HYDR.L Regulatory News (HYDR)

Results of the Board of Directors Meeting on December 23, 2020

 

PJSC RusHydro (ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces that the Company's Board of Directors held a meeting in absentia on December 23, 2020.

 

Resolutions passed on Items of the agenda:

 

Item 1: On Approval of the Report on Implementation of the RusHydro Annual Integrated Purchasing Program for 9 Months of 2020.

Adopted Resolution:

The report on implementation of the PJSC RusHydro Annual Integrated Purchasing Program for 9 months of 2020 (Schedule No. 1 to the Minutes) be approved.

 

Item 2: On Approval of the RusHydro Annual Integrated Purchasing Program for 2021.

Adopted Resolution:

The RusHydro Annual integrated Purchasing Program for 2021 (Schedule No. 2 to the Minutes) be approved.

 

Item 3: On Approval of the Company Register of the Non-Core Assets, updated, and the Action Plan for the Non-Core Assets Sale.

Adopted Resolution:

The following be approved:

Register of the Non-Core Assets of RusHydro, in the new revision (Schedule No. 3 to the Minutes); Action Plan for the RusHydro Non-Core Assets Sale for 2020 (Q4) - 2021 (Schedule No. 4 to the Minutes).

 

Item 4: On Review of the Report on Compliance with the RusHydro Information Policy.

Adopted Resolution:

The Report on Compliance with the RusHydro Information Policy be taken into consideration (Schedule No. 5 to the Minutes).

 

Item 5: On Authorizing to Concurrently Hold Positions in management bodies of other organizations.

Adopted Resolution:

Viktor Viktorovich Khmarin acting as the RusHydro sole executive body be authorized to hold positions in management bodies of other companies as well as other paid positions in other organizations, as follows:

All-Russia Association of Employers "Russian Union of Industrialists and Entrepreneurs", member of the Management Board; Global Sustainable Energy Partnership, member of the Board of Directors; Global Energy Association, member of the Supervisory Board; PJSC Inter RAO, member of the Strategy and Investments Committee under the Board of Directors.

 

Item 6: On Consideration of Issues of Material Importance for the Company:

6.1. Confidential.

Adopted Resolution: Confidential.

 

6.2. On the Status of Execution of the Priority Projects for the Construction of Facilities in the Far East.

Adopted Resolution: Information on the status of execution of the priority projects for the construction of facilities in the Far East as of September 30, 2020 (Schedule No. 6 to the Minutes) be taken into consideration.

 

6.3. On Recognition of Members of the Company's Board of Directors as Independent.

Adopted Resolution:

Pursuant to the recommendations of the HR and Remunerations (Nominations) Committee under the Board of Directors of the Company (Minutes dated December 21, 2020), the information be taken into consideration on the results of assessment of the Board members' compliance with the independence criteria provided for in Appendix 4 to the Moscow Exchange Listing Rules (hereinafter, "the Listing Rules"). In accordance with Clause 2 of Section 2.18, Appendix 2, and Appendix 4 to the Listing Rules, recognize:

2.1. Pavel Sergeyevich Grachev as Independent Director, despite the existence of formal criteria of relatedness on the grounds specified in Schedule No. 7 to the Minutes.

 

2. In accordance with Clause 2 of Section 2.18, Appendix 2, and Appendix 4 to the Listing Rules, recognize:

2.2. Maksim Sergeyevich Bystrov as Independent Director, despite the existence of formal criteria of relatedness on the grounds specified in Schedule No. 8 to the Minutes.

 

Schedule No. 7 to the Minutes

 

Having assessed the compliance of P. S. Grachev, a member of the Board of Directors of the Company, with the criteria for determining the independency of the Board members, as envisaged by Appendix 4 to the Listing Rules, the HR and Remunerations (Nominations) Committee (Minutes No. 105 dated December 21, 2020) established that P. S. Grachev is not a party related to:

the Company; any substantial Company shareholder; the Company competitors; the state (the Russian Federation, a Russian Federation constituent entity), or any municipal entity.

Based on the results of the assessment, the criteria of P. S. Grachev's relatedness to the Company's substantial counterparty - PJSC FGC UES*, were revealed due to the Company's contractual relations in the field of technological connection of the Company's generating facilities to PJSC FGC UES power grids and due to the contractual relations in the field of electric capacity sales by the Company. Therewith, the amount of liabilities under contracts between the Company and PJSC FGC UES exceeds 2% of revenues according to the consolidated financial statements of each party, prepared under IFRS for the preceding fiscal year.

The HR and Remunerations (Nominations) Committee under the Board of Directors of the Company established that the existing relatedness to the substantial counterparty is of nominal nature, and recommended the Board of Directors of the Company to recognize P. S. Grachev as an Independent Director. The above relatedness cannot affect P. S. Grachev's ability to form unbiased and independent opinions as to the agenda items considered by the Board of Directors and act for the benefit of the Company and its shareholders due to the reasons as follows:

1) Pursuant to Order No. 804-r dated March 30, 2020 of the Government of the Russian Federation (hereinafter, the Russian Government), P. S. Grachev was nominated, by the Russian Federation, to the Company Board Members as an Independent Director, thereby there is no duty for P. S. Grachev to vote in pursuance of the Russian Government directives (Clause 16 of Regulation No. 738 of the Government of the Russian Federation dated December 03, 2004);

2) PJSC FGC UES is an organization for managing the unified national (all-Russian) power grid under Article 8 of the Federal Law "On Electric Power Industry" and provides services for the transmission of electricity under conditions of natural monopoly. As a participant in the wholesale electricity and capacity market, the Company sells electricity and capacity as produced, which requires that the Company's generating facilities be connected to the PJSC FGC UES power grids. The connection to the power grids is performed by entering into contracts with PJSC FGC UES in accordance with the procedure and on the terms specified by the Government of the Russian Federation, and at prices determined in accordance with the acts of the Government of the Russian Federation.

Considering the above, P. S. Grachev has no opportunity to influence the terms of the technological connection contracts between the Company and PJSC FGC UES.

3) The Company is a subject of the wholesale electricity and capacity market (WECM) and a party to the Contract for Joining the Wholesale Market Trading System (hereinafter referred to as the "Joining Contract"). The Company concludes contracts in accordance with the WECM Rules and the WECM Regulations, which are appendices to the Joining Contract. The terms and conditions of the Joining Contract are binding on the parties when they participate in relations on the wholesale electricity and capacity market (WECM).

The Company and PJSC FGC UES, in accordance with Sub-Clause 4 of Clause 4 of the WECM Rules, have entered into agreements for the supply of capacity at free prices based on the results of competitive capacity takeoff (hereinafter, the "CCT Agreements"), where the Company acts as a capacity supplier.

Prices under the CCT agreements are determined in the course of / on the basis of competitive procedures (competitive selection) conducted in accordance with the WECM Rules and Joining Contract provisions.

Considering the above, P. S. Grachev has no opportunity to influence the terms and conditions of the CCT Agreements between the Company and PJSC FGC UES.

Throughout the period of filling the Board Member vacancy, P. S. Grachev has been involved actively in the activities of the Board of Directors of the Company - he has been participating in the absolute majority of meetings held by the Board of Directors and Committees under the Board of Directors of the Company (including those of the Board of Directors, Audit Committee, HR and Remunerations (Nominations) Committee, Strategy Committee, and Far East Power Industry Development Committee, as held since the beginning of 2020).

P. S. Grachev's track record with the Company Board of Directors and Committees under the Company Board of Directors in 2016 - 2020, as well as his active stands in the discussions at the in-person meetings, have been demonstrating his ability to provide independent, unbiased and fair judgments, since the P. S. Grachev's stands as to the agenda items of meetings of the Board of Directors and the Committees are based on his professional expertise and experience, being rational and independent, and the nature of resolutions adopted by P. S. Grachev previously and at present allow coming to a conclusion that occurrence of his nominal relatedness to a substantial counterparty of the Company will affect neither independence of P. S. Grachev, nor his ability to act for the benefit of the Company and all shareholders thereof.

