Samruk-Enegry JSC

Samruk-Enegry JSCAnnual Report 2011

Annual Report 2011Message of the Chairman of the Management Board of Samruk-Energy JSC Mr. Satkaliyev A.M.Message of the Chairman of theManagement Board of Samruk-Energy JSCMr. Satkaliyev A.M.The activity of Samruk-Energy in 2011 in the electricity and coalindustries were carried out in accordance with the approved plans.The planned production volume for the company as a wholewere met.Samruk-Energy JSC is running 19 companies including 16 companiesof the first level, and three companies with its indirect participation.Electricity production in 2011 was 13,397 million kWh, by 5%higher than the planned volume comparing to the similar indicatorof the last year, with the growth of 5.6%. The above was caused bythe increase of such load generating capacities as EkibastuzskayaGRES-2 Station JSC, Almaty Power Plant JSC, Shardarinskaya HPP JSCand Zhambylskaya GRES named after T.I. Baturov JSC.The volume of heat power production in the reporting period was7,756 thousand Gcal, with the 3% increase, comparing to the similarindicator of the last year, the growth was 4%, which was caused bythe increase of heat loads at low outdoor temperatures during theheating season.The volume of production and sale of coal of Bogatyr Komir LLP was40.6 million tons, which was by 1% higher than the planned volumeof the same period of last year, with the 3% growth.Net income for the reporting period was 14,927 million tenge. Incomparison with the previous year, the revenue increased by 3,932million tenge, or 36%. The increase resulted from the growth ofelectricity production and sales volume of coal in Kazakhstan, as wellas the increase of coal price at sale in Russia.The Company’s assets increased by 32% to 322.3 billion tenge, theliabilities – by 14% to 150.50 billion tenge, own capital – by 53%up to 171.83 billion tenge, and the charter capital – by 57% up to20.29 billion tenge.The main goal set by the Shareholders before the Company’sManagement is implementation of the Development Strategy aimedat achieving the status of the National Operator in the field of powergeneration and coal mining.We place a special emphasis on the above and believe in theachievability of this goal in the framework of public policy, socialresponsibility, pursuance of safety and environment principles, andwith the support of the Government of the Republic of Kazakhstanand National Welfare Fund Samruk-Kazyna JSC.As a result, total income in 2011 was 87,795 million tenge. Comparingto the similar period of the year 2010, the revenues increased by6,491 million tenge, or 8%.

Annual Report 2011Key Performance IndicatorsIn the reporting period the activity of Samruk-EnergyJSC (hereinafter referred to as Samruk-Energy JSC orthe Company) was performed in accordance with theapproved plans. The production volumes set for theCompany as a whole were met.Electricity production amounted to 13 billion397 million kWh, 106% of the 2011 plan.Thermal energy production was 7 million 756 thousandGcal, or 104 % of the 2011 plan.The volume of transportation of electricity in thereporting period was 7 billion 961 million kWh.The volume of electricity sales was 5 billion330 million kWh.The Company produced 40.6 million tons of coal.13,397 million kWh7,756 thousand Gcal7,961 million kWh5,330 million kWh40.6 million tonsKEY PERFORMANCEINDICATORSDynamics of the results achieved in three years12,68613,39714,2514,950 4,9935,330.4 5,54111,6287,616 7,460 7,756 7,86738.940.6 40.47,382 7,547.507,961.48,31134.72009 2010 2011 2012estimated2009 2010 2011 2012estimatedElectricity production (million kWh)Thermal energy production (thousand Gcal)The volume of electricity sales (million kWh)Coal mining (million tons)The volume of transportation of electricity (million kWh)

Annual Report 2011About the CompanyIn the framework of development and implementation of a longtermstate policy on modernization of existing and introductionof new generating capacities, and pursuant to the decision of theGeneral Meeting of founders, Samruk-Energy Joint Stock Company(hereinafter – Samruk-Energy JSC or the Company) was establishedon April 18, 2007. The Company’s founders at that moment wereKazakhstan State Assets Management Holding Samruk JSC andKazTransGas JSC.The Company was registered on May 10, 2007 with its Central officelocated in Almaty.On November 3, 2008, because of the merge of KazakhstanState Assets Management Holding Samruk JSC and SustainableDevelopment Fund Kazyna JSC, the Company’s Shareholderbecame National Welfare Fund Samruk-Kazyna JSC, the successorof Kazakhstan State Assets Management Holding Samruk JSC.KazTransGas JSC remained the Company’s shareholder.Aboutthe CompanyDuring 2008–2011, Samruk-Energy JSC merged with the numberof companies, including Bogatyr Komir LLP, the owner of thelargest surface coal mine in the world, and Ekibactuzskaya GRES-2 Station JSC, Ekibastuzskaya GRES-1 named after Bulat NurzhanovLLP, Aktobe TPP LLP, Zhambylskaya GRES named after Т.I. BaturovJSC, Alatau Zharyk Kompaniyasy JSC, Almaty Electric Stations JSC,Shardarinskaya HPP JSC and others.In May 2010, the Company moved from Almaty to Astana.Following the results of the diagnostics of the corporate governancesystem performed in 2011, the level of compliance of the corporategovernance system of Samruk-Energy JSC with the best world practicewas 61.9%.Today the Company represents the largest diversified energyholding successfully integrated into the international power balance,which creates value for its shareholders and aimed at forming ahighly efficient system of energy supply, ensuring the sustainabledevelopment of all sectors of Kazakhstan.

Annual Report 2011About the CompanyDevelopment StrategyMission of the CompanyThe mission of Samruk-Energy JSC lays in ensuring a reliable andqualitative thermal and electrical energy supply to consumers in allsectors of the economy and the population (by energy supply andmodernizing existing and building new power plants and electricitydistribution networks of the company in accordance with moderntechnology, environmental requirements and international standards).Priority Activity Directions and Principal Products:• production of electric energy• production of thermal energy• transmission and distribution of electric energy• extraction of power-generating coal• reconstruction, expansion and construction of energy facilitiesThe daughter companies of Samruk-Energy JSC have licenses for:• Production, transmission and distribution of electric energy;• Production of thermal energy;• Operation of power plants, electrical networks and substations;extraction of solid minerals;• Design, manufacture, installation and repair of electricalequipment.Production СapacitiesVision of the CompanyThe vision of Samruk-Energy JSC is the establishment of the Company as a leading and competitive electric powerholding company with a share of electricity production and coal mining not less than 40% within the country.Goals and Objectives of the CompanySamruk-Energy JSC intends to continue its activities and operations giving a top priority to the interests of thepopulation and taking into consideration the increasing demand for electric power, ensuring high quality anduninterruptable electric and thermal power supply. Taking into consideration the increasing requirements to theenvironmental standards and regulations, the Company will place a primary emphasis on innovative technologieswhich will allow to considerably reduce the level of hazardous emissions and to improve the electric power stationsoperational efficiency and performance.The Company’s core medium-term objectives are as follows:• reconstruction and modernization of the electric power facilities in Almaty and Almaty oblast.• Increasing the power capacity of Ekibastuskaya GRES-2 through construction of new electric power units, andintroduction of the technological process automation systems at the electric power units #1–2.• Construction of Kerbulakskaya HPP, which will become a counter-regulatory station of Kapchagaiskaya HPPand will allow it to increase the peak power output by 112 MW.The electric power installed capacity (as of 31.12.2011) was3,670.9 MWh, or 18.5% of the gross installed capacity of the UES ofthe republic.The electric power station available capacity (as of 31.12.2011) was3,062.2 MWh, or 19.4% of the gross installed capacity of the UES ofthe republic.Length of overhead power transmission lines (hereinafter the OHTL):• OHTL 220 kV – 971.5 km• OHTL 110 kV – 4,117.6 km• OHTL 35 kV – 3,451.0 km• OHTL 6-10 kV – 13,941.5 km• OHTL 0.4 kV – 10,858.5 kmTransformer capacity of 264 substations (hereinafter – the SS) withvoltage above 35 kV is 7,953 МVА.7,298 of transformer substations of 6-10/0.4 kV with the installedtransformer capacity of 2,270 МVА.In addition, Samruk-Energy JSC aims to implement the following four main strategic goals by 2020:• increasing electric power production capacity to 7,986.8 MW with the share of electricity generation fromrenewable energy source of up to 4%;• increasing the operational efficiency: ROACE – to 13.53% and EBITDA margin to 19%;• innovational development of the Company through the increase by the year 2020 of investments todevelopment and implementation of new products and technologies against the Company’s expenses up to 8%and implementation of ten projects/technical innovations;• creasing local content by the year 2015 to 84%, including procurement of goods – to 80%, works andservices – to 87%.

