Results of the Board of Directors Meeting on June 21, 2019
PJSC RusHydro (ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces that the Company's Board of Directors held a meeting in absentia on June 21, 2019.
Resolutions passed on Items of the agenda:
Item 1. On approval of amendments to the Decision on the additional issue of the Company's securities.
The resolution adopted:
To approve amendments to the Decision on the additional issue of RusHydro shares (ordinary shares) (Schedule 1 hereto).
Item 2. On approval of amendments to the Company's Securities Prospectus.
The resolution adopted:
To approve amendments to the RusHydro Securities Prospectus (for ordinary shares) (Schedule 2 hereto).
Item 3. On approval of the report on the interim results of the fulfillment of the Company's Business Plan for 2019 considering the actual results for Q1 2019 (including the report on the fulfillment of the Investment Program, inter alia, the Comprehensive Modernization Program of Generating Facilities, for Q1 2019).
The resolution adopted:
To approve the report on the interim results of execution of the Business Plan for 2019 considering the actual results for Q1 2019 (including the report on the fulfillment of the Investment Program, inter alia, the Complex Modernization Program for Generating Facilities, for Q1 2019) (Schedule 3 hereto).
Item 4. On approval of the report on the fulfillment of the Annual Complex Procurement Program of the Company for Q1 2019.
The resolution adopted:
To approve the report on execution of RusHydro's Annual Complex Procurement Program for Q1 2019 (Schedule 4 hereto).
Item 5. On election of members of Committees under the Company's Board of Directors.
5.1. On election of members to the HR and Remuneration (Nominations) Committee under the Company's Board of Directors.
The resolution adopted:
- To terminate ahead of time the powers of Sergey Nikolayevich Ivanov, a member of the HR and Remuneration (Nominations) Committee under the Company's Board of Directors.
- To elect Pavel Sergeyevich Grachev, a member of the Board of Directors, to the HR and Remuneration (Nominations) Committee under the Company's Board of Directors.
5.2. On election of members to the Audit Committee under the Company's Board of Directors.
The resolution adopted:
- To terminate ahead of time the powers of Sergey Nikolayevich Ivanov, a member of the Audit Committee under the Company's Board of Directors.
- To elect Pavel Sergeyevich Grachev, a member of the Board of Directors, to the Audit Committee under the Company's Board of Directors.
- To elect Pavel Sergeyevich Grachev the Chairman of the Audit Committee under the Company's Board of Directors.
Item 6. On approval of the reports on the performance results of the Committees under the RusHydro Board of Directors for the corporate year 2018-2019.
The resolution adopted: To postpone the matter to a later date.
Item 7. On consideration of the Company's Management Board Performance Report for 2018.
The resolution adopted:
To take into consideration the Company's Management Board Performance Report for 2018 (Schedule 5 hereto).
Item 8. On approval of the Company's internal documents:
8.1. On amending the Unified Regulation on Procurement of Products for the Needs of RusHydro Group: on extending the practice of using factoring in performing contracts for supply of goods (performance of work, provision of services).
The resolution adopted:
1. To amend clause 5.3.9 of the Unified Regulation on Procurement of Products for the Needs of RusHydro Group approved by Decision of the RusHydro Board of Directors (Minutes No. 277 dated October 4, 2018) to read as follows:
"5.3.9. A procurement notice and/or procurement documentation may provide for the use of assignment of claim (factoring) in performing product delivery contracts concluded by the Customer with small and medium business entities based on the results of procurements held in the form of a competitive tender in accordance with the provisions of the civil laws of the Russian Federation."
2. To instruct the Chairman of the Management Board and General Director of the Company N. G. Shulginov:
2.1. To notify controlled organizations that have acceded to the Unified Regulation on Procurement of Products for the Needs of RusHydro Group about the amendments introduced thereto within 10 business days after this resolution is adopted.
2.2. To publish information about the execution of Directives of the Government of the Russian Federation No. 4111p-p13 dated May 8, 2019, along with the electronic copies of the supporting documents on the Interdepartmental State Property Management Portal by July 10, 2019.
Item 9. On the consideration of matters of significance to the Company:
9.1. On the creation of a Centralized Service Center performing accounting and tax accounting functions and generation of reports in RusHydro Group.
The resolution adopted:
To approve establishing of a Centralized Service Center performing accounting and tax accounting functions and generation of reports in RusHydro Group based at HydroEngineering Siberia JSC.
9.2. On the consideration of the report on the progress of the Action Plan (the list of measures) for the implementation of occupational standards in the Company's operations.