P. S. Grachev signed a Declaration of a Member of the Board of Directors of the Company Recognized as Independent, in the form recommended by Moscow Exchange.

 

* P. S. Grachev is a member of the Board of Directors of PJSC FGC UES.

 

Schedule No. 8 to the Minutes

 

Having assessed the compliance of M. S. Bystrov, a member of the Board of Directors of the Company, with the criteria for determining the independency of the Board members, as envisaged by Appendix 4 to the Listing Rules, the HR and Remunerations (Nominations) Committee (Minutes No. 105 dated December 21, 2020) established that M. S. Bystrov is not a party related to:

the Company competitors; the state (the Russian Federation, a Russian Federation constituent entity), or any municipal entity.

According to the assessment results, for M. S. Bystrov, a criteria were revealed of being related to:

a substantial Company shareholder - the Russian Federation**, as M. S. Bystrov is a Board Member at more than two organizations controlled by the Russian Federation, namely Rosseti PJSC, SO UES JSC, and RusHydro; the Company - M. S. Bystrov has been a Member of the Board of Directors of the Company since 2013, i.e. as of June 28, 2020, the period of his holding the Board Member position amounted to over 7, but less than 12 years (7 years 3 months). the Company substantial counterparties: ATS JSC, SO UES JSC, CFR JSC, Market Council TC ANO***, Karachaevo-Cherkesskenergo JSC, Kabbalkenergo JSC***, STC UPS Protivoavariynoe Upravlenie JSC****, and PJSC FGC UES*****, because the amount of liabilities under agreements between the Company and each of the aforesaid counterparties has exceeded 2% of the book value of assets as of the immediately preceding reporting date and/or 2% of the revenues for the preceding fiscal year, of each of the counterparties, and as regards liabilities to PJSC FGC UES also exceeds 2% of the Company's revenue under consolidated statements prepared under IFRS for the preceding fiscal year.

The HR and Remunerations (Nominations) Committee under the Board of Directors of the Company established that the existing relation to the Company, its substantial counterparties and its substantial shareholder, is of nominal nature, and recommended the Board of Directors of the Company to recognize M. S. Bystrov as an Independent Director.

M. S. Bystrov's relatedness to the Company substantial counterparties: ATS JSC, SO UES JSC, CFR JSC, Market Council TC ANO, Karachaevo-Cherkesskenergo JSC, Kabbalkenergo JSC, STC UPS Protivoavariynoe Upravlenie JSC, PJSC FGC UES, and with the Company substantial shareholder is of nominal nature and cannot affect his ability to form unbiased and independent opinions as to the agenda items considered by the Board of Directors and act for the benefit of the Company and all shareholders thereof, due to the reasons as follows:

Pursuant to Order No. 804-r dated March 30, 2020 of the Government of the Russian Federation (hereinafter, the Russian Government), M. S. Bystrov was nominated, by the Russian Federation, to the Company Board Members as an Independent Director, thereby there is no duty for M. S. Bystrov to vote in pursuance of the Russian Government directives, if elected into the Board of Directors in 2020 (Clause 16 of Regulation No. 738 of the Government of the Russian Federation dated December 03, 2004); ATS JSC***** (Wholesale Electricity and Capacity Market Trading System Administrator Joint Stock Company) is a wholesale electricity and capacity market (hereinafter, the wholesale market) commercial operator, and renders services, to the Company, in the sphere of arranging electricity and capacity trading at the wholesale market, as prescribed by Article 33, Clause 7 of Federal Law No. 35-FZ dated March 26, 2003, "On Electric Power Industry" (hereinafter, the Russian Federal Law on the Electric Power Industry), under the Contract for Joining the Wholesale Market Trading System. The Contract terms and conditions are and shall be binding on the parties. Commercial relations between the Company and ATS JSC are based on the principle of non-discriminatory access to the services providable by the wholesale market commercial infrastructure organizations (Article 20 of the Russian Federal Law on the Electric Power Industry) and the principle of the state regulation of tariffs for the wholesale market commercial operator's services (Article 23.1 of the Russian Federal Law on the Electric Power Industry); SO UES JSC (System Operator of the Unified Energy System Joint-Stock Company) renders services, to the Company, in the operational dispatch management in the electric power industry owing to its system operator's status assigned thereto by Article 12, Clause 1, of the Russian Federal Law on the Electric Power Industry, under the Contract for Joining the Wholesale Market Trading System. Commercial relations between the Company and SO UES JSC are based on the principle of non-discriminatory access to the operational dispatch management in the electric power industry (Article 20, Clause 6, of the Russian Federal Law on the Electric Power Industry) and the principle of the state regulation of tariffs for the operational dispatch management services (Article 23.1 of the Russian Federal Law on the Electric Power Industry); CFR JSC (Center of Financial Settlements Joint-Stock Company) is a Russian Federation wholesale electricity and capacity market commercial infrastructure organization that ensures functioning of the wholesale market contractual structure and the system of financial settlements between the market participants, and renders services, to the Company, in estimating requirements and liabilities under the Contract for Joining the Wholesale Market Trading System. The said Contract was executed in pursuance of Article 32, Clause 1, of the Russian Federal Law on the Electric Power Industry, and Clause 40 of Rules of the Wholesale Electricity and Capacity Market as approved by the Russian Government Resolution No. 1172 dated December 27, 2010) (hereinafter, the "WECM Rules").

