generating records annual report 2014

Risk Management

The key principle of the Corporate Risk Management System of Rosatom State Corporation is the integration of current management processes, primarily, in strategic and medium-term planning, budgeting, and investment planning processes.

In 2014 the Concern continued improving the risk management system seeking further integration with all main processes and first of all with the strategic planning.

As a part of the indicated activity the list of risks was updated, the evaluation of aggregate impact of risks (including macroeconomic and geopolitical) on the main indicators of activity was carried out; owners of newly detected risks were determined, and the scheduled monitoring of risk management activities was conducted.

The most important risks from the point of view of achieving the Concern’s goals:

Production risk (risk of reducing generation volumes). The main risk factors are upsets and failures in equipment operation leading to unscheduled load reliefs, stops, and unscheduled repairs due to technical conditions of a power unit. In 2014 such risk did not affected the results of activities of the Concern. All cases of upsets and failures in equipment operation were investigated pursuant to the established procedure. Corrective and preventive measures were developed. They are aimed at removal of the root causes of upsets and prevention of their repetition. In particular, a set of activities on recovery of resource characteristics of the graphite stack of reactors with RBMK-type power units which is currently implemented permitted us to minimize the risk as well as to obtain additional generation in 2014. We do not foresee significant changes in the risk level in 2015. We intend to continue scheduled work on recovery of resource characteristics of the graphite stack of reactors with RBMK power units. Furthermore, in 2015 special attention will be paid to electrical equipment. An entire program system was developed in order to increase its reliability and prevent damages and defects.

Commodity risks (adverse change in prices for electrical power and capacity). Commodity risk depends exclusively on external factors. The adverse impact of the risk increased in 2014 versus 2013. The main factors were increase in total volume of offer using new (more efficient) heating stations and increase in generation of NPPs on the background of slower economic growth and, as a result, less energy consumption. In these conditions the Concern’s efforts were directed at reducing possible adverse consequences for commodity risk. According to the Ministry of Economic Development, in 2015 the growth rate of prices for natural gas will continue decreasing, and this, in its turn, will probably slow down the growth of electricity prices. The decrease in growth rate of electricity consumption may also have an adverse impact on the prices.

Smolensk NPP

Credit risk (increase in accounts receivable, including overdue). The main risk factors are the following: imperfection of ECWM rules to the extent of ensuring timely payment for supplied electricity and capacity; current financial and economic situation in Russia reflected in increase of short-term indebtedness of electricity buyers due to decrease in capacity to attract credits channeled to elimination of the cash gap. We managed to reduce the impact of the risk in 2014 comparing with 2013 thanks to participation in the entire complex of measures, such as implementation of financial guarantee system and work on improvement of payment discipline at ECWM. In 2015 the tools and mechanism of influence on non-payers will remain largely the same.

Risk of non-achievement of investment projects of NPP construction in the Russian Federation (increase in expenses and construction timelines). The risk impact is assessed as insignificant in the one year term. In order to minimize the risk in midand long-term, the Concern implements activities (mostly organizational) aimed at increasing efficiency of the current construction management system.

The most detailed information on electricity generation, sales markets, and prospects for construction of new NPPs is provided in Section 3 of the Annual Report – Main Performance Results.

Due to specifics of activity the Concern pays main attention to the risks of nuclear, radiation, technical, and fire safety, and physical protection of NPPs. The detailed information on NPP safety is provided in subsection 3.3 – Ensuring Safety of Russian NPPs. Radiation Effect on Personnel and Population.

In 2015 the Concern plans to continue its work aimed at further enhancement of the risk management system.