Annual Report 2011About the CompanyKey Sales MarketsKey sales markets for the products (electric power wholesale andretail markets, thermal power local markets) and the services ofsubsidiary and related organizations of Samruk-Energy JSC by zonesof the Unified Electric Power System of the Republic of Kazakhstan:• Northern Zone – Akmola, Aktobe, West Kazakhstan, Karagandy,Kostanay, Pavlodar, North Kazakhstan oblasts, and Astana• Southern Zone – Almaty, Zhambyl, Kyzylorda and SouthKazakhstan oblasts, and Almaty• Western Zone – Mangistau oblast.The key sales markets of the power-generating coal are the domesticKazakhstani market where 62% of coal is sold, and the RussianFederation where 38% of coal is sold.General Performance IndicatorsIndicatorProduction Goals and Objectives of the Company:• Producing required outputs of electric and thermal power;• Minimization of adverse environmental impact;• Reducing a specific fuel consumption and optimization of theequipment operation;• Ensuring the operation of the power-generating equipment incompliance with the applicable regulatory requirements;• Restoration, modernization and reconstruction of the existingand construction of new power facilities.Unit ofmeasurement2011(actual)2015(estimated)2020(estimated)Electric power station installedcapacityMW 3,670.9 4,674 7,986.8Power-generating coal output bln kWh 13.4 17.41 34.94Share of electric power stationinstalled/ rated capacity in the totalinstalled/ rated capacity of the Unifiedmln tons 40.64 42.25 43.7Electric Power System of the Republicof KazakhstanPower-generating coal output % 18.5 20.75 32.68The main consumers of coal in Kazakhstan are the followingcompanies of the energy and household sector:• Ekibastuzskaya GRES-1 LLP• Ekibastuzskaya GRES-2 Station LLP• AlEs JSC• Astana-Energy JSC• SevKazEnergo JSC• Karaganda Energotsentr LLP• Dzhet-7 LLP• Pavlodarenergo JSC• MUS State Enterprise with the Rightsof Economic Management Kokshetau Zhylu• and othersIn the Russian Federation, consumers of steam coal produced byBogatyr Komir LLP are the following companies:• Reftinskaya GRES, OGC-5• Troitskaya GRES, OGC-2• Serovskaya GRES, OGC-2• Verhnetagilskaya GRES, OGC-1• Omsk TES-4, TES-5, TGC-11,• Cherepetskaya GRES,• Biyskenegro OJSCThe installed capacity excluding BTES JSC, EGRES-1 LLP and Irtysh Coordinated Hydroelectric System. The 2020 figures include Irtysh CoordinatedHydroelectric System.

Annual Report 2011About the CompanyInnovation ActivityImplementation of new innovative technologies in cooperation withresearch and project organizations of the country is one of the mainconditions to achieve key activity directions. During the reportingperiod, the Company in association with the said organizationsimplemented a number of projects with innovation technologies.Implementation of technologies and equipment with higher steamparameters (565 о С against 540 о С of existing power generating unit)that allow increasing the efficiency output from 35–36% (existingpower generating unit) to 41% (power generating unit underconstruction):• Ekibastuzskaya GRES-2, power generating unit #3,Р = 630 MWh;• Balkhashskaya TES, Р = 1,320 MW (2х660 MW).Implementation of a gas-steam cycle (GSC) with the efficiency outputincreased to 55%, power generation per one gas unit increased by35% and more at Almatinskaya TES-1.Increase of performance efficiency at production of electric energyby implementing modern quality and management control systemson the basis of the microprocessor technology of automatic processcontrol system in Ekibastuzskaya GRES-2, power generating unit #1, 2.Decrease of noxious emissions of thermal power stations by means of:• Implementing electric filters with ash collection coefficient of upto 99.6% in Ekibastuzskaya GRES-1 and Ekibastuzskaya GRES-2;• Installation of emulsifiers of second generation with ashcollecting coefficient of up to 99.4% at Almatinskaya TES-2.Involving in the balance of renewable energy sources:• by means of using innovation technologies of wind generators atWPS Ereymentau with 51 MW capacity and expected capacityup to 300 MW, and WPS Shelek with 60 MW capacity andexpected capacity up to 300 MW;• by means of using innovation technologies of solar panels at SECKapshagay with 2 MW capacity.In 2012, we plan to continue implementation of the above-mentionedprojects. For further involvement in the energy balance of renewableenergy sources and development of innovative wind turbines, weplan to conduct the theoretical and experimental studies on thedevelopment of a new design of the vortex wind turbine. The newdesign of wind turbines will use the dynamic pressure of the windflow, and work without guidance on the direction of the wind.International CooperationIn carrying out its investment activities, Samruk-Energy JSC is activelycooperating with international companies.The Agreement between the Government of the Republic ofKazakhstan and the Government of the Republic of Korea wassigned in August 2011 in terms of development, financing, designing,construction, exploitation and technical servicing of BalkhashskayaTES; a consortium of KEPCO and Samsung companies will implementthe project.China International Water and Electric Corporation is the chiefcontractor of the Construction of Moinakskaya HPP project.Moreover, the Agreement between the Government of the Republicof Kazakhstan and the People’s Republic of China was signed inSeptember 2011 “On Technical Assistant in the Form of Grant to theGovernment of the Republic of Kazakhstan from the Government ofthe People’s Republic of China”. The Chinese side will provide theexperimental batch of solar panels and wind turbines at no cost.Samruk-Energy JSC is appointed the operator of the project from theKazakh side.Feasibility agreements were signed in 2011 with Dar MuhendislikMusaverlik A.S. (Turkey-England) on wind power stationsconstruction.In the framework of implementation of the Expansion andReconstruction of Ekibastuzskaya GRES-2 with Installation of thePower Generating Unit #3 Project, agreement for the CustomEngineer Services was signed with Lahmeyer International GmbН(Germany) consortium.Moreover, Samruk-Energy JSC is actively cooperating withinternational financial institutes and development institutes on manyinvestment projects. In this regard, in June 2011 the Company andExport-Import Bank of China signed a master agreement on financialcooperation for implementation of projects for construction of electricstations, distribution networks and other perspective projects to thetotal amount of up to 500 million US Dollars.

Annual Report 2011Corporate GovernanceInformation on the ShareholderSamruk-Energy JSC was officially registered on May 10, 2007 withthe purpose of development and implementation of a long-termstate policy of modernization of existing and commissioning of newgenerating facilities/ plants.As it was planned to consolidate the electric power assets belongingto Kazakhstan State Assets Management Holding Samruk JSC andKazTransGas JSC under the management of Samruk-Energy JSC, thefollowing companies were appointed as the founders of Samruk-Energy JSC:• Kazakhstan State Assets Management Holding Samruk JSC• KazTransGas JSCCORPORATEGOVERNANCEOn November 3, 2008, as a result of the reorganization by means ofmerging of Kazakhstan State Assets Management Holding Samruk JSCand Kazyna Sustainable Development Fund JSC, National WelfareFund Samruk-Kazyna JSC, a successor of Kazakhstan State AssetsManagement Holding Samruk JSC, was appointed as a shareholder ofSamruk-Energy JSC.In accordance with the Articles of Association of Samruk-Energy JSCapproved by the General Meeting of Shareholders on April 18, 2007,the Company’s governing bodies include:• General Meeting of Shareholders• Board of Directors• Management Board• Internal Audit

