Corporate governance

The effectiveness of the Company’s operations is provided through properly built corporate governance processes at each of the levels that ensure transparency, control and delineation of powers, and that avoid various risks through timely response.

Shareholder

“Sovereign Wealth Fund “Samruk-Kazyna” JSC holds 100 % of “Samruk-Energy” JSC shares (www.sk.kz).

The relationship with the Sole Shareholder is to ensure protection and respect for its rights and legitimate interests and is based on honesty. Accountability, responsibility and transparency.

The sole shareholder ensures the management of the Company by setting priorities and strategic areas of activities.

Therefore, the Company strives to comply with the interests of the Sole Shareholder by ensuring the growth of long-term value and sustainable development of operations.

So, based on the results of the Company’s operations, in 2017 the number of announced securities reached 8,602,187, placed – 5,601,687. The nominal value of one common share was 842 tenge.

According to the Dividend Policy of “Samruk-Kazyna” JSC, dividends on common shares of 4,704,895,450 tenge were paid following 2016 results on the basis of the decision (minutes) of the Sole Shareholder No. 14/17 of July 25, 2017.

The Board of Directors

The Board of Directors bears in mind the creation of shareholder value, as well as the responsibility to all stakeholders when making decisions. The Board always takes into account its obligations to the Company in accordance with the Legislation and the Corporate Governance Code, in particular the commitment to contribute to the success of the business, when making decisions that, in its opinion, are in line with the best interests of shareholders and long-term sustainable development of the Company. The Board of Directors ensures strategic management of the Company and oversees the activities of the executive body.

Successful implementation of our strategy depends on engaging and retaining the right talent. This starts with the availability of a high-quality Board of Directors. Balance is an important requirement for the composition of the Board, not only in terms of the number of executive and non-executive directors, but also in terms of experience, diversity of skills, knowledge and thinking styles.

Criteria for a good quality composition of the Board of Directors are set up by the Rules for formation of the composition of “Samruk-Kazyna” JSC Board of Directors.

In 2017, PricewaterhouseCoopers’ experts analyzed the effectiveness of the Board of Directors of “Samruk-Energy” JSC, held a series of seminars on introduction of best practices and made recommendations for improving the corporate governance of the Company as part of the evaluation of the corporate governance rating.

As of December 31, 2017, the composition of the Company’s Board of Directors was as follows:

• Chairman of the Board of Directors – Bektemirov Kuanysh Abdugaliyevich
• Chairman of the Management Board – member of the Board of Directors – Satkaliyev Almassadam Maidanovich
• Representative of the Sole Shareholder – Rakhmetov Nurlan Kusainovich
• Independent director – Spitsyn Anatoly Tikhonovich
• Independent director – Andreas Stoerzel
• Independent director – Luca Sutera
• Independent director – Joaquin Galindo Velez

Independent directors are a guarantee of making non-biased decisions that corresponds most closely to the Company interests. The main criterion for the election of Independent Directors is the presence of sufficient competence and independence to make objective decisions that are free from the influence of any parties. Independent directors actively share their experience and knowledge to apply the best international practices in the Company.

Following the results of 2017, Independent Directors of the Company fully met the criteria of independence.

The Board delegates authority to the BoD committees to perform certain tasks on its behalf so that it can operate effectively and pay due attention for in-depth study and quality consideration of issues and decisions taken; the Company has Committees under the Board of Directors: Audit Committee, Appointment and Remuneration Committee and Strategic Planning Committee.

In 2018, by the decision of the Sole Shareholder was terminated by members of the Board of Directors Bektemirov K.A. and Satkaliev A.M. Representative of the Sole Shareholder Aidarbaev A.S. appointed Chairman of the Board of Directors.

The basic data of the Board of Directors members are given below. A full resume of each Board member is available on the website: www.samruk-energy.kz.

