Key performance indicators In the Key Performance Indicators section, a special methodology is used to calculate KPIs, and therefore the values of indicators with the same name may differ in other sections of the report. The methodology for calculating the KPI of the Long-term Development Program is disclosed in Appendix No. 9 to the Report.
The system of key performance indicators (“KPI”) for RusHydro’s management is based on national statutory requirements Clause 4 of the List of Russian President’s Instructions No. Pr-1474 of July 5, 2013, Instruction of the Russian Government No. ISH-P13-2043 of March 27, 2014, and Directives of the Russian Government No. 2579p-P13 of April 25, 2014, No. 7558p-P133 of November 12, 2014, in accordance with Methodological Guidelines of the Federal Agency for State Property Management. and is designed to improve the Company’s performance and achieve the goals set by its shareholders. Since 2017, the management KPI system includes annual key performance indicators of the Management Board and key performance indicators of RusHydro’s Long-Term Incentive Plan (“LTIP”).
In 2016, based on recommendations of an independent advisorRecommendations of an independent advisor (Ernst & Young (CIS) B.V.) on the methodology for the Management Board’s remuneration system were approved by the Board of Directors (Minutes No. 241 of September 23, 2016)., the Company developed its annual KPI list, as well as calculation and evaluation methodology for the KPI of RusHydro’s Management Board, and KPI of the LTIP aimed at motivating the Company’s management to achieve strategic goals and thus balancing the interests of the Company’s management and shareholders. In 2019, the independent advisor updated the list of the LTIP KPI by introducing Earnings per share (EPS), RUB/share as a KPI with a 15% weight. The RusHydro Management Board’s KPI and the Company’s LTIP KPI are calculated and evaluated using the calculation and evaluation methodology (approved by the Board of Directors) for the Management Board’s KPIAs amended (Minutes No. 251 of April 18, 2017 and No. 269 of April 25, 2018). and the calculation and evaluation methodology for the KPI of RusHydro’s Long-Term Incentive PlanThe latest version approved by the Board of Directors (Minutes No. 283 of February 21, 2019)..
Annual KPI of RusHydro’s Management Board in 2018
The annual KPI of RusHydro’s Management Board for 2018 consist of five financial and two industry-specific indicators. Financial indicators of the annual KPI of RusHydro’s Management Board include a mandatory indicator required by the Federal Agency for State Property Management – return on equity (ROE). The Company’s financial indicators are calculated based on the Group’s consolidated financial statements prepared under the IFRS.
Resolution of the Board of DirectorsMinutes No. 264 of December 28, 2017 as amended by resolutions of the Board of Directors (Minutes No. 269 of April 25, 2018, No. 276 of October 4, 2018, and No. 283 of February 21, 2019). approved the target annual KPI of RusHydro’s Management Board for 2018 and target KPI of the second cycle of the Long-Term Incentive Plan for 2018–2020.
|KPI||Period||Target||Actual||Target KPI achievement||Weight, %||KPI achievement in 2018, %|
|EBITDAAccording to the applicable calculation and evaluation methodology for the KPI of RusHydro’s Management Board, the EBITDA approved by resolution of the Board of Directors shall be calculated on the basis of RusHydro Group’s audited consolidated financial statements under the IFRS using the following formula: EBITDA = EBT + depreciation and amortization+non-cash expenses – non-cash revenue + interest payable + fuel cost. The EBITDA calculated using this formula is different from that used in RusHydro Group’s IFRS financial statements due to different approaches to calculating the indicator. According to Note 6 to the IFRS consolidated financial statements of RusHydro Group, EBITDA is calculated as operating profit/loss net of depreciation and amortization, gain on financial assets at fair value through profit or loss, impairment of fixed assets, impairment of receivables, gain/loss on disposal of fixed assets, gain/loss on disposal of subsidiaries and joint ventures, and other non-cash operating income and expenses. , RUB mn||2017||97,993||110,323||Achieved||15||100|
|Share of procurement from small and medium businesses, %||2017||≥18||85||Achieved||10||100|
|including: based on procurement from small and medium businesses only, %||2017||≥10||38||Achieved||10||100|
|number of production-related accidents||2017||≤ 5-year average 25.2.||14||Achieved||20||100|
|2018||≤ 5-year average 22.8.||9||Achieved||20||100|
|number of major accidents||2017||0||0||Achieved||20||100|
|Adherence to the capacity commissioning schedule, funding and spending plan, %||2017||85||92.8||Achieved||20||100|
|Labor productivity, RUB ‘000/man-hour||2017||4.74||5.20||Achieved||10||100|
|Decrease in operating expenses (costs), %||2017||2||2.26||Achieved Subject to factors beyond control of the management. Resolution of the Board of Directors of April 24, 2018 (Minutes No. 269).||10||100|
|2018||2||2.69||Achieved Subject to factors beyond control of the management. Resolution of the Board of Directors of April 4, 2019 (Minutes No. 286).||10||100|
KPI of the Long-Term Incentive Plan
The first and second cycles of RusHydro’s LTIP consist of the following KPI: three financial indicators (including total shareholder return (TSR) as a mandatory indicator required by the Federal Agency for State Property Management) and an integrated innovative KPIApproved by resolution of the Interagency Working Group for Implementing the Innovative Development Priorities of the Presidium of the Russian President’s Council for Modernization of the Economy and Innovative Development of Russia (Minutes No. AD-P36-247pr of December 17, 2015). The integrated innovative KPI is listed among KPI in compliance with Directives No. 1427p-P13 of the Russian Government of March 3, 2016 and Resolution of the Board of Directors (Minutes No. 242 of October 10, 2016)..