Annual Report 2011Corporate GovernanceThe most important human resources issues involve approving thenumber of staff of the Company, electing managerial employees,determining the number of members of the Management Board,early termination of powers of Management Board members, electionof Management Board members and determining the salaries ofthe Management Board members. Appointment of employeeswas previously discussed at the meetings of the Committee forAppointments and Awards.The fact of approval of the 2011–2020 Company DevelopmentStrategy is worthy of noting as well.To increase the corporate governance level, the Company approvedthe Resolution on Evaluation of the Board of Directors’ Activity,Committees of the Board of Directors and each Member of theBoard of Directors; the Policy for Improving the Skills and AttractingExternal Experts by the Members of the Board of Directors; the Policyfor Settlement of Corporate Disputes and Conflict of Interests in theCompany; the Rules for Recruitment of Internal Auditor and other.The Rules for Currency Risk Management, the Rules for InterestRisk Management and the Rules for Liquidity Risk Management andother risk management documents were considered by the AuditCommittee and approved by the Board of Directors.Moreover, the Board of Directors considered the Internal Audit’sactivity for the year 2010 and evaluated it as “highly efficient”.Satkaliyev А.М., Daukeyev G.Zh., Isekeshev Е.О., Ogay А.V.,Nurov К.I. and Upushev Е.Е. participated in all meetings of the Boardof Directors.Kulibayev Т.А., Turganov D.N. and Abulgazin D.R. due to theirbusiness trips missed one meeting of the Board of Directors in 2011each, held at the time of termination of their powers as members ofthe Board of Directors of Samruk-Energy JSC; their attendance ratewas 92%.Measures taken by the Board of Directors to incorporate theviews of the Sole ShareholderThe Board of Directors takes all possible measures to incorporate thepositions and views of the Sole Shareholder including:• representatives of the Sole Shareholder are the members of theBoard of Directors and all issues considered at the meetings ofthe Board of Directors are submitted to them for taking finaldecisions;• those representatives of the Sole Shareholder who are not themembers of the Board of Directors are part of the Board ofDirectors’ Committees (as experts with an advisory capacity) andexpress the position of the Sole Shareholder at the meetings ofCommittees and the Board of Directors;• members of the Board of Directors participate in the corporategovernance diagnostics and all meetings with the SoleShareholder representatives.In accordance with the Company’s Board of Directors Resolution, theChairman of the Board of Directors ensures effective communicationwith the Sole Shareholder, bringing his views and positions to thenotice of the Board of Directors and providing answers and feedbackto the Sole Shareholder on his requests.Remuneration of the Board of DirectorsMember of the Board of Directors being the government official andexercising his powers in accordance with the job requirements isnot entitled for the remuneration. The Chairman of the ManagementBoard of the Company when he is appointed to the Board ofDirectors is not entitled for the remuneration as well.Those members of the Board of Directors who are the representativesof the Shareholder are not entitled to remuneration for their work inthe Board of Directors.Independent Directors, for their performance of duties as the Board ofDirectors’ members, receive annual fixed remuneration in the amountof 1,170,000 tenge, and additional remuneration for participation ineach meeting in presentia of the Board of Directors’ Committee as theCommittee member – in the amount of 65,000 tenge.In case the Independent Director participates in less than half ofthe meetings in presentia and meetings in absentia of the Board ofDirectors in the reporting period, except for absence due to illness,vacation and business trips, the fixed remuneration is not paid.Expenses of the Independent Director (transportation,accommodation, daily allowances) connected with participation inthe meetings of the Board of Directors held outside of his permanentresidence are reimbursed.Committees within the Board of Directors’ StructureThe Committees are established for the purpose of facilitating anefficient performance of the functions of the Board of Directors.Activities of all the Committees are regulated by the internaldocuments approved by the Board of Directors and contain theregulations for their membership, competence, procedure of electionof the Committees’ members, procedure of the Committees’ work,and rights, powers and duties of their members.There are three Committees under the Board of Directors:• Audit Committee• Committee for Appointment and Awards• Strategic Planning Committee

Annual Report 2011Corporate GovernanceAudit CommitteeAudit Committee is the advisory body of the Board of Directors andis engaged in analyzing and development of recommendations oninternal and external audit issues, internal control system and riskmanagement system.The members of the Audit Committee are:• Erlan Isekeshev – Independent Director, Chairman of the AuditCommittee of the Board of Directors of the Company• Gumarbek Daukeyev - Independent Director, Member of theAudit Committee of the Board of Directors of the Company• Vladimir Kuzmin – Chief Manager of the Audit and Controldepartment of Samruk-Kazyna JSC, the Committee’s expertwithout voting rights.During 2011, the Audit Committee conducted 10 meetings, includingeight meetings in presentia and two meetings in absentia.The following issues were considered at the meetings of the AuditCommittee in accordance with the Audit Committee Resolution:• report on Internal Audit results for 2010• the status of implementation of risk management system• the status of implementation of corporate governance system• efficiency coefficient of the Internal Audit Head and criteria forevaluation of the Internal Audit activities• the 2010 year-end activity report of the Audit Committee of theBoard of Directors of Samruk-Enegry JSC• preliminary approval of the Methodology of Efficiency Evaluationof the Company’s Risk Management System• consideration and preliminary approval of the 2012–2014Internal Audit Strategic Development• preliminary consideration of the Methodology of Developmentof Key Risk Indicators of the Company and the Register forclassification of the dimension of an enterprise• otherMoreover, in accordance with its competence, in the reporting periodthe Audit Committee had preliminary considered and approved theappointment and the size and terms of remuneration and bonuses ofemployees of the Internal Audit Service.In addition, in the reporting year the Audit Committee hadpreliminarily considered and approved the following external auditissues:• On preliminary consideration and approval of the annualfinancial statements of Samruk-Energy JSC for the year 2010;• On consideration of consolidated and separate financialstatements of Samruk-Energy JSC for the six months ending June30, 2011;• On appointment and replacement of the external auditor ofthe Company and preparation of recommendations on thegiven issue;• On approval of critical provisions of agreement (contract) withthe external auditor for auditing of annual financial statements ofthe Company for 2011, issues on appointment and remunerationof the Company’s Internal Audit Office employees.Isekeshev Е.О., Daukeyev G.Zh. and Kuzmin V.М. participated in allmeetings of the Board of Directors Committee.Committee for Appointment and AwardsCommittee for Appointment and Awards is the advisory body of theBoard of Directors set up with the purpose to develop and analyzerecommendations on the issues of election and appointment of theindependent directors, Corporate Secretary, Management Boardmembers and the managerial staff, as well as а for creation ofefficient remuneration system for the above employees.The Company’s Committee for Appointment and Award members are:• Gumarbek Daukeyev – Independent Director, Chairman of theCommittee for Appointment and Awards of the Company• Erlan Isekeshev – Independent Director, Member of theCommittee.In 2011, the Committee held four meetings in presentia andconsidered 11 issues within its competence.In 2011, the Committee for Appointment and Awards submitted thefollowing recommendations to the Board of Directors:• to approve the new version of the Salary Scheme of theCompany;• to identify salaries of the Management Board members and theCorporate Secretary;• to appoint:1. Duisenbay Turganov for the position of the First Deputy of theChairman of the Management Board;2. Saltanat Shunayeva for the position of the Managing Directorfor Investments;3. Aidar Amanzholov for the position of the Managing Director;4. Saule Tulekova for the position of the Director of AccountingDepartment – Chief Accountant.• to agree on appointment of:1. Mukhit Umbetov for the position of the Chairman of theManagement Board of Alatau Zharyk Kompaniyasy JSC;2. Rostislav Li for the position of Deputy Chairman of theManagement Board of Almaty Electric Power Stations JSC;

