,2 26,2
Gazprom Energoholding LLC 1 162,0 152,2 144,8 38,0 37,7 38,0
RusHydro PSCJ 2 124,0 113,6 114,3 37,5 38,5 38,6
INTER RAO — Electric Power Plants 3 104,0 131,6 127,2 21,4 29,1 29,0
EuroSibEnergo JSC 4 77,0 75,0 64,0* 19,5 19,5 19,5
T Plus Group 5 57,0 58,4 56,5 14,7 15,7 15,3

SALES MARKET AND PRODUCT CONSUMERS

The Concern’s products (electricity and capacity) is sold in the Wholesale Electricity and Capacity Market (WECM) which is a sphere of circulation of special goods of electric power and capacity within the UES of Russia.

The Concern’s product consumers are all enterprises and companies specified in Section 2 — Buyers of Power and Capacity of the Wholesale Electricity and Capacity Market Entities Register, and any company or organization, which is connected to the WECM trading system according to the established procedure with a view to make transactions for the purchase of electricity and capacity.

The Concern does not influence the composition and number of electricity and capacity buyers. The number, composition and structure of consumers is defined by the commercial operator of WECM (Trading System Administrator JSC) on an annual basis during the centralized WECM contracting campaign. In order to ensure compliance with the principles of proportionality and fair distribution of contracting agents under the contracts supporting sale of electricity and capacity at regulated prices, the distribution projects undergo an approval procedure among market participants during preparation for the contractual campaign. During this approval procedure the projects are optimized taking into account the interests of the market participants. Demand for electricity and power capacity supplied by the Concern in the WECM is generally steady with some deviations due to seasonal changes in electricity consumption and water content conditions with the appropriate change in hydrogeneration in the volume of electricity production on a scale of the Unified Energy System of Russia.

In 2015, the Concern supplied electricity in the WECM under regulated contracts, on the dayahead basis, in the balancing market, and under deregulated contracts. Power capacity was supplied under regulated contracts, capacity sale contracts executed following competitive selection of price quotes for capacity sale, and capacity sale contracts of new NPP facilities. Meanwhile, payments for electricity and capacity supplied under regulated contracts, and payment for capacity under capacity sale contracts with new power plant facilities were made at the tariffs (prices) set for the Concern in 2015.

The actual amount of electricity produced by NPPs in 2015 equaled to 195.2 bln kWh. 195.0 bln kWh (99.89%) out of that amount was supplied to WECM and 0.22 bln kWh (0.11%) — to the retail market (Bilibino NPP output).

The planned NPP power output specified in the balance target is 189.15 bln kWh. The additional NPP power output totaled 6.06 bln kWh, or 3.2%.

DEVELOPMENT OF POWER SALES

Sales channels:

  • WECM;
  • AtomEnergoSbyt JSC;
  • Regional heat market;
  • Rusatom Service JSC.

Detailed information about AtomEnergoSbyt JSC and Atomenergopromsbyt JSC activities in 2015 is given in Section 3.2 — International Activities.

CONCERN’S ELECTRICITY SUPPLY STRUCTURE IN WECM BETWEEN 2011 AND 2015, BLN KWH