Commercial relations between the Company and CFR JSC are based on the principle of non-discriminatory access to the services providable by the wholesale market commercial infrastructure organizations (Article 20 of the Russian Federal Law on the Electric Power Industry). The amount of payment for the CFR JSC service package, the same for all counterparties, is and shall be as approved by the NP Market Council Association Supervisory Board;

Market Council TC ANO (NP Market Council Training Center Continuing Professional Education Autonomous Non-Commercial Organization) established under NP Market Council Association, a wholesale and retail electricity and capacity trading infrastructural organization, renders services, to the Company, in educating and training specialists in the sphere of arranging effective wholesale and retail electricity and capacity trading system.

Whereas wholesale market regulations, as approved by the NP Market Council Association Supervisory Board (hereinafter, the "WECM Regulations"), change regularly, for the purposes of maintaining high level of knowledge in the area of wholesale market procedures and obtaining information on the wholesale market actual and planned changes, the Company employees must be trained at the original source of the changes, namely at Market Council TC ANO. Contracts for education and training, between the Company and Market Council TC ANO, are concluded on an arm's length basis;

Karachaevo-Cherkesskenergo JSC and Kabbalkenergo JSC are the only guaranteed supply companies in the territory where they operate, that acquire energy resources at the wholesale market and sale them to any offtaker having addressed them, by entering into public contracts with the latter. Under the contracts, Karachaevo-Cherkesskenergo JSC and Kabbalkenergo JSC sell electric power to the Company for business and administrative needs thereof. The payment is made at the price and/or pursuant to the price determination procedure fixed as per the provisions, as in force on the payment date, of Federal Laws, other regulations, as well as acts adopted by the authorized bodies in the sphere of state regulation of tariffs; STC UPS Protivoavariynoe Upravlenie JSC is a Competency Center for mathematical, digital and physical modeling/simulation of power systems, research of electrical modes, steady-state and transient stability, development and design of devices and systems for relay protection, mode and emergency control, development of specialized software, and is also the only organization that can provide such services, with no equivalent replacement in the market. The contracts between the Company and STC UPS Protivoavariynoe Upravlenie JSC were executed for the purposes of implementing measures of accident rate reduction at the industrial sites specified in a range of binding documents. PJSC FGC UES is an organization for managing the unified national (all-Russian) power grid under Article 8 of the Federal Law "On Electric Power Industry" and provides services for the transmission of electricity under conditions of natural monopoly. As a participant in the wholesale electricity and capacity market, the Company sells electricity and capacity as produced, which requires that the Company's generating facilities be connected to the PJSC FGC UES power grids. The connection to the power grids is performed by entering into contracts with PJSC FGC UES in accordance with the procedure specified by the Government of the Russian Federation, and at prices determined in accordance with the acts of the Government of the Russian Federation; The Company is a participant in the WECM and a party to the Joining Contract. The Company concludes contracts in accordance with the WECM Rules and the WECM Regulations. The terms and conditions of the Joining Contract are binding on the parties when they participate in relations on the wholesale electricity and capacity market (WECM).