Annual Report 2011Corporate Governance3. Nurbol Turlybekov for the position of the Managing Directorfor Finance of Mangistau Distribution Electric Company JSC;4. Murat Karimov for the position of the Managing Director forProduction of Mangistau Distribution Electric Company JSC.• to approve the efficience coefficient for the members of theManagement Board of Samruk-Energy JSC for 2011;• other.Daukeyev G.Zh. and Isekeshev Е.О. participated in all meetings of theBoard of Directors’ Committee for Appointment and Awards.Strategic Planning CommitteeStrategic Planning Committee is the advisory body of the Companyset up with the purpose to develop and analyze recommendations onthe issues of strategic directions of the Company’s activity.The members of the Strategic Planning Committee are:• Almasadam Satkaliyev – Chairman of the Board of Directors,Chairman of the Committee• Gumarbek Daukeyev – Independent Director, Member of theCommittee• Kanat Nurov – Independent Director, Member of the Committee• Rakhimzhan Satayev – Chief Manager of Corporate Managementand Strategic Development Department of Samruk-Kazyna JSC,the Committee’s expert without voting rights.The Committee did not have any meetings in 2011 as it wasestablished in December 22, 2011 (Minutes #54).Management BoardThe executive body of the Company is its management Boardheaded by the Chairman of the Management Board. Members ofthe Company’s Management Board are appointed by the Company’sBoard of Directors.The structure of the Management Board is determined by theCompany’s Board of Directors at the suggestion of the Chairmanof the Company’s Management Board. The Management Board ofSamruk-Energy JSC has been determined at the suggestion of itsChairman and comprises six members.Chairman of the Management BoardManagement over the Company’s current activities is exercised by theChairman of the Company’s Management Board.The Chairman of the Management Board is competent to deal withall the matters of management over the Company’s current activities,except for the issues falling within the competence of the GeneralMeeting of Shareholders, Board of Directors and Management Boardof the Company.The composition of the Management Board:E. Upushev – Chairman of the Management Board;D. Turganov – First Deputy Chairman of the Management Board;K. Maksutov – Deputy Chairman of the Management Board onEconomy and Finance;E. Abitayev – Managing Director for Production and Technology;A. Li – Managing Director for Long-term Development;S. Tazabekov – Managing Director for Legal Issues.In 2011, the Company’s Management Board held 31 meetings andconsidered 123 issues, including the following:• Conclusion of deals being of interest to and involving theorganizations belonging to the Group of Samruk-KazynaNational Welfare Fund JSC, including the matters of financialsupport to subsidiary organizations for the purpose ofimplementation of the Plan for Prospective Developmentof Electric Power Networks in Almaty and for ProvidingUninterrupted Operation of Almaty Thermal Power Stations.• Financial recovery and restructuring of assets of Alatau ZharykKompaniyasy JSC in terms of transfer of shares of Aktobe TES JSCto Samruk-Energy JSC.• Approval of long-term purchase commitments of theorganizations controlled by the Company.• Provision of sponsor and/or beneficent aid.• Development and approval of the Stakeholders’ Map inaccordance with the global business management practices forregulation of relations with the interested parties.• Implementation of the solar electric station construction projectin Kapshagay and Almaty oblast with 2MW capacity.• Succession by Samruk-Energy JSC of obligations of KazKuatJSC previously accepted from the Kazakhstan DevelopmentBank JSC.

Annual Report 2011Corporate GovernanceThe composition of the Management Board as of December 31, 2011E. UpushevChairman of the Management BoardD. TurganovFirst Deputy Chairman of theManagement BoardE. AbitayevManaging Director for Production andTechnologyA. LiManaging Director for Long-termDevelopment• Repayment of the liabilities of Alatau Zharyk Kompaniyasy JSCbefore Samruk-Energy JSC.• Provision of temporary reimbursable assistance to MoinakskayaHPP JSC.• Extension of the terms of financial aid received by AlmatyElectric Power Stations JSC from Samruk-Energy JSC under theAgreement on temporary financial aid #FP-56 dated 14.06.2010to July 1, 2011.• Payment by Samruk-Energy JSC of money to EkibastuzskiyEnergotsentr JSC for full repayment of tax debts and finalizing ofthe liquidation procedure of the said company.• Conclusion of deal on transition to Samruk-Energy JSC of 100%of shares of Shardarinskaya HPP JSC.• Amendment of the tenor of guarantee serving as collateral underAlatau Zharyk Kompaniyasy JSC credit line obligations.K. MaksutovDeputy Chairman of theManagement Board on Economyand FinanceS. TazabekovManaging Director for Legal Issues

Annual Report 2011Significant Corporate EventsApril, 5Due to the voluntary liquidation of KMG-Energy JSC, the Department of Justice of Almaty of the Ministry of Justice of theRepublic of Kazakhstan conducted state re-registration of Samruk-Energy Story Service LLP. As a result, 100% of shares in thecharter capital of Samruk-Energy Story Service LLP were transferred in the ownership of Samruk-Energy JSC.SIGNIFICANTCORPORATE EVENTSMay, 19May, 18May, 27June, 13June, 15June, 20July, 4August, 25October, 5October, 21October, 24November 1-3November, 17November, 24December, 1Participation of Samruk-Energy JSC representatives in the roundtable meeting at the Senate of the Republic of Kazakhstan onthe Status and Perspectives of Electric Power Development in Kazakhstan.Signing of trust agreement between NWF Samruk-Kazyna and Samruk-Energy JSC; transfer of 50% of share of participation inthe charter capital of Ekibastuzskaya GRES-1 LLP in trust management of the Company.Participation in the 39th meeting of the CIS Electric Energy Council in Almaty.Signing master agreement between Samruk-Energy JSC and Export-Import Bank of China on financial cooperation inimplementation of the project for electric stations and distribution networks construction and other perspective projects to thetotal amount of up to 500 million US Dollars.Decision of the Management Board of Samruk-Kazyna JSC (Minutes #26/11) on termination of powers of the Chairman of theBoard of Directors Timur Kulibayev and members of the Board of Directors Daniyar Abulgazin and Duisenbay Turganov aheadof time.Appointment of Almasadam Satkaliyev, Managing Director of Samruk-Kazyna JSC, to the position of the Chairman of theBoard of Directors of the Company, and appointment of Alexey Ogay to the position of the Member of the Board of Directors.State re-registration of AlmatyEnergoSbyt LLP with subsequent transfer of 100% of shares of participation to Samruk-Energy JSC.During the teleconference with the country’s regions in the framework of the industrial-innovation forum “Let’s buildstrong Kazakhstan together!” the Head of state N. Nazarbayev launched online project “Expansion and Reconstruction ofEkibastuzskaya GRES-2 with Installation of the Power Generating Unit #3” with 630 MW capacity.Agreement between the Government of Kazakhstan and the Government of the Republic of Korea in terms of development,financing, designing, construction, exploitation and technical maintenance of the Construction of Balkhashskaya TES project.Entering of Samruk-Energy JSC in the Global UN Compact.Entering of Samruk-Energy JSC in Kazakhstan Electricity Association (KEA).Appointment of Kanat Nurov to the position of Independent Director and the Member of the Board of Directors of Samruk-Energy JSC, in accordance with the decision of Samruk-Kazyna JSC Management Board (Minutes #44/11).Participation in the international exhibition-conference PowerKazakstan 2011.As a result of XIV Annual Competition of annual reports and websites, organized by Securities Market magazine (Russia) andsocial network Investor.ru supported by Russian Federal Financial Markets Service, the annual report of Samruk-Energy JSCtook third place in the category “Best Annual Report a foreign company”.Participation in “State Order 2012” event organized by the Almaty akimat jointly with NWF Samruk-Kazyna JSC.Following the “Analysis of involvement of Samruk-Energy JSC employees” conducted by NWF Samruk-Kazyna JSC, satisfactionindexes of the Company were 88.9%, loyalty indexes – 84.6% and support of initiatives – 82.4%.December, 6 The Board of Directors of Samruk-Energy JSC approved the 2011–2020 Company’s Development Strategy (Minutes #53).December, 9December, 9December, 16December, 20In a nationwide video conference to launch the Industrialization Map projects “Strong Kazakhstan will build together! Alga,Kazakstan!” held in celebration of the Day of Industrialization, and presidential awards ceremony “Altyn sapa” and “Paryz”,the Managing Director of Samruk-Energy JSC Abitayev E.A. informed the President of the Republic of Kazakhstan NursultanNazarbayev on the project “Construction of Moinakskaya Hydroelectric Station”.Participation in the Job Fair organized by KazNTU named after K. Satpaev.By the 20 th anniversary of Independence of the Republic of Kazakhstan the records of achievement of the employees of thecompanies of Samruk-Energy JSC were marked by state awards: three people were awarded Kurmet medals, five people – Erenenbegi ushin medal, and two people – Certificate of Honor of Kazakhstan.Samruk-Energy JSC was awarded the international certificate of quality management system requirements of the internationalstandard ISO 9001:2008.

