2.1. Corporate Governance Practices

Interview with
the Director
for Corporate
Management, Legal
and Property Issues
Elena M. Gabdulkhaeva
92%
of the Code of Corporate Governance recommendations are met

How does corporate management affect the investment appeal of Unipro PJSC?

In essence, corporate management is among the primary tools of communication with investors. On the one hand, we show how Unipro PJSC takes the best management practices into account and builds efficient processes. On the other hand, we demonstrate the Company’s current performance, plans and potential to investors. This is why the factors affecting our investment appeal include the performance of the corporate management system.

Our shareholders take part in the management of the Company to the extent they are authorised to do so by corporate law. In the meantime, we are maintaining an ongoing open dialogue with them and trying not to limit ourselves to formal approaches. Instead, we strive to report additional indicators to them as evidence that we are serving their best interests. Ultimately, information transparency pushes up the liquidity of securities.

Please tell us about the Company’s benchmarks and key results secured in 2018 as they regard improvements in the management system.

Russian corporate law is continuously improving. As we adjust our activities to the changes in corporate regulation and new requirements of the market, we are striving to adapt our Company bylaws pursuant to the most recent recommendations of the Central Bank of Russia and the effective Listing Rules of the Moscow Exchange. To that end, we revised the Company’s Articles of Association, Code of Corporate Governance, Regulation on the Insider Information and other bylaws in the reference period.

Furthermore, one of our shareholders — international gas and energy group Uniper — has very strong positions in the European market and obviously has high corporate management standards. We are watching the evolution of this function in the group closely, and unless this comes in conflict with Russian corporate law, borrow individual best practices.

In my opinion, developing the new dividend policy that received final approval in March 2019 was among the key corporate management successes. The document has become more transparent in terms of dividend payout plans and our shareholders are now able to forecast the performance of their investments.

Unipro PJSC is one of the leading public joint stock companies in Russia by the number of minority shareholders. What are the challenges that this situation poses to the corporate management system and how does the Company address them?

Obviously, a company that has over 300,000 shareholders will have certain difficulties. They are predominantly due to the fact that a large number of our minority shareholders are senior citizens who have limited access to means of electronic communication. This engenders certain problems concerning the timely entry of changes in the register system (shareholders’ passport data, postal addresses and other details) and shareholders’ ability to receive the notices of our General Shareholders’ Meeting. These little things that may seem trivial at first sight affect our shareholders’ ability to enjoy their rights in full.

We give special attention to this issue, notify our shareholders of the procedure for contacting the registrar and of the need to enter changes in the personal data on a regular basis. We have a strong respect for all the shareholders of the Company. We never disregard a single letter we receive from them, even if they concern minor administrative matters that should be sent to the registrar. Given all the peculiarities of communication, we try to work with each and every shareholder individually and we can already see the fruits of these efforts.

At year-end 2018, the legal risks were recognised as material. What methods did the Company use to counter these risks?

The fact that the Company has recognised the legal risks as material is strong evidence of Unipro PJSC’s transparency. We openly announce our risks, why they are material and inform on preventive measures. As far as the methods to counter these risks are concerned, these are the methods provided by applicable law.

Legal risks associated with frequent changes in the law that governs the Company’s core business are of special significance for the Company. To that end, we reorganised the corporate and legal function in 2018 and created a separate department for regulatory affairs to provide the Company with systemic support when interfacing with regulators and the market on matters concerning new regulatory initiatives.

Unipro PJSC builds a corporate governance system in full compliance with the norms and requirements of Russian legislation, including in the field of corporate law, anti-corruption legislation and securities market legislation, as well as in accordance with international standards and recommendations.

The organisation of effective corporate governance aimed at gaining maximum efficiency and performance in the Company business, enhancement of transparency and justification of adopted managerial decisions, risk reduction and protection of rights and interests of the Company’s shareholders are the major priorities of Unipro PJSC.

A special role in building an efficient corporate governance system goes to the governance standards which are extensively used by Uniper Group and which the Company vigorously incorporates into its governance practice.