The Company and PJSC FGC UES, in accordance with Sub-Clause 4 of Clause 4 of the WECM Rules, have entered into agreements for the supply of capacity at free prices based on the results of competitive capacity takeoff (hereinafter, the "CCT Agreements"), where the Company acts as a capacity supplier.

Prices under the CCT agreements are determined in the course of / on the basis of competitive procedures (competitive selection) conducted in accordance with the WECM Rules and Joining Contract provisions.

Selecting such counterparties was stipulated by unbiased factors such as a unique status of the counterparties at a particular market, and peculiarity of the electricity and capacity market structure; part of the contractual terms and conditions are governable by the RF Government acts. Therefore, concluding such contracts has no relation to M. S. Bystrov's being Member of the Board of Directors of the Company.

M. S. Bystrov's relatedness to the Company, which appeared in June 2020, is of nominal nature and exerts no influence on his ability to form unbiased and independent opinions as to the agenda items considered by the Board of Directors and act for the benefit of the Company and all shareholders thereof, due to the reasons as follows:

since 2015, M. S. Bystrov has been sitting on the Audit Committee under the Board of Directors of the Company; from 2015 through July 2019, he was sitting, and from December 2020 has been sitting, on the HR and Remunerations (Nominations) Committee under the Board of Directors of the Company. From 2013 through 2020, he was also sitting on other Committees under the Board of Directors of the Company. The long period of M. S. Bystrov's work with the Board of Directors of the Company, HR and Remunerations (Nominations) Committee and Audit Committee under the Board of Directors is of advantage for the Company, since M. S. Bystrov has the necessary many years' professional experience in electric power industry, investments, economy and finance, and extensive knowledge of the Company business, which facilitate and enhance the performance of the Board of Directors of the Company and the Committees thereunder; M. S. Bystrov signed a Declaration of a Board Member / a Candidate to the Board of Directors of the Company Recognized as Independent, in the form recommended by Moscow Exchange; throughout the period of filling the Board Member vacancy, M. S. Bystrov has been involved actively in the activities of the Board of Directors of the Company - he has been participating in the absolute majority of meetings held by the Board of Directors (including all meetings of the Board of Directors, Audit Committee, and Investment Committee, as held since the beginning of 2020); M. S. Bystrov's track record with the Company Board of Directors and Committees under the Company Board of Directors in 2013 - 2019 has been demonstrating his ability to provide independent, unbiased and fair judgments, since M. S. Bystrov's stands as to the agenda items of meetings of the Board of Directors and the Committees are based on his professional expertise and experience, being rational and independent, and the nature of resolutions adopted by M. S. Bystrov previously and at present allow coming to a conclusion that his nominal relatedness to the Company and a substantial counterparty of the Company will affect neither independence of M. S. Bystrov, nor his ability to act for the benefit of the Company and all shareholders thereof.

In addition to the aforementioned actual relatedness criteria, M. S. Bystrov was found to be potentially related to entities controlled by Rosseti PJSC, operating in the wholesale and retail electricity and capacity markets, due to the existence or possible conclusion by the Company of the following contracts with the following counterparties:

A) contracts with the only guaranteed supply companies in the territory, under which contracts the Company purchases electric power for administrative and business needs, and the aggregate amount of liabilities may exceed 2% of the book value of assets and/or 2% of the revenue of a guaranteed supply company;

Guaranteed electricity supply companies purchase energy resources on the wholesale market and sell them to any offtaker who applies to them, concluding public contracts with those offtakers. Under such contracts, payment is made at the price and/or pursuant to the price determination procedure fixed as per the provisions, as in force on the payment date, of Federal Laws, other regulations, as well as acts adopted by the authorized bodies in the sphere of state regulation of tariffs;

B) contracts for technological connection with grid organizations, under which the Company acts as an offtaker and the grid organizations connect the Company's power receivers to their power grids, and the aggregate amount of liabilities may exceed 2% of the book value of the grid organization's assets and/or 2% of its revenues.