Annual Report 2011Structure of Samruk-Energy JSCApproved by the Decision of the Management Board ofSamruk-Energy JSC on December 6, 2011. Minutes #28Structure of Samruk-Energy JSCNWF Samruk-Kazyna JSC(94.7931% of shares)KazTransGas JSC(5.2069% of shares)Committee for Appointmentand AwardsBoard of DirectorsAudit CommitteeStrategic PlanningCommitteeStructure ofSamruk-Energy JSCBoard of DirectorsSecretariatFirst Vice-Chairman of theManagement BoardCorporate SecretaryRepresentative OfficeManagement BoardChairman of theManagement BoardInternal Audit OfficeAdvisers to theChairman of theManagement BoardVice-Chairman of the ManagementBoard for Economics and FinanceManagingDirector forProduction andTechnical IssuesTechnicalEngineeringDepartmentManagingDirectorCapitalConstructionsDepartmentDepartment forMonitoring &ProcurementManaging Directorfor Long-TermDevelopmentCorporateGovernance& StrategyDepartmentHumanResources andAdministrationDepartmentOccupationalSafety & HealthDepartmentManagingDirector forLegal IssuesLegal DepartmentEconomic Analysisand PlanningDepartmentFinancialDepartmentManagingDirector forInvestmentsInvestmentProjectsDepartmentCorporateFinancingDepartmentRisk ManagementDepartmentCole AssetsManagementDepartmentAutomatedControl Systemand InformationalTechnologiesDepartmentBusinessDevelopmentand InnovationsDepartment

Annual Report 2011AssetsCharter capitalCharter capital of Samruk-Energy JSC is 120,294,884 thousand tenge. The number of authorized shares was5,602,187 ordinary shares, and the number of outstanding shares – 4,646,315 ordinary shares.Structure of Assets of Samruk-Energy JSC as of December 31, 2011Samruk-Energy JSCEkibastuzskaya GRES-1 LLP – 50%(trust management)Forum Muider B.V. - 50%Ekibastuzskaya GRES-2 Station JSC – 50% Bogatyr Komir LLP – 100%Ust-Kamenogorskaya HPP JSC – 89.99%Mangistau EDNC JSC – 75% + 1 shareASSETSShulbinskaya HPP JSC – 92.14% Samruk-Enegry Story Service LLP – 100%Bukhtarminskaya HPP JSC – 90% AlmatyEnergoSbyt LLP – 100%Shardarinskaya HPP JSC – 100% Alatau Zharyk Kompaniyasy JSC – 100%Moinakskaya HPP JSC – 51%Zhambylskaya GRES named after T.I.Baturov JSC – 50%62.623%Almaty Power Stations JSC37.377%Aktobe HPP JSC100%Balkhashskaya TES JSC – 100%KazKuat JSC – 100%at liquidation stageKMG-Energy JSC – 100%at liquidation stage

Annual Report 2011Information on the Company’s Subsidiary and Related OrganizationsStation Ekibastuskaya GRES-2 JSCAlmaty Electric Power Stations JSCThe station’s installed/ rated capacity is 1,000 MW.Electric power output in 2011 was 5,917.6 million kWh.Electric power sales markets: Northern, Central, Easternand South regions, and Aktobe oblast of Kazakhstan.In the framework of the project for Expansion andReconstruction of Ekibastuskaya GRES-2 withInstallation of the Power Generating Unit #3, thestation started implementation of primary constructionworks. In December 2011 the agreement was signedfor production and delivery of main and supplementequipment of the main building (boiler and turbineisland). Production and delivery of equipment as well asconstruction works are scheduled for 2012.Bogatyr Komir LLPAlmaty Electric Power Stations JSC includes thefollowing facilities:• Almaty TES-1• Almaty TES-2• Almaty TES-3• Kapshagaiskaya HPP• Western Thermal Power Complex• Almaty Coordinated Hydroelectric System• Energoremont• Fuel Filling and Unloading CenterThe installed/ rated capacity of AlES JSC is 1,238.9 MWand 3,922.2 Gcal/h.In 2011, the enterprises of AlES JSC generated 5,438.5million kWh of electric power and 5,748.7 thousandGcal of thermal power.The 2011–2015 Reconstruction and Modernization Planincludes:• Construction of a boiler house at the TES-2 withtransmission of thermal power (250–460 Gcal/h.)to the heat supply zone of TES-1.• Construction of a boiler unit #8 at the TES-2.• Construction of combined cycle gas turbine(CCGT) at TEC-1.• Construction of counter-regulatoryKerbulakskaya HPP.Alatau Zharyk Kompaniyasy JSCBogatyr Komir LLP is the Kazakhstan largest open-pitcoal mining company. The share of the Company’scoal output in the total volume of coal mined in theEkibastuz coal-mining field is 70%.At present, production capacity of Bogatyr Komir LLPis 42 million tons of coal per year, including Bogatyrcoal-mining field – 32 million tons, and Severnyi coalminingfield – 10 million tons.Taking into account the implementation in the periodup to 2017 of modernization program with thetransition to an automatic conveyor coal mining andblending practice and the organization of a permanentinternal blade, the production capacity of Bogatyr coalmining field will be 40 million tons, and productioncapacity of Severnyi coal mining field for the period ofup to 2020 will remain at 10 million tons.The core activities of Alatau Zharyk Kompaniyasy JSC(AZK JSC) include the services of transmission anddistribution of electric power to consumers of Almatyand part of Almaty oblast in accordance with electricpower supply agreements.In 2011, the total volume of services rendered fortransmission and distribution of electric power throughnetworks of Alatau Zharyk Kompaniyasy JSC was5,261.853 million kWh.In 2011, in the framework of the investment programof Alatau Zharyk Kompaniyasy JSC, the substationsOtrar and Alatau were duly put into commission toprovide power supply to Almaty city.The transformer power of the new facility put intocommission was 206 MVA.The Company continued construction of SS Kensayintended to create a ring of 220 kV transmission line.Construction of SS Kensay with the transformer powerof 500 MVA, is scheduled for completion in 2012.

Annual Report 2011Information on the Company’s Subsidiary and Related OrganizationsAlmatyEnergoSbyt LLPIrtysh Coordinated Hydroelectric SystemAlmatyEnergoSbyt LLP provides power to consumersof Almaty and Almaty oblast in the area of network ofAlatau Zharyk Kompaniyasy JSC (AZK JSC).In 2011, AlmatyEnergoSbyt LLP purchased 5,331.15million kWh of electric power under concluded powerpurchase agreements, which was by 26% (337.46 mlnkWh) more than that of 2010.The Irtysh Coordinated Hydroelectric System includesthree hydropower stations:• Bukhtarminskaya HPP• Ust-Kamenigorskaya HPP• Shulbinskaya HPPIn 2011 the gross generation or total output of electricpower by the system reached 5.485 billion kWh.1. Bukhtarminskaya HPPThe Bukhtarminskaya HPP is the upstream facility, whichrated capacity is 675 MW (nine units of 75 MW each).The multiseasonal storage of 49.6 billion cubic meterscapacity supports the power-producing operation ofthis HPP.In 2011, the gross generation or total electric poweroutput was 2,542 billion kWh.2. Ust-Kamenigorskaya HPPThe Ust-Kamenigorskaya HPP is the midstream facility,which rated capacity is 331,2 MV (four units of 82.8 MWeach).Structure of ElectrIC Power PurCHASES in 2010:Supplier Volume, mln kWh Share, %Almaty Electric Power Stations JSC 3,271.68 61.36Zhambylskaya GRES named after Baturov JSC 203.455 3.82Ekibastuskaya GRES-1 JSC 1,358.354 25.48Ekibastuskaya GRES-2 Station JSC 325.100 6.1AEC Shulbinskaya HPP LLP 7.729 0.14Electric Power Sources in the Central Asia 164.832 3.1Total: 5,331.15 100The multiseasonal storage has the capacity of0.65 billion cubic meters.In 2011, the gross generation or total electric poweroutput was 1.497 billion kWh.3. Shulbinskaya HPPThe Shulbinskaya HPP is a tailrace structure/downstream facility, which rated capacity is 702 MW(six units of 117 MW each).The multiseasonal storage has the capacity of0.92 billion cubic meters.In 2011, the gross generation or total electric poweroutput was 1.446 billion kWh.