Aidarbayev Alik Serikovich

Member of “Samruk-Energy” JSC Board of Directors, representative of the Shareholder interests

Citizenship: the Republic of Kazakhstan

Year of birth: 19 May 1963

Date of first election: 23 April 2018

Does not hold the Company’s as well as suppliers and competitors’ shares

Deputy Chairman of the Board of “Samruk-Kazyna” JSC, Candidate of Technical Sciences, and Honorary Professor of Kazakh National Technical University named after K. Satpayev.

Expert in the oil and gas industry, as well as in strategic and corporate governance.

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Rakhmetov Nurlan Kusainovich

Member of the Board of Directors, representative of the Shareholder interests

Citizenship: the Republic of Kazakhstan

Year of birth: 24 September 1965

Date of first election: 28 January 2017

Does not hold the company’s as well as suppliers and competitors’ shares.

Expert in strategic management, economics, finance and audit

Combining jobs and membership in the BOD:

• From October 2012 to March 2016 – was a member of “KazMunaiGas” JSC Board of Directors
• Managing Director for the Republic of Kazakhstan Government relations at “Samruk-Kazyna” JSC.

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Luca Sutera

Senior Independent Director of “Samruk-Energy” JSC Board of Directors

Citizenship: the Italian Republic

Year of birth: 07 July 1971

Date of first election: 08 May 2012

Date of election as Senior Independent Director from 14 October 2016.

Reelected: 05 July 2016

Does not hold the company’s as well as suppliers and competitors’ shares.

Chairman of the Audit Committee, member of the Appointment and Remuneration Committee, member of the Strategic Planning Committee

Expert in the following areas:

• Accounting, finance, audit, (holds the CPA certificate)
• Risk management and internal control
• Corporate strategy
• Mergers and acquisitions
• Investment valuation
• HR and organization
• Performance management
• Corporate Governance (Chartered Director of IoD UK)
• Commissioning, integration and turnover of companies
• Large-scale transformation programs of the company

Combining jobs and membership in the BOD:

• Vice President for Finance of the Group, Member of the Executive Board at Nebras Power (Qatar Sovereign International Power Company)
• From April 2011, Luca Sutera is a member of the Russian Association of Independent Directors
• From April 2014, Luca Sutera is a member of the British Institute of Directors (IoD)
• From August 2015, Group Chief Financial Officer at Nebras Power, Qatar Sovereign International Power Company

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Spitsyn Anatoly Tikhonovich

Independent Director of “Samruk-Energy” JSC Board of Directors

Citizenship: Citizen of the Russian Federation

Year of birth: 24 May 1939

Date of first election: 08 May 2012

Reelected: 05 July 2016

Does not hold the company’s as well as suppliers and competitors’ shares

Chairman of the Appointment and Remuneration Committee, member of the Audit Committee, member of the Strategic Planning Committee

Expert in economics, finance, management and strategic development.

Doctor of Economics, Professor, Member of the Presidium of the Russian Academy of Natural Sciences (RANS), a member of the Union of Architects of the USSR and the Russian Federation.

Combining jobs and membership in the BOD:

• Currently, he is a professor of economics and finance of the public sector of the Russian Academy of National Economy and Public Administration under the President of the Russian Federation, Director of the Institute for Strategic Studies of Integration Problems of the Eurasian Economic Community
• Vice President of the Russian Academy of Natural Sciences, First Vice President of the International Academy of Investments, Director of the Institute for Strategic Studies of EurAsEC Integration Problems, Independent Director “KEGOC” JSC

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Andreas Stoerzel

Independent Director of “Samruk-Energy” JSC Board of Directors

Citizenship: citizen of Germany

Year of birth: 12 October 1963

Date of first election: 05 July 2016

Does not hold the company’s as well as suppliers and competitors’ shares

Chairman of the Strategic Planning Committee, member of the Appointment and Remuneration Committee, member of the Audit Committee

Expert in corporate management, strategy, finance, mergers & acquisitions and investments.