In order to purchase electricity for its own needs, the Company may be required to connect its power receivers to power grids owned by grid distribution companies operating in the relevant territory, which connection is done on the basis of contractual relations whose price and conditions are regulated in accordance with the procedure established by the Government of the Russian Federation.

At the conclusion of such contracts the Company has no opportunity to select other counterparties or change the material terms and conditions of the contracts against those prescribed by the respective regulatory legal procedure.

 

C) regulated contracts the Company as a seller of electric power (capacity) concludes (may conclude) in accordance with Clause 4, Sub-Clauses 1, 9, and 10, of the WECM Rules, and competitive contracts the Company as a seller of electric power (capacity) concludes (may conclude) in accordance with Clause 4, Sub-Clauses 3 through 5, 7, and 13 through 15, of the WECM Rules.

Conclusion of these contracts is conditioned by unbiased factors and arrangements of the WECM, the standard forms of contracts have been approved by the Supervisory Board of NP Market Council Association, and the scope, price and cost of the said contracts are determined by the Commercial Operator of the WECM in accordance with the acts of the Government of the Russian Federation and/or the Joining Contract provisions.

The Company is a participant in the WECM, a party to the Joining Contract, and concludes contracts/agreements in accordance with the WECM Rules and the Joining Contract provisions. The terms and conditions of the Joining Contract are binding on the parties when they participate in the circulation of electric power and capacity in the wholesale electric power (capacity) market.

Prices (tariffs) under regulated contracts are determined by the federal executive body in charge of state regulation of tariffs.

Prices under the competitive agreements are determined in the course of / on the basis of competitive procedures (competitive selection, capital project bidding) conducted in accordance with the WECM Rules and Joining Contract provisions.

Due to the specifics of building relations between companies on the WECM, the Company has no opportunity to influence the selection of potential counterparties.

In view of the above, M. S. Bystrov has no opportunity to influence the material terms of conclusion of the said contracts/agreements.

 

** 61.73% of the RusHydro ordinary shares are owned by the Russian Federation represented by the Federal Agency for State Property Management, and 12.95% of the RusHydro ordinary shares are owned by VTB Bank (PJSC) which is also controlled by the Russian Federation. The data are given subject to outstanding shares of the additional issue No. 1-01-55038-E-043D dated August 27, 2018.

*** M. S. Bystrov is the SO UES JSC Board member, as well as the ATS JSC Management Board Chairman and Member of the Board of Directors, and the Management Board Chairman and Supervisory Board Member at NP Market Council Association. CFR JSC (through ATS JSC) and Market Council TC ANO, are controlled entities of NP Market Council Association.

**** Karachaevo-Cherkesskenergo JSC and Kabbalkenergo JSC are controlled entities of Rosseti PJSC, the Board of Directors whereof includes M. S. Bystrov.

***** STC UPS Protivoavariynoe Upravlenie JSC is a controlled entity of UES Research Center JSC, the Board of Directors whereof includes M. S. Bystrov.

****** M. S. Bystrov is a member of the Board of Directors of Rosseti PJSC, which controls PJSC FGC UES.

******* By resolution of the NP Market Council Association Supervisory Board (previous name - NP ATS) dated November 30, 2007, since April 01, 2008, ATS JSC has been charged with performing functions of the wholesale market commercial operator regarded, under Article 33, Clause 1 of the Russian Federal Law on the Electric Power Industry, as a wholesale market commercial infrastructure organization.

 

 

6.4. Confidential.

Adopted Resolution: Confidential.

 

 

 

About RusHydro

RusHydro Group is the leading producer of renewable energy in Russia. It is Russia's largest generating company and is the fourth in the world with over 400 generating facilities. The Group's total electricity generation capacity including Boguchanskaya HPP is 38 GW.

 

 

For more information:

Investor Relations Department

Tel. +7 (495) 122 0555 ext. 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 RusHydro. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "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 conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to RusHydro and its operations.