The resolution adopted:
To approve the report on the progress of the implementation of the Action Plan (the list of measures) for the introduction of occupational standards in the Company's operations in Q4 2018 and Q1 2019 (Schedule 6 hereto).
9.3. On the progress of priority projects for the construction of two facilities in the Far East (CHPP in Sovetskaya Gavan, Sakhalin GRES-2 (stage 1)) as of March 31, 2019.
The resolution adopted:
To take note of information on the progress of the priority projects of construction of two facilities in the Far East (CHPP in Sovetskaya Gavan, Sakhalin GRES-2 (stage 1)) as of March 31, 2019 (Schedule 7 hereto).
9.4. On recognizing candidates to the Company's Board of Directors (a Member of the Company's Board of Directors) as independent.
The resolution adopted:
In accordance with the recommendations of the HR and Remuneration (Nominations) Committee under the Company's Board of Directors:
1. To take into account the information on the results of the evaluation of conformance of A. O. Chekunkov, a candidate nominated for election to the Company's Board of Directors at the annual General Meeting of Shareholders in 2019, to the independence criteria stipulated in Schedule 4 to the MOEX Listing Rules.
A. O. Chekunkov is not affiliated with the Company, a substantial shareholder of the Company, or the Company's competitors.
Mr. Chekunkov has formal criteria of affiliation with:
- The state, as Mr. Chekunkov is General Director of the Far East and Baikal Region Development Fund JSC, an organization controlled by the Russian Federation.
- The Company's substantial counterparty, the Far East and Baikal Region Development Fund JSC (FEDF), as the amount of liabilities between the Company and the FEDF under a loan agreement exceeds 2% of the book value of assets and 2% of revenue of the FEDF.
To note that the affiliation between A. O. Chekunkov and the state and a substantial counterparty is formal in nature and does not affect Mr. Chekunkov's ability to act on the Board of Directors for the benefit of the Company and all its shareholders for the following reasons:
- In accordance with Order of the Government of the Russian Federation No. 607-r dated March 30, 2019, A. O. Chekunkov has been nominated by the Russian Federation as an independent director; therefore, Mr. Chekunkov has no obligation to vote according to the directives of the Government of the Russian Federation (clause 16 of Regulation of the Government of the RF No. 738 dated December 3, 2004).
- The affiliation of A. O. Chekunkov with the state is formal in nature because his labor relations with the Far East and Baikal Region Development Fund JSC do not influence the objective and independent decisions made by Mr. Chekunkov as the control of the Russian Federation over the Far East and Baikal Region Development Fund JSC is indirect and is exercised via the State Development Corporation VEB.RF, which is managed by management bodies typical for a commercial institution.
- The affiliation of A. O. Chekunkov with RusHydro's substantial counterparty is formal in nature due to the following:
On April 4, 2018, RusHydro (the Borrower) and the FEDF (the Lender) concluded a financing (target loan) agreement for the purpose of construction of offsite infrastructure facilities at Sakhalinskaya GRES-2 (the "Project"). The borrowed funds were allocated to RusHydro on a repayable and paid basis; the loan agreement has been concluded for the period until June 25, 2026, for a total amount of up to RUB 5 billion at 5% per annum.
Provision of funds to the FEDF to finance RAO Energy Systems of the East JSC for the implementation of the Project in accordance with Regulation of the Government of the Russian Federation No. 1055 dated October 16, 2014, has been preliminarily approved by the Government Subcommission for the Implementation of Investment Projects in the Far East and in the Baikal Region (Minutes No. 3 dated December 25, 2017), by the FEDF Board of Directors (Minutes No. 57 dated December 29, 2017), and by the RusHydro Board of Directors as an interested party transaction (Minutes No. 265 dated February 6, 2018; A. O. Chekunkov did not vote on this item). As of December 31, 2018, the loan had been disbursed in full (RUB 5 billion), and the loan funds had been allocated to finance the Project by way of their transfer in the form of a loan to an organization controlled by the Company, RAO ES of the East JSC.
- The track record of A. O. Chekunkov in the Company's Board of Directors and the Company's Committees in 2016-2018 has proved his ability to make independent, unbiased, and conscientious judgments as the opinion of Mr. Chekunkov on the agenda items of meetings of the Board of Directors and committees under the Board of Directors was based on his expertise and experience and was autonomous and independent, and the decisions made by Mr. Chekunkov previously allow one to draw the conclusion that his formal connection with the state did not influence his decisions as Mr. Chekunkov acted for the benefit of the Company and all its shareholders.