Combining jobs and membership in the BOD:

• From 2014 to present, Chief Executive Officer of Innogy Middle East & North Africa, Dubai, UAE
• From 2012 to 2014 CEO, RWE Middle East Ltd. Dubai, United Arab Emirates

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Joaquin Galindo Velez

Independent Director of “Samruk-Energy” JSC Board of Directors

Citizenship: citizen of Spain

Year of birth: 27 August 1957

Date of first election: 28 January 2017

Does not hold the company’s as well as suppliers and competitors’ shares

Member of the Strategic Planning Committee, member of the Appointment and Remuneration Committee, member of the Audit Committee

Expert in business management and economics, generation and engineering

Combining jobs and membership in the BOD:

• Chief Executive Officer of the leader generation company (16.000 MW) in LATAM, with operations in Argentina, Brazil, Colombia, Chile and Peru

The Board of Directors of the Company held 11 meetings in 2017, of which 9 meetings were held in person, 3 meetings were held in absentia. 151 items were considered during meetings. Each quarter the Board of Directors considered the reports on risk management and on the work performed to minimize them, reports on work in the area of occupational health and safety and workplace injuries, reports on the execution of the Action Plan for improvement of corporate governance and the introduction of the Corporate Governance Code, investments in the Company’s investment projects, Reports on execution of the Roadmap for implementation of “Samruk-Energy” JSC Long-term Development Strategy, Consolidated interim financial statements of the Company.

Furthermore, items related to privatization of assets were discussed, preliminary amendments to the Company’s Charter were approved, an Ombudsman of the Company was appointed, the Company’s budget was approved and matters related to the implementation of the Development Plan were discussed. The documents on implementation of Transformation Program and other areas of the Company’s activities have been approved.

Remuneration of the Board of Directors members

The representatives of the Sole shareholder and the Chairman of the Board as members of the Board of Directors receive no remuneration.

Independent directors receive annual fixed remuneration for performing their duties as members of the Company’s Board of Directors and additional remuneration for participating in each meeting in presentia of the Committee of the Company’s Board of Directors as members of the committee.

An independent director is reimbursed for expenses (transport. accommodation and daily allowance) related to departure for meetings of the Board of Directors and committees of the Board of Directors held outside the place of his/ her permanent residency.

Remuneration to independent directors for 2017

Report on performance results of the Board of Directors Committees

The Audit Committee

The Audit Committee work is aimed at assisting the Board of Directors for in-depth study of issues within its competence:

1)  development of recommendations for creating an effective system for monitoring the financial and business operations of the Company, including the completeness and reliability of financial reporting;

2) development of recommendations for monitoring the reliability and effectiveness of internal control and risk management systems, as well as for the execution of documents in the field of corporate governance;

3) development of recommendations for monitoring the independence of external and internal audit, as well as for ensuring compliance with the legislation of the Republic of Kazakhstan;

4) conduct benchmarking of the level and policy of remuneration of the head of the Internal Audit Service in Kazakhstan and foreign companies similar in scale and type of operation, and inform the Board of Directors.

The composition of the Committee:

• Luca Sutera – Senior Independent Director, Chairman of the Committee;
• Spitsyn Anatoly Tikhonovich – Independent director, member of the Committee;
• Andreas Stoerzel – Independent director, member of the Committee;
• Joaquin Galindo – Independent director, member of the Committee.

Main items discussed:

Quarterly discussion and preliminary approval of Reports: On the Company’s execution of the Common Action Plan for addressing the shortcomings in the process of preparation of financial statements in “Samruk-Kazyna” JSC group, on compliance / non-compliance with the principles and provisions of the Corporate Governance Code, the report on the Service’s performance the report on risk management with a description and analysis of critical risks as well as information on the implementation of plans and programs for their mitigation.

Risks associated with cyber security as well as the independence and objectivity of an external auditor were assessed.