The corporate governance of Unipro PJSC is focused on creating and maintaining the Company’s trusting relations with investors, protecting the rights and interests of shareholders, increasing the value of shares and, consequently, increasing business reputation

Corporate Governance Principles at Unipro PJSC

Accountability

Fairness

Responsibility

Transparency

Ethics

Sustainable development

Reliability

Improvement of the corporate governance system in 2018

Improvement of the corporate governance is considered by Unipro PJSC as an integral part of overall work to improve the efficiency and competitiveness of the Company and is subject to constant monitoring by the Board of Directors and executive bodies of the Company. The main reference point for improving the Company’s corporate governance system is currently the Bank of Russia Code.

In 2018 the following key measures were implemented:

Educational webinar on antitrust law

In accordance with the Corporate Code of Conduct, every employee of Unipro PJSC must adhere to the rules of fair competition and be aware of antitrust risks that arise or may arise during work.

On 18 December 2018, internal training was conducted in the Headquarters with the use of video conferencing for the heads of departments/workshops of the Company and their employees (Headquarters and branches), who deal with antitrust laws in their work.

During the training, real examples of antitrust violations faced by the Company were reviewed, an analysis of these violations was given, and the main antitrust risks of the Company were identified for:

  • wholesale electric power and capacity market;
  • retail markets (water supply, water disposal, heat supply);
  • sphere of procurement of goods and services.

Recommendations were given for minimising risks in these areas of activity.

Unipro PJSC employees, who took part in the training, got a general idea about antitrust risks of the Company, the Federal Antimonopoly Service as a regulator in the field of competition, the types of antitrust violations and responsibility for their commitment, learned to what moments attention should be paid in their field in order to minimise the possibility of antitrust violations.

Training seminars
for press services

During 2018, specialists of the operational and legal department prepared and conducted training seminars for the press service and heads of the branches' press services.

The topics of the seminars were legal issues related to the dissemination by the mass media of inaccurate information about the Company and the main contracts used in the activities of the press service.

The seminars addressed aspects of qualification of the information disseminated by the mass media as inaccurate and discrediting the business reputation of the Company, judicial and extrajudicial ways for protecting the business reputation of the Company when disseminating false information about it.

Forms of a request for refutation of false information disseminated by the mass media were offered for press service employees and heads of the branches' press services for use in their work.

Terms and conditions of the gift/donation contract, as well as contracts for the manufacture and distribution of advertising, and the sponsorship agreement were analysed. Criteria were stated for distinguishing each of the types of the above contracts and the specifics of their conclusion at Unipro PJSC. The participants of the seminar were informed about the main risks that may arise during the conclusion and execution of these types of contracts.

Seminar participants noted the relevance of the stated topics and the applicable nature of the materials provided, and expressed their gratitude for the holding of seminars.

Compliance with the Code of Corporate Governance

Unipro PJSC increases the level of corporate governance, progressively improving the quality of management practices each year. In 2018, the Company continued to improve its corporate governance system according to the recommendations set forth in the Bank of Russia Code, promptly responding to external changes and best practices.

The Company partially or fully complies with 92% of the principles of corporate governance and, compared to 2017, significantly improved the indicator of full compliance with the recommendations of the Bank of Russia Code from 46 to 53.

Assessment of the compliance of the Company’s corporate governance to the principles of the Code of Corporate Governance, %

Section

Principles recommended by the code

Guidelines fully adopted by the Company

Guidelines partially adopted by the Company

Guidelines non adopted by the Company

I. Shareholder rights and equal treatment for shareholders in the exercise of their rights

13

8

4

1

II. The Company’s Board of Directors

37

28

4

5

III. The Company’s Corporate Secretary

2

2

0

0

IV. Remuneration system of members of the Board of Directors, executive bodies and other key managerial staff of the Company

10

5

5

0

V. Risk management and internal control system

6

4

2

0

VI. Disclosure of information about the Company, the Company’s information policy

7

4

3

0

VII. Major corporate actions

5

2

3

0

Total

80

53

21

6

Plans to improve the corporate governance system in 2019

In 2019 the Company will continue to work on improving corporate governance based on the constant interaction of all participants in the corporate relations system — shareholders, members of the Board of Directors, committees and management — in order to achieve strategic goals and development priorities of the Company, respect the interests and maximise the profits of shareholders in the short, medium and long term.

Key activities scheduled for 2019: