ТОО «Объединенная химическая компания»
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ANNUAL REPORT
2014
TABLE OF CONTENTS
|1. WELCOME ADDRESS OF THE CHAIRMAN OF SUPERVISORY BOARD | |
| |3 |
|2. WELCOME ADDRESS OF THE MANAGEMENT BOARD |5 |
|3. KEY MILESTONES OF 2014 |7 |
|4. COMPANY INFORMATION |9 |
|4.1. ORGANIZATIONAL CHART OF UCC |10 |
|4.2. UCC ASSETS PROFILE |11 |
|5. MAJOR TASKS FOR 2015 |13 |
|6. BRIEF OUTLINE OF CHEMICAL MARKET AND MARKET SHARE |14 |
|7. FACTS AND FIGURES OF THE “UNITED CHEMICAL COMPANY” LLP |17 |
|8. OPEATING ACTIVITY |20 |
|8.1. INFORMATION ABOUT MAJOR TRANSACTIONS OF 2014 |22 |
|8.2. BORROWING STRUCTURE IN UCC |23 |
|9. CORPORATE MANAGEMENT |24 |
|9.1. POLICY FOR CLEARING OF CONFLICT OF INTEREST |29 |
|9.2. MANAGEMENT STRUCTURE AND MANAGEMENT BODIES OF UCC |29 |
|9.3. COMPOSITION OF THE UCC SUPERVISORY BOARD. UCC SUPERVISORY BOARD OPERATION REPORT | |
|9.4. COMPOSITION OF UCC MANAGEMENT BOARD. UCC MANAGEMENT BOARD OPERATION REPORT |31 |
|9.5. COMMITTEES UNDER GOVERNING BODIES | |
|9.6. AUDIT COMMISSION |35 |
|9.7. ARRANGEMENTS WITH SUBSIDIARIES AND AFFILIATES |39 |
|9.8. RISK MANAGEMENT |41 |
|9.9. ACCESSIBILITY AND DISCLOSURE OF INFORMATION |41 |
|9.10. ISSUES SURROUNDING THE UCC PARTIES CONCERNED |42 |
|9.11.PRIMARY PR-EVENTS OF UCC |43 |
| |44 |
| |45 |
|10. STAFF POLICY |46 |
|11. SOCIAL RESPONSIBILITY |48 |
|12. PROCUREMENT AND LOCAL CONTENT |49 |
|13. ACTIVITY OF SUBSIDIARIES AND AFFILIATES |50 |
|14. LIST OF ABBREVIATIONS |58 |
|15. CONTACT INFORMATION OF THE “UNITED CHEMICAL COMPANY” LLP |59 |
|16. INDEPENDENT AUDITORS REPORTS |60 |
|17. CONSOLIDATED FINANCIAL STATEMENT |62 |
1. WELCOME ADDRESS OF THE CHAIRMAN OF SUPERVISORY BOARD
Dear colleagues!
The “United Chemical Company” LLP activity for 2014 is presented in this annual report.
At present, the United chemical company has 12 subsidiaries companies and affiliates implementing the investment projects chemical industry which in the measurable future will enable the mastering of new types of chemical products, raise production of domestic competitive high-value added chemical products having ensured the domestic market saturation and realization of export capacity in the chemical industry of Kazakhstan.
Chemicals and petrochemical industry have entered to the State Program of Industrial and Innovative Development (SPIID-2) as top-priority sectors ensuring the growth of competitive ability of the Kazakhstani economy.
The message of the Head of state N. Nazarbayev about new economic policy “Nurly Zhol” under implementation framework of which the funds from the National fund will be allocated for completion of construction of infrastructure of special economic zones including the “NPTP” SEZ has become a landmark event of 2014.
The TV link-up with the participation of the President of Kazakhstan N. Nazarbayev has taken place on December 25, 2014, in the course of which the vitriol plant in Stepnogorsk was presented among 15 new projects of the “Industrialization map”.
Specific place in 2014 was held by the Transformation program of the “Samruk-Kazyna” JSC, program of large-scale transformations of corporate operations of the Fund group. Within the framework of its implementation the Road map of UCC transformation was developed, according to which the operating transformation of UCC is planned from 2016 with performance of preparatory measures package in 2015.
The work for improvement of corporate management and increase of UCC activity transparence is carried on. Thus, the Guidance for corporate management of UCC subsidiaries and affiliates was accepted in 2014, also the UCC Audit commission has performed the diagnostics of UCC corporate management according to results of which the relevant recommendations were given for improvement of corporate management practice.
Finally I would like to wish to the entire collective of UCC the successful activity directed on development of chemical industry of our country!
Yerdebai Dauren Imanzhanuly
2. WELCOME ADDRESS OF THE MANAGEMENT BOARD
Dear colleagues and partners!
2014 was a period for the “United Chemical Company” LLP for ensuring of steady basis for successful development in medium- and long-term outlook. The consolidation of the Partnership positions has continued by formation of new Company assets and further implementation of investment projects.
The vigorous efforts have been made for establishment of the “Chemical Park Taraz” SEZ” infrastructure within the territory of which the building and assembly works have been commenced so far in March 2014.
For similar purposes – construction of infrastructure facilities- the “Karabatan Utilities Solutions” LLP was created within the territory of the “National Industrial Petrochemical Techno park” SEZ.
The formation of the “NIPT” SEZ and “Chemical Park Taraz” SEZ infrastructure as important condition for attracting investments is underlined by the Head of state in the President’s address to the people of Kazakhstan “Nurly Zhol – the Path to the Future”.
Agreement with the CMEC Chinese company on basic conditions for purchase and sale of partnership interest in the charter capital of the “KHIM-plus” LLP was signed in May 2014 in the frame of work with foreign partners.
In 2014 the “Polymer Production” LLP has obtained the equipment of the “Starlinger” and Kuhne companies for rollout of polypropylene bags and has proceeded to pre-commissioning activities of lines for production of polypropylene bags and polyethylene film.
Participation of the “JV SAP Kazatomprom” LLP in the “New industrialization of Kazakhstan” nationwide TV link-up has become a dramatic event for the entire group of companies of the “United Chemical Company” LLP: results of 2014 and first five-year plan” with participation of the President of the Republic of Kazakhstan N.Nazarbayev. The start for pre-commissioning at the vitriol plant in Stepnogorsk was given at this event. In such a manner the production of commercial chemical products –technical sulphuric acid- will be commenced in the near future after completion of pre-commissioning activities.
In the fulfillment of the order of the Republic of Kazakhstan President the Partnership has accepted the decision to perform the increase of tariff rates and post salaries of production personnel by 10% from April 1, 2014.
The changes in the Partnership top-managers team have taken place in 2014. Michael Dunster engaged as international expert was included to the composition of the Management board members of the “United Chemical Company” LLP. The questions supervised by him are coordination and control of UCC activity regarding the management of technical, technological and innovative development.
Last year the “United Chemical Company” LLP has announced oneself on the pages of universal multi-language Internet encyclopedia Wikipedia. The materials about history, Partnership management and activity are posted in Kazakh, English and Russian languages.
The work for planning of measures and its preparation to implementation within the frameworks of Transformation program of the “Samruk-Kazyna” Fund has been started in the “United Chemical Company” LLP in the second half of the 2014. I am sure that fundamental change of investment policy of the “Samruk-Kazyna” Fund will allow the Partnership successfully implement the scheduled projects and come into new international markets.
We thank the “Samruk-Kazyna” Fund for permanent all-round support of our Company activity.
The making of prominent advance for implementation of intended purposes by all business areas is forthcoming in 2015which will be inaugurated for UCC as a beginning of operating activities.
Omarov Askhat Assanovich
3. KEY MILESTONES OF 2014
January:
– Was obtained the favorable opinion of state expert appraisal for feasibility study of the “Production of sodium cyanide and hydrocyanic acid” project;
– Obtained the license for exploitation of chemical production upon the “Reconstruction of vitriol plant with productive capacity of 180 thousand tons annually in Stepnogorsk” project;
– Was started the due Diligence of geological information upon the “Production of potassium sulfate” project.
March:
– CAW for external infrastructure facilities upon the “Establishment of “KhimPark Taraz” SEZ” project have been commenced.
May:
– Was signed the agreement with the CMEC Chinese company on basic conditions of purchase and sale of partnership interest in the charter capital of the “KHOM-plus” LLP;
– Was obtained the favorable opinion of state expert appraisal for feasibility study of the “Manufacture of polymeric products in Atyrauskaya oblast” project.
June:
− Was obtained the favorable opinion of state expert appraisal for DED of the “Manufacture of polymeric products in Atyrauskaya oblast” project.