The Appointment and Remuneration Committee

The Appointment and Remuneration Committee is an advisory and consultative body of the Board of Directors. All propositions developed by the Committee are recommendations that are offered for consideration by the Board of Directors. Main areas of activity are:

1)  development of recommendations on the election and appointment of candidates for Independent Directors, the composition of the Management Board, the Corporate Secretary, taking into account the provisions of the Company’s internal documents and submission to the Board of Directors

2)  recommendations on the remuneration of Directors. members of the Management Board, the Corporate Secretary in accordance with the goals, objectives and current status of the Company, and the level of remuneration in companies similar by type and scale of operations.

3)  recommendations for introduction of an organized and open remuneration system for Directors, members of the Management Board and the Corporate Secretary

The composition of the Committee:

• Spitsyn Anatoly Tikhonovich – Independent Director, Chairman of the Committee
• Andreas Stoerzel – Independent Director, member of the Committee
• Luca Sutera – Senior independent director, member of the Committee
• Joaquin Galindo – Independent Director, member of the Committee

The main items considered at the meetings of the Appointment and Remuneration Committee:

During the reporting period the Board of Directors was provided with recommendations on election of Supervisory Boards / Boards of Directors members of “AlmatyEnergoSbyt” LLP, “Mangistau Distribution Power Grid Company” JSC, “EK REC” JSC, “AZhC” JSC, “Ekibastuz SDPP–1” LLP, “Shardarinsk HPP” JSC, “Ekibastuz SDPP–2 Plant” JSC, “First Wind Power Plant” LLP.

Recommendations for the following jobs were provided: Director General of “Kazhydrotechenergo” LLP, “AlmatyEnergoSbyt” LLP, “Ereymentau Wind Power” LLP, “Energy Solutions Center” LLP, and on “Samruk-Energy” JSC Management Board composition.

The actual values of key performance indicators of the Management Board members, the Head of the Internal Audit Service and the Corporate Secretary of “Samruk-Energy” JSC, the motivational KPI of the Management Board members, the Head of the Internal Audit Service and the Corporate Secretary of “Samruk-Energy” JSC were considered.

Certain matters related to Job matching, results of assessment of efficiency of “Samruk-Energy” JSC Board of Directors’ members remuneration policy, assessment of efficiency of the process of succession planning for key positions of “Samruk-Energy” JSC, as well as other issues were discussed.

The Strategic Planning Committee

The Strategic Planning Committee was established to provide recommendations on development of priority businesses, setting of strategic goals of the Company, introduction of a sustainable development management system, the implementation of investment projects, the Master Plan of the Company, including on matters related to the development of activities that will enhance the Company’s long-term performance.

The composition of the Committee:

• Andreas Stoerzel – Independent Director, Chairman of the Committee;
• Spitsyn Anatoly Tikhonovich – Independent director, member of the Committee;
• Luca Sutera – Independent director, a member of the Committee;
• Joaquin Galindo – Independent Director, member of the Committee.

The main issues discussed at the meetings of the Strategic Planning Committee:

Quarterly review of the Reports: on the work in the area of occupational safety and health and workplace injuries, on execution of the Action Plan for improvement of corporate governance and the introduction of the Corporate Governance Code of “Samruk-Energy” JSC for 2016–2017, on fulfillment of the road map for implementation of “Samruk-Energy” JSC long-term development strategy, on execution of the Action Plan for meeting expectations of shareholder, on the use of investments as regards the Company’s investment projects, approval and subsequent control over the achievement of strategic KPI.

Consideration and updating of some matters of the Company’s Strategy for 2015–2025.

Approval of the Work Plan of the Strategic Planning Committee under the Board of Directors of “Samruk-Energy” JSC for 2017. Assessment of the efficiency of implementing the activities in the area of corporate social responsibility.

The pre-investment stage of the project “Gasification of Almaty energy complex, retrofit of Almaty CHP–2 with minimization of environmental impact, implementation of the project” Gasification of Almaty energy complex. Expansion of CHP–1 of “APP” JSC with installation of the new energy source based on gas turbine technologies, pre-investment stage of the project “Reconstruction of the heating main of CHP–2-WHC of “APP” JSC, pre-investment stage of the project“ Reconstruction of Almaty CHP–3 of “APP” JSC was approved.

The executive body

The Management Board is the collegial executive body of the Company. The executive body manages the daily activities of the Company and ensures its compliance with the strategy, development plan and decisions adopted by the Sole Shareholder and the Board of Directors.

The Management Board as of 31.12.2017:

1. Satkaliyev Almassadam Maidanovich
2. Maksutov Kairat Berikovich
3. Moldabayev Kanysh Tanirbergenovich
4. Ogay Alexey Vladimirovich
5. Tutebayev Serik Suinbekovich
6. Ospanov Yersain Yerikovich
7. Baltabayev Askar Kuatbayevich

In 2018, Zhulamanov B.T. was appointed Chairman of the Management Board of the Company by decision of the Sole Shareholder.

The qualifying criteria for the positions of the Management Board members of the Company were approved by the decision of the Company’s Board of Directors dated 14.10.2016 (Minutes No. 07/16) and meet the requirements for improving management efficiency, the distribution of strategic goals, business processes, duties and responsibilities in accordance with the organizational structure of the Company.

The performance of “Samruk-Energy” JSC Management Board members is evaluated in accordance with the Rules for evaluating the performance and remuneration of senior management of the Company approved by the decision of the Board of Directors on October 14, 2016 (Minutes No. 07/16) (hereinafter – the Rules).

The Report of the Management Board

19 in-person meetings of the Company’s Management Board were held in 2017, 344 items were considered.

The Management Board of the Company adopted the following most important decisions:

• On the conclusion of the Agreement on long-term purchases of services for granting the rights to use SAP software on lease. as a deal which is in line with the interests of “Samruk-Energy” JSC
• On evaluation of “Samruk-Energy” JSC employees’ compliance with the qualification requirements for the new organizational structure jobs (Job matching)
• On operation of management system
• On approval of the staff list of “Samruk-Energy” JSC in the new edition
• On approval of “Samruk-Energy” JSC Development Plan for 2018–2022
• On some matters related to the sale of “MDPGC” JSC shares
• On approval of implementation of the project “Gasification of Almaty Energy Complex. Expansion of CHP–1 of “APP” JSC with installation of the new energy source based on gas turbine technologies”
• On approval of the pre-investment stage of the project “Gasification of Almaty Energy Complex, Modernization of Almaty CHP–2 with minimization of environmental impact”
• On approval of the pre-investment stage of the project “Reconstruction of the heating main of CHP–2-WHC of “APP” JSC “
• On approval of the pre-investment stage of the project “Reconstruction of Almaty CHP–3 of “APP” JSC.
• On approval of strategic and medium-term planning standard of “Samruk-Energy” JSC

Committees of the Management Board

Currently, the Company’s Management Board has the following advisory bodies set up to provide the members of the Management Board with expert assistance in dealing with the most difficult tasks.

All committees report to the Company’s Board and operate within the competence granted to them by the Board in accordance with provisions of these bodies.

The Committee for risks and management system

The Committee assists the Management Board in making decisions in the area of risk management, the Company’s management and internal control system, prepares recommendations and proposals for organization and maintenance of an effective risk management system, internal control and management system, ensuring their operation and development of processes aimed at identification, evaluating, monitoring and controling risks. The Committee also prepares proposals for controlling over activities in these areas.

Committee for Planning and Performance evaluation

The main purpose of the Committee for Planning and Performance evaluation of “Samruk-Energy” JSC under the Company’s Board is to improve the performance of the Company and its subsidiaries and affiliates, including optimizing the structure of their assets and expenditures.