2. For the purpose of increasing the transparency of RusHydro, building its positive business reputation, strengthening the positive current expert evaluation of the corporate governance system, increasing the share of independent directors in the Board of Directors,* and ensuring the conformance of RusHydro to the recommendations of the Code of Corporate Governance and the Company's internal documents, it is suggested that the candidate to the RusHydro Board of Directors Aleksey Olegovich Chekunkov be recognized as an independent director.
Mr. Chekunkov has an excellent business and personal reputation, the knowledge, skills, and experience necessary to make decisions that fall within the competence of the Board of Directors and required for the effective performance of his functions, thus allowing him, among other things, to participate in work of various Committees under the RusHydro Board of Directors. Since 2015, Mr. Chekunkov has been a member of the Committee for Far East Energy Development under the Board of Directors of the Company. In 2016-2018, he was a member of the Company's Board of Directors and of the Reliability, Energy Efficiency, and Innovations Committee and the Investment Committee under the Company's Board of Directors. The long service of A. O. Chekunkov in the Company's Board of Directors and the Committee for Far East Energy Development is his advantage as Mr. Chekunkov has the necessary longstanding experience in the field of electrical power and investments and extensive knowledge of the Company's business, which can contribute to the effective work of the Board of Directors and the Committees of the Company.
During the meetings of the Committees and the Board of Directors, Mr. Chekunkov was always active in discussing the agenda items and always expressed an objective and well-considered opinion in voting that was independent from the opinion of the Company management; he is responsible and proactive. When participating in the work of the Board of Directors and its Committees, Mr. Chekunkov made a significant contribution to the Company's implementation of the most important matters related to various areas of the Company's business, including priority projects for the construction of facilities in the Far East, investment projects, and the RusHydro innovation development program.
Furthermore, Mr. Chekunkov chaired the Far East and Baikal Region Development Fund for a long time. He has 18 years of experience working in the sector of direct investments. He has held senior positions in the Russian Direct Investment Fund (RDIF), A-1 (Alfa-Group consortium), Delta Private Equity (US-Russian Investment Fund), and Investment Group Alrosa OJSC. He is also a member of the Supervisory Board at JSC Alrosa (PJSC). Mr. Chekunkov took part in building the main mechanisms and approaches that served as the basis for the state system of the management of Far East development and was one of the ideologists and creators of the Voskhod investment system for attracting capital to investment projects in the Far East.
The work experience described above, a deep knowledge of the specifics of the Company's work, an understanding of business processes, possession of the necessary professional competences in the financial, administrative, and economic areas, and use of the best corporate governance practice in his work make the experience of Mr. Chekunkov significant for the Company.
3. Based on clause 2 of section 2.18 of Annex 2 and based on Annex 4 to the MOEX Listing Rules, to recognize Aleksey Olegovich Chekunkov as an independent director.
* According to the recommendations following the external independent audit of performance of the Board of Directors conducted in 2018 by PricewaterhouseCoopers Consulting Services LLC, it is necessary to increase the share of independent directors in the Board of Directors (to elect an additional independent director with global expertise in (hydro-)power engineering).
9.5. On the consideration of the Electrical Power Development Program to ensure advanced economic growth in the Far Eastern Federal Okrug.
The resolution adopted:
To take into account the Electrical Power Development Program to ensure advanced economic growth in the Far Eastern Federal Okrug (Schedule 8 hereto).
9.6. Confidential.
The resolution adopted: Confidential.
About RusHydro
RusHydro Group is one of Russia's largest generating companies. RusHydro is the leading producer of renewable energy in Russia with over 400 generating facilities in Russia and abroad. The company also manages a number of R&D, engineering and electricity retail companies. Group's thermal assets are operated by subsidiary - RAO Energy System of East in the Far East of Russia. Total electricity generation capacity of the Group is 39.4 GW, heat capacity - 18.5 thousand GCal/h.
Russian Federation owns 60.56% in RusHydro, the rest is held by other institutional and individual shareholders (over 360,000). The company's stock is traded on Moscow Exchange (MOEX), and included in MSCI EM и MSCI Russia indexes. Company's GDRs in the IOB section of LSE, ADRs - in OTCQX.
For more information:
Investor Relations Department
Tel. +7 (800) 333 8000 ext. 1607, 1319, 1304
ir@rushydro.ru
The information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of PJSC "RusHydro" ("RusHydro"). One can identify forward-looking statements by terms such as "expect", "believe", "anticipate", "plan", "aim", "target", "forecast", "project", "should", "estimate", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially from these statements.
We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic and political conditions, our competitive environment, risks associated with operating in Russia and rapid technological and market changes in our industries, as well as many other risks specifically related to RusHydro and its operations.