Annual Report 2011Zhambylskaya GRES namedafter T. I. Baturov JSCShardarinskaya HPP JSCInformation on the Company’s Subsidiary and Related OrganizationsCore activities: electric power generationRated capacity: 1230 MW (3х200 MW + 3х210 MW)Electric power sales market: Southern region ofKazakhstanElectric power output in 2011 was 868 million kWh.The Shardarinskaya HPP JSC is engaged in coordinationof actions and works connected with operation of thehydropower complex of the Naryn-Syrdarya system, andaimed at improvement of efficiency of utilization of themultiseasonal storage potential/ capacity, optimization ofthe power supply services and power-producing regimesin the southern region of the Republic of Kazakhstan.The total storage volume of the HPP is 5.2 billion cubicmeters with the rated capacity of 100 mW (4 х 25 MW),while the mean energy capability is 377 million kWh.In 2011, the electric power output was495.7 million kWh.Aktobe TES JSCBalkhashskaya TES JSCAktobe TES JSC is a supplier of electric and thermalpower to consumers of Aktobe.Its rated capacity is as follows:• thermal power – 1,139 Gcal/h• electric power– 102 MW.In 2011, the station generated 677 million kWh ofelectric power and 1,918 thousand Gcal of thermalpower.Modernization of Aktobe TES provides for replacementof the turbine unit #3. In the framework of this project,the agreement was signed in December 2011 forproduction and delivery of the main equipment.Construction works will start in the beginning of 2013,when equipment is delivered.Brief description: construction of a double-unitmodule with 1,320 MW capacity.Purpose: elimination of energy shortage, satisfactionof energy needs and demand in the Republic ofKazakhstan, and reaching the power output of9.2 billion kWh per annum.Project participants: Samruk-Energy JSC; КEPCO,Samsung C&T.Commissioning of the 1 st module – 2017.

Annual Report 2011Information on the Company’s Subsidiary and Related OrganizationsMoinakskaya HPP JSCCommissioning date: August 2012Brief description: construction of a hydropower station atthe Charyn river (Almaty oblast) with the rated capacityof 300 MW.Expected effect: a controllable source of electric powerfor elimination of energy shortage, and load factoring inthe Southern region of the Republic of Kazakhstan.Implementation period: 2006–2012.Mangistau Electric Distribution GridCompany JSCMangistau Electric Distribution Grid Company JSCis engaged in provision of the services of electricpower supply to facilities of the oil-and-gas industryand to rural settlements, villages, towns and cities ofMangistau oblast (except for Aktau) throughout thetotal area of 166.6 thousand km 2 .In 2011, the volume of services of electricpower transmission and distribution reached2,332 million kWh.In 2011, in the framework of capital construction:• installation of 2x4 000 kVA transformersfor Tuschikuduk and Kyzan substations wascompleted;• KRUN-10 was replaced by RP-10 kV;• the cells of KRA 6-kV were changed toPS-110/6 kV “Prombaza”;• KRUN-10 was replaced by PS-35/10kV“Akzhigit”;• Automated system for commercial measurementof power consumption (ASCMPC) wasintroduced at the facilities of MREC JSC (Stage 3)

Annual Report 2011Financing and Operating ActivitiesSamruk-Energy JSCConsolidated Statement of Comprehensive Income for the year ended December 31, 2011in thousand tenge Note 2011 2010Revenue 7 85,549,944 76,939,880Cost of sales 8 (68,823,661) (60,932,911)Gross Income 16,726,283 16,006,969Other operating income 9 1,444,122 745,124Expenses on sales 10 (112,733) (124,375)General and administrative expenses 11 (6,405,338) (4,881,940)Operating income 11,652,334 11,745,778Financial income 12 834,330 2,654,737Financial expenses 12 (5,365,512) (5,553,261)Net financial expenses (4,531,182) (2,898,524)Share in profit of the investments accounted usingequity method16 10,024,877 3,449,023Income (loss) before taxation 17,146,029 12,296,277Income tax expenses 13 (2,219,436) (1,214,688)Income (loss) for year 14,926,593 11,081,589Other comprehensive income - -Total comprehensive income / (loss) for the year 14,926,593 11,081,589Income/ (loss) due to:Group’s shareholders 14,794,171 10,862,599Minority shareholders 132,422 218,990Income/ (loss) for the year 14,926,593 11,081,589Income per shareBasic and diluted earning per share 22(д) 3.24 3.19

Annual Report 2011Financing and Operating ActivitiesSamruk-Energy JSCConsolidated Statement of Changes in Equity as at the year ended December 31, 2011CapitalDue to the Company’s ShareholdersIn thousand tenge Equity CapitalUndistributed/ RetainedprofitOther ReserveCapitalTotalMinorityShareholder’sShareTotal CapitalBalance as of January 1, 2010 32,255,100 11,745,568 (4,086,756) 39,913,912 1,687,219 41,601,131Profit and total comprehensiveincome for the year— — 10,862,599 10,862,599 218,990 11,081,589Transactions with ownersrecognized directly in equityContributions from shareholders 44,459,978 — — 44,459,978 — 44,459,978The result of transactions with ashareholder in the non-market— 15,388,206 — 15,388,206 — 15,388,206conditionsReturn of the previously paidadditional capital— (300,000) — (300,000) — (300,000)Changes in share interest insubsidiary companies— — (3,995) (3,995) 106,509 102,514Dividends declared — — — — (31,234) (31,234)Balance as of December 31, 2010 76,715,078 26,833,774 6,771,848 110,320,700 1,981,484 112,302,184Balance as of January 1, 2011 76,715,078 26,833,774 6,771,848 110,320,700 1,981,484 112,302,184Profit and total comprehensiveincome for the year— — 14,794,171 14,794,171 132,422 14,926,593Transactions with ownersrecognized directly in equityContributions from shareholders 43,579,806 — — 43,579,806 — 43,579,806The result of transactions with ashareholder in the non-market— 2,637,388 — 2,637,388 — 2,637,388conditionsReturn of the previously paidadditional capital— — (19,330) (19,330) 40,830 21,500Changes in share interest insubsidiary companies— — (1,629,350) (1,629,350) (12,449) (1,641,799)Balance as of December 31, 2011 120,294,884 29,471,162 19,917,339 169,683,385 2,142,287 171,825,672

Annual Report 2011Финансово-хозяйственная деятельностьInvestment ActivityThe investment activity of Samruk-Energy JSC is aimed at providingreliable energy supply and meeting the needs of the population inelectrical and thermal energy.Investments structure in 2011The main directions of the Company’s investment policy are:• Modernization and reconstruction of generating capacities anddistribution networks of electric power;• Construction of new generation units;• Improvement of ecological situation and implementation ofmodern equipment meeting international ecological standards.76435In 2011, expenses under the investment program including capitalmaintenance expenses were 63.5 billion tenge, which is higher thanthe 2010 figure by 9%. The major part inside capital investmentsbelongs to investment programs of AZK JSC, ALES JSC andMoinakskaya HPP JSC.24,163,525billion tengeINVESTMENTACTIVITYIn August 2011, in the framework of Construction of BalkhashskayaTES project, the Intergovernmental agreement was signed betweenthe Government of the Republic of Kazakhstan and the Governmentof the Republic of Korea in the sphere of development, financing,designing, construction, exploitation and technical maintenance ofBalkhashskaya TES. Signing of project agreements is scheduled for2012 to launch construction of the main facilities of Balkhash TES inthe 4 th quarter of 2012.Moinakskaya HPP 35 %AZK JSC 24.4 %AlES JSC 24.1 %EGRES-2 Station JSC 7 %Bogatyr Komir JSC 6 %24,4Shutting off the Charyn river and filling of reservoir of Bestyubinskoyewater reserve of Moinakskaya HPP to the starting mark of 1736meters began in September 2011 under Construction of MoinakskayaHPP with 300 MW Capacity project.Other 4 %In the framework of Expansion and Reconstruction of EkibastuzskayaGRES-2 with the Installation of Power Generating Unit #3 Project,in June 2011 года SEGRES–2 Station JSC started implementationof primary construction works. Services supplier was selected inNovember 2011 to perform first priority construction works of theProject. Production, equipment delivery and construction works arescheduled for 2012.Modernization of Aktobe TES will be performed though replacementof a turbine unit. Production and equpment delivery under the Projectare scheduled for 2012.Under the Reconstruction of Shardarinskaya HPP Project, in 2011,trash racks were put into operatoin; capital repair of transformerswas completed; ORU-110 kW were replaced by KRUE-110 kW;compressor station, gantry cranes and oil purification equipment weredelivered and installed. Purchasing of hydroelectric sets is scheduledfor 2012.