The achievement of target KPI for the Long-Term Incentive Plan will be assessed upon expiry of the respective period.
|Total shareholder return (TSR), %||100|
|Integrated innovative KPI, %||85|
|Free cash flow (FCF), RUB mn||–138,601|
|Earnings per share (EPS), RUB/share||0.85|
|Total shareholder return (TSR), %||100|
|Integrated innovative KPI, %||85|
|Free cash flow (FCF), RUB mn||–92,284|
|Earnings per share (EPS), RUB/share||0.81|
KPI of the Long-Term Development Program
RusHydro’s Long-Term Development Program consists of KPI established for 2018–2022.
The target KPI were calculated in accordance with RusHydro Group’s draft Consolidated Business Plan for 2018–2022 (including the consolidated investment program) and subject to the activities stipulated in the Group’s programs.
The list of KPI for RusHydro’s Long-Term Development Program for 2018–2022 includes the list of annual KPI of the Management Board and the list of LTIP KPI. 
|EBITDAThe methodology of calculating EBITDA for the purpose of the LTDP KPI is similar to that for EBITDA of the Management Board’s KPI. , RUB mn||170,932||181,526||Achieved||175,629 As resolved by the Company’s Board of Directors (Minutes No. 282 of December 27, 2018).||193,795||209,894||207,698|
|ROE, %||15.86||23.88||Achieved||16.36 As resolved by the Company’s Board of Directors (Minutes No. 282 of December 27, 2018).||16.12||16.70||16.03|
|Share of procurement from small and medium businesses, %||18||76||Achieved||18||18||18||18|
|including procurement from small and medium businesses only, %||15||46||Achieved||15||15||15||15|
|number of production-related accidents||≤ 5-year average||≤ 5-year average||Achieved||≤ 5-year average||≤ 5-year average||≤ 5-year average||≤ 5-year average|
|number of accidents||0||0||Achieved||0||0||0||0|
|Adherence to the capacity commissioning schedule, funding and spending plan||85||92.8||Achieved||85||85||85||85|
|Labor productivity, RUB ‘000/man-hour||5.30||6.12||Achieved||5.72 As resolved by the Company’s Board of Directors (Minutes No. 282 of December 27, 2018).||5.31||5.60||5.75|
|Decrease in operating expenses (costs), %||2||2.69||Achieved As resolved by meeting of the Board of Directors of April 5, 2019 (Minutes No. 286).||2||2||2||2|
|Integrated innovative KPI, %||85||96||Achieved||85||85||85||85|
|Total shareholder return (TSR) The TSR in 2018 was down by 32.8%, while the MOEX Russia Index grew by 12.2% over the same period. In 2018, the MOEX Russia Index was up 7.8% y-o-y, while the Moscow Stock Exchange Power Index was down 11.4%, with shares in RusHydro losing 33.4%. In 2018, the market value of RusHydro shares decreased against a backdrop of the general lack of investor interest in the electric power industry, as evidenced by the Power Index downward trend. RusHydro shares were under pressure from sanctions imposed on RUSAL and geopolitical risks, including the proposed new US sanctions (DASKA, August 2018). The exclusion of the Company from the MSCI Russia Index in late November 2018 was the strongest contributor to the decline. , %||100||0|| ||100||100||100||100|
|Free cash flow (FCF), RUB mn|| || ||Achieved||11,704||25,498||54,277||56,424|