To achieve the main goal, the Committee performs the following functions:

1. consideration and development of recommendations on the drafts Development Plans;
2. consideration and development of recommendations on reports on achievement of key performance indicators for the reporting period;
3. consideration of the item on approval of financial statements for the reporting year;
4. development of recommendations on the distribution of net income for the past fiscal year and the amount of dividends;
5. consideration and development of recommendations on improving performance.

Investment and Innovation Council

The Committee helps to increase the efficiency of investment and innovation activities across Samruk-Energy group of companies

To this end, the Council develops recommendations in the following areas:

1. approval of internal documents on investment and innovation activities, implementation of certain stages of pre-investment and investment stages of a project, development of recommendations for transition to the next stage;
2. acquisition and alienation of shares (equity stake) of other legal entities by the Company, including as part of exercising the priority right to acquire the subsoil use right of a facility tied to the subsoil use right, the merger of Samruk-Energy group of companies with third-party legal entities, the establishment of legal entities as part of Investment Projects;
3. adjustment of key parameters of projects, use of scientific and technical achievements and best practices of international companies-leaders and addressing issues innovative in nature.

Asset and Liability Management Committee

The purpose of the Committee is to ensure timely and quality decision-making on matters related to the preliminary approval of the investment decision to place the Company’s temporarily available cash (TAC). The Committee makes recommendations on financial assets, including the investment of money in financial instruments, controls over the compliance with the planned and the state of the actual standards when placing funds. In addition, the Committee analyzes the investment portfolio to determine whether it is in line with the current and projected market situation, develops recommendations for risk hedging with a view to minimizing them, and develops recommendations for reinvesting, diversifying and classifying the treasury portfolio.

Credit Committee of “Samruk-Energy” JSC

The main tasks of the Credit Committee are the implementation of the credit policy of “Samruk-Energy” JSC and the debt management and financial stability policy of the Fund.

To this end, the Committee:

1. Consider and develop recommendations on applications for loans, financial assistance and issuance of guarantees and preliminary determination of basic conditions for their provision;
2. Determines the acceptable structure and quality of the loan portfolio, develops recommendations on problem loans.

Information on the compliance of corporate governance practices with the principles of the Corporate Governance Code, and in the event of its non-compliance, the explanation of the reasons for non-compliance with each of the principles

The introduction of corporate governance practices is based on the Corporate Governance Code, the approved Code has been developed taking into account the principles of the OECD, the UK Corporate Governance Code, and the best global corporate governance practices.

In order to improve the corporate governance system, the Company conducts target-driven and systematic work to implement the principles and provisions of the Code.

The company, implementing the principles of the Code, pays special attention to the balance and effectiveness of the Board of Directors, the executive body, risk management, internal control and audit, as well as the Company’s sustainable development and transparency.

In order to control over the implementation of activities aimed at fighting corruption, including the assessment of corruption risks, the Compliance Service was established at Samruk-Energy group of companies.

From 2017, the Fund’s group has introduced a mechanism for confidential consideration of complaints through the involvement of an independent organization, Deloitte, which collects, processes and sends information to the Fund and the Company. You can call the hotline, send a letter to an e-mail, the stands with the necessary information are available in each of the Fund’s subsidiaries in three languages (Kazakh, Russian and English). The information is recorded, consolidated and sent to the Company and distributed to IAS, the Ombudsman and the Compliance Service according to the nature of appeals.

The Company’s website discloses all information affecting the interests of stakeholders in accordance with the legislation of the Republic of Kazakhstan and the Listing Rules of the Exchange. Information is placed in a timely manner. The company discloses information about corporate events on the Internet resources of DFS and KASE in order to comply with the laws “On joint-stock companies”, “On securities market” and internal regulations of the Company.

The Company in the course of business meets the requirements and recommendations of the Corporate Governance Code, exceptions:

To learn about the full report on compliance with the principles and provisions of the Corporate Governance Code, please click on the link: https://www.samruk-energy.kz/ru/shareholder/other-statements.