Annual Report 2011Investment Activity70 000600005000040000300002000010 0000Capital expenses,in million tenge19,6729,60510,067Investment projectsMaintenance58,17012 ,48745,68363,52521,90641,6192009 2010 2011In 2011, in the framework of the investment program, Otrar andAlatau substations were set into operation by Alatau ZharykKompaniyasy JSC to provide electric power supply to Almaty city.New transforming capacity was 206 MVA. The Company continuedconstruction of SS Kensay intended to create a ring of 220 kVtransmission line. Construction of SS Kensay with the transformerpower of 500 MVA is scheduled for completion in 2012.The following projects were implemented in the framework of theinvestment program by Almaty Electric Power Stations JSC:• Completion of construction of combined ash and slagremoval system at TES-1. The project is aimed at providing ofuninterrupted technological work of the station and decreasingthe negative impact on the environment. Implementation of theproject allows storage of ash waste of TES-1 during 5.7 years,with an annual ash and slag output of 135 thousand m 3 /year.• Completion of reconstruction and expansion of ash dump atTES-3, which will ensure uninterrupted technological work of thestation and decreasing the negative impact on the environment.Implementation of the project allows storage of ash waste ofTES-1 during 2 years, with an annual ash and slag output of356 thousand m 3 /year.• Under the project for Reconstruction and Expansion of AlmatyTES-2, the primary equipment was purchased and constructionworks started in 2011. The project’s implementation will allowusing extra thermal capacity of TES-2 to transfer it via TES-2 andTES-1 heating lines to TES-1 heating zone.

Annual Report 2011Risk ManagementThe Company performs quarterly monitoring of current foreignexchange position of its group of companies. According to theconsolidated financial statements of 31.12.2011, the foreign exchangeposition in US Dollars amounted to 38.3 billion tenge.Exposure to interest rate risk is also caused by borrowings underinvestment projects. Percentage gap as per the consolidated financialstatements as at 31.12.2011 was 32.2 billion tenge.Currently, the Company is working on development of a hedgingmethodology to minimize (reduce) the risks associated with anunfavorable change in the tenge exchange rate against foreigncurrencies and unfavorable changes in interest rates on loanswith floating interest rates. Due to the limited choice of financialderivatives in the Kazakhstan market and due to the fact, that suchinstruments are expensive, hedging of financial risks was not usedduring 2011 because the benefits of these tools do not cover thecosts. Despite the above, the Company continues to monitor thechanges in financial derivative instruments for the implementation ofhedging structures in the future.In order to comply with best international practices in riskmanagement, in 2011 the Company developed and implemented aMethodology for Evaluating the Effectiveness of Risk Management.The Company plans to evaluate the effectiveness of risk managementsystem in accordance with the Methodology on a regular basis,including evaluation of its subsidiaries.

Annual Report 2011Local ContentThe strategy of increasing the share of local content in theimplementation of current activities is pursued by prioritizing theprocurement of goods, works and services of Kazakh origin, as wellas organization of joint ventures in Kazakhstan for the productionof certain types of electrical equipment with participation of leadingmanufacturers. At implementation of investment projects, the strategyis based on attracting domestic manufacturers and contractors inprojects with foreign participation.Preferences to domestic producers in the implementation ofthe procurement process in 2011Samruk-Energy JSC in the implementation of procurement procedures,in accordance with the requirements of the Rules of Procurement ofNWF Samruk-Kazyna JSC provides the following preferences to thedomestic producers:LOCAL CONTENT1. The tender documentation provides for the following mandatorycriteria for evaluating and comparing of bids of potential suppliers,which affect the conditional reduction in the price:• potential supplier of goods is the domestic producer and isin the Register of Domestic Producers of Holding Company(conditional price reduction of 10%);• potential supplier is an organization of persons with disabilities(disabled individual carrying entrepreneurial activity) producingthe goods, and is in the Register of Domestic Producers ofHolding Company (conditional price reduction of 5%);• Local content in the product of a potential supplier, which is thesubject of ongoing procurement (conditional price reductionof 0.1% for every 1% of local content), which is determined onthe basis of the original or a notarized copy of the certificate oforigin (form CT KZ) or copies certified by the state authorizedbody which issued the certificate;• guarantee letter from a potential supplier on the share of localcontent in the works or services (conditional price reduction of0.1% for every 1% of local content), signed by the head of a potentialsupplier or other authorized person, with specifying thepercentage of local content in the proposed works or services;Procurementvolume`Comparative analysis of procurements of 2010 and 2011(in million tenge without VAT, excluding EGRES-1 LLP)2010 2011 increaseLocal contentShare of localcontentProcurementvolumeLocal content264,329.4 156,500.3 59% 294,925 166,769.2 57%Share of localcontent 10,268.9

Annual Report 2011Local Content• guarantee letter from a potential vendor on the organization ofproduction of purchased goods and / or its components in theRepublic of Kazakhstan (conditional price reduction of 10%);• a potential supplier is a member of a Special Economic Zone(SEZ) “Innovation Technologies Park”, and delivers goods andservices relating to priority activities in accordance with theobjectives of SEZ “Innovation Park” (conditional price reductionof 5%).2. In case of equality of conditional bid price quotations the winner isthe domestic producer of goods purchased.3. Domestic producers, at participation in the tender for the supplyof their goods, do not provide a bank guarantee or other collateral forthe performance of the contract.4. If the contract is signed with domestic producer of goods, it shouldprovide for prepayment in an amount not less than 30% of thecontract, payable not later than thirty (30) calendar days from the dateof the contract.The following actions were performed to attract domestic producersand suppliers for implementation of investment projects with foreignparticipation:• Negotiations with foreign partners for attraction of Kazakhenterprises to implementation of projects, namely, constructionof Balkhashskaya TES;• Monitoring of imported goods to define those goods that can bereplaced by domestic products;• Organizational activity on the presentation of domesticenterprises.For example, Karaganda Foundry and Mechanical Plant together withPodolsky boiler plant already mastered release of the heating surfaces,economizers, and other components for the reactors of EGRES-1(block number 8) and AksuGRES (block number 2). The next targetfor the delivery of components is the construction of power unit #3EGRES-2. The total volume of deliveries of the company is designedfor tens of millions of US dollars.Participation in forums to increase local content andpromote domestic productsThe Company participated in the following events conducted bythe state authorities on procurement issues with the participation ofdomestic producers, aiming at promotion of local goods among itsdaughter companies:• “State Order-2011” conducted by the Akimat of Almaty onDecember, 28;• expanded board of NWF Samruk-Kazyna JSC with participationof the Prime Minister of Kazakhstan Karim Massimov, held onJanuary 24, 2011;• Kazakhstani Content Forum held on February 16–17, 2011 inPavlodar with participation of Deputy Prime Minister – Ministerof Industry and New Technologies of Kazakhstan IssekeshevА.О., Deputy Chairman of the Management Board of NationalWelfare Fund Samruk-Kazyna JSC;• Kazakhstani Content Forum held on September 7, 2011 inAstana.The Scientific and Technical Council was established in Samruk-Energy JSC aiming at determining compliance with currentrequirements and quality standards of purchased goods on anongoing basis, for development of local production of these goods inKazakhstan.The Scientific and Technical Council analyzed the purchased producton a regular basis.The Company performs the annual purchase of about 1,200 types ofdomestic goods from more than 50 domestic producers to the amountof 60 billion tenge. Among the main suppliers for the Group’s Holdingare such Kazakhstan manufacturing plants as:• Almaty Heavy Machine Building Plant JSC,• Kentau Transformer Plant JSC,• Almaty Electromechanical Plant LLP• KazEnergoKabel JSC• Karaganda Foundry and Mechanical Plant LLP.Portion of localcontent, in %Estimated portion of local content in procurements of 2011–20152011 2012 2013 2014 201557% 75% 74% 76% 85%Note: the estimated portion of local content for 2012–2015 was adjusted, as the Rules for Procurement of Goods, Works and Services of NWFSamruk-Kazyna JSC are not applicable for Balkhashskaya TES JSC, and the data for EGRES-1 being under trust management, was excluded.

Annual Report 2011Social PolicyThe Company follows the requirements of the 2011–2020 Company’sDevelopment Strategy and Corporate Social Responsibility Strategyin its social policy. The main goals and objectives of the Company’ssocial policy include the personnel health care, social security of theemployees and their families. On October 6, 2011, the Companyjoined the UN Global Compact, following, within its sphere ofinfluence, the ten principles of the Global Compact in its strategy andeveryday activity.The main components of social support in 2011 involved one-timeaid for health improvement, health insurance, and financial assistanceon work-related injury. Expenditure on social assistance in 2011amounted to 149% compared to 2009 and 115% compared to 2010.The Company pays the employees social security benefits at its ownexpense for temporary disability due to general illness, in accordancewith the laws of the Republic of Kazakhstan.SOCIAL POLICYOn a periodic basis, the Company’s employees undergo medicalinspections and examinations for regular health surveillance toprevent from work-related or occupational diseases, and, in the eventof finding out of any initial symptoms of the disease, to arrange fortimely medical treatment.The Company’s subsidiary and related organizations, in accordancewith the labor contract, pay overtime compensation, bonuses forwork on weekends and public holidays and for night work; otherpremiums and increments of a compensatory and incentive nature;compensation for work under arduous and harmful labor conditions;and annual paid vacation. One-time bonus is paid in connection withthe jubilee (50, 60 years) with continuous work experience in thepower industry of 10 years or more.Employees combining work and study in educational institutions areprovided with additional vacations for the period of examinations oroverview lectures, preparing and presentation of graduation projects(works), and taking final exams.The Company uses its best endeavors to promote and encouragea healthy lifestyle of its employees and their families. Jointly andin cooperation with the trade unions of the subsidiary and relatedorganizations, the Company every year arranges and holds sportingevents and outdoor activities.Special attention is paid to children: the Company distributesvouchers to health resorts, holiday centers and children’s recreationcamps; establishes kindergartens (child day-care centers), arrangeschildren’s New Year parties and gifts, as well as exhibitions of pictures

Annual Report 2011Social Policyand handcrafted items. More than 30% of all social expenses wereused for the above purposes in 2011.Along with its operational activity, the Company holds significantsocial work to support children’s department of Research Instituteof Oncology and Radiology, provides assistance to energy veterans,the disabled, orphans and children left without parental care,children from poor families, the Athletes Associations Support Fund,educational institutions, health, culture; organizes tours for poorchildren and orphans, and charitable assistance to individuals. Totalamount of money spent on sponsorship and charitable aid in 2011was 931 million tenge.Social policy is an integral and inseparable part of personnel policy,aimed at providing a sense of satisfaction from working in thecompany and is implemented through a system of social guaranteesand compensation for all employees.Personnel ManagementPersonnel Management Policy in the Group of Samruk-Energy JSCcompanies supports the creation of high-performance company thathas a transparent corporate governance system meeting internationalstandards, a stable corporate culture and an integrated system ofcorporate values.HR policy is focused on the strategic development of humanresources. Human Resources Management is a key feature of theCompany, aimed at improving business performance through theimprovement of the quality of staff.The Corporate Center of Samruk-Energy JSC includes 80 people.Total number of employees of Samruk-Energy JSC Group ofcompanies is 13,799 people including:• administrative-managerial personnel – 1,328 people,• production personnel – 12,451 people.The average age of employees is 41 years. The Company has abalanced age composition of staff, which allows solving the problemof succession of generations, and share experiences.Key Indicators of the Personnel Policy:• Staff turnover – 7.6%• The degree of employees’ satisfaction – 81.5%To determine the level of involvement of the administrative personnelof Samruk-Energy JSC, a sociological study was conducted byan independent company, according to which the employees ofthe Company demonstrated the highest level of loyalty – 84.6%.Loyalty of employees is a key indicator of the involvement of staff,describing the emotional attitude of employees to the company, team,and manager. Loyalty is a strong internal motivation to work. Themeasurement and formation of this motivation is very important inthe management of personnel.The educational level of staff:• Higher professional education – 4,101 employees• Secondary technical education – 4,183 employees;• High School – 5,515 employees.Expenses on staff training were 209,866 thousand tenge and the costof training per one employee was 26,622 tenge; 7,883 employeeswere trained. There are three training centers operating in theCompany aiming to deliver training, retraining and advanced training(AlES JSC, SEGRES-2 JSC, Bogatyr Komir LLP).The Company cooperates with many universities and scientific andtechnological enterprises of the Republic of Kazakhstan and theRussian Federation in order to share experiences and learn newtechnologies, as well as to deliver training and advance training ofpersonnel.Special emphasis is placed on motivation, aiming at achieving thestrategic objectives of the Company. Priorities of motivation arereflected in a transparent pay system, a system of social support foremployees and the system of staff key performance indicators.Occupational Health and SafetyOne of the most important tasks of the Company lays in providing asafe working environment and the preservation of life and health ofworkers. In this regard, in 2011, the Company’s Board of Directors(Minutes #47 dated May 11, 2011) approved the Occupational SafetyPolicy (hereinafter – the Policy).The Company determines the following Policy priorities:• the priority of life and health of a worker in relation to the resultsof production activities;• prevention of injury and health deterioration of personnel;• continuous improvement of safety management system andincreasing its efficiency;• continuous improvement of safety through the use of modernequipment and means of collective and individual protection.To implement the priorities of the Policy the Company intends toprovide:• ongoing work on the determination of existing risks and developaction plans to prevent and resolve risks;• continuous training of personnel;• integration of health and safety issues with all existing and newlyintroduced processes;• establishing personal liability of managers and performers on theissues of security and safety;• motivation of staff to increase its involvement in themanagement system and occupational safety;

Annual Report 2011field of occupational health and safety. Certification for compliancewith international standards for Alatau Zharyk KompaniyasyJSC and Almaty Power Station JSC is scheduled for 2012. TheIntegrated Management system is scheduled for implementation atShardarinskaya HPP JSC.Environment ProtectionThe main objective of the society is to raise the level of environmentalsafety, to achieve growth in the capitalization of the Company’ssubsidiaries by providing reliable and environmentally soundproduction, transport and distribution of energy, as well as integratedapproach to the use of natural energy resources.It is planned to implement an environmental management system,which will become an integral part of corporate governance and anessential part of non-financial risk management systems, operating inthe Company.The Company is cooperating with international governmentaland non-governmental organizations, scientific and educationalinstitutions, effectively working in the field of environmentalprotection.In the framework of environmental protection and ecological safetythe main activities of the Company are:• reduction of emissions and discharges of pollutants into theenvironment;• reduction of waste production and ensuring their safe handling,implementation of measures for waste management;• prevention of water pollution and conservation of biologicalresources in the exploitation of hydropower station;• development of alternative and renewable energy sources;• technological modernization and gradual decommissioningof obsolete equipment, introduction of advanced technologyexisting in the production, transportation and distribution ofelectricity;• regulation reservoirs’ flow for hydropower industry;• introduction to the thermal power stations of new technologiesof burning energy coal, modern methods of gray-and nitrogenpurification of flue gases.Compliance with generally accepted standards of environmentalprotection will reduce the negative impact on the environment.

010000, Astana,Kabanbai batyr avenue, 17, Block «Е»Tel.: +7(7172) 55 30 00, 56 30 21Fax: +7(7172) 55 30 30e-mail: info@samruk-energy.kzwww.samruk-energy.kzKazakhstanika.kz

Annual Report 2011samruk-energy.kz