July:
– On-the-job training of 4th course students of KazNTU named after K.I.Satpayev and Nazarbayev University was arranged at the vitriol plant in Stepnogorsk.
September:
– Was obtained the favorable opinion of state expert appraisal for feasibility study of the butadiene production (Stage 1) project;
– “KUS” LLP was established- operator of the project for infrastructure facilities construction within the territory of the “NIPT” SEZ (gas turbine plant);
– Was accredited the test laboratory of the “JV SAP Kazatomprom” LLP;
− Was obtained the favorable opinion of state expert appraisal for feasibility study of the “Construction of infrastructure facilities of the “NIPT” SEZ” project (Karabatan and Tengiz sections), including by the gas turbine plant facility.
October:
− “JV Kazatomprom VP” LLP has performed the taking-in of vitriol acid necessary for plant launching after reconstruction.
November:
– Managing company of the “KhimPark Taraz” SEZ in liaison with the National Chamber of Entrepreneurs of RoK and with the assistance of the “National Export and Investment Agency “KAZNEX INVEST” JSC, Association of Kazakhstan economic zones entrepreneurs, arranged the meeting with representatives of Astana city and Akmolinskaya oblast business structures.
The questions of development prospects and business risk of implemented producing operations and free economic area at large, questions of current status of SEZ infrastructure, cost of sales and output of the “Production of glyphosate (herbicide)” project, etc. have been discussed at the meeting.
December:
– Was performed the repurchase of share in an amount of 25% in the charter capital of the “KLPE” LLP in the “Sat & Company” JSC;
– Was given a start to pre-commissioning activities at the vitriol plant in Stepnogorsk in the process of nationwide “New industrialization of Kazakhstan: results of 2014 and first five-year plan” TV link-up with participation of the Republic of Kazakhstan President N. Nazarbayev;
– Was signed the agreement between the “JV Kazatomprom VP” LLP with the “Sembizbai-U” LLP for rendering of services in taking-in, pumping and storage of vitriol acid;
– Was concluded the ЕРСМ-contract for construction of gas turbine plant within the territory of the “NIPT” SEZ in Atyrauskaya oblast.
4. COMPANY INFORMATION
UCC was established on January 22, 2009 upon a decision of the Fund BoD dated November 28, 2008.
Sole participant of UCC - “Samruk-Kazyna” JSC.
Paid-up charter capital of UCC - 113 107 921 537 KZT (as of December 31, 2014).
UCC development strategy for 2012-2022 (redrafted, adjusted for the Fund development strategy for 2012 -2022) is approved by decision of the SB of UCC on March 20, 2013.
UCC Mission – participation in chemical industry development for its transformation to one of advanced industries of the Kazakhstani economy.
UCC vision by 2022 – leader of chemical industry of Kazakhstan coming to 5 largest domestic non-energy industrial companies by sales volume.
Strategic growth priorities of UCC:
– Enhancement of long-term cost.
– Assistance in diversification and modernization of national economy.
– Social responsibility.
Major goals of UCC by 2022:
− Gross output 464 bln KZT.
− Operating earnings EBITDA margin 35%.
− Labor efficiency 150 mln. KZT/person.
Major tasks of UCC:
− Modernization of existing and creation of new production capacity in target segments of chemical industry: basic organic products and polymer, basic non-organic products and mineral fertilizers, some sorts of special and consumer chemicals (commercial chemicals and reactive chemicals, pesticides, artificial fibres, lacquer, paints, floatation reagents, doping agents, restraining agents, catalyst agents, etc.);
− Engineering activity;
− Creation of chemical clusters.
Target segments of chemical industry:
– Base products of inorganic chemistry including mineral fertilizers (base inorganics);
– Base products of organic chemistry and polymers (base organics);
– Some sorts of special chemicals.
4.1. ORGANIZATIONAL CHART OF UCC
(as of December 31, 2014)
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|DDIP – Directorate for development of investment projects |ARD– Accounting and Reporting Department |
|DMISCA – Directorate for management of inorganic and special chemistry assets |DEP – Department of economy and planning |
|DMOCA – Directorate for management of organic chemistry assets |CFD – Corporate finance department |
|DTD – Directorate for technological development |LD– Legal department |
|DMPH – Department for management of personnel and housekeeping |DOPLC– Department for organization of procurement and local content |
| |ITS– Information technology service |
| |CDD – Corporate development department |
4.2. UCC ASSETS PROFILE
(as of December 31, 2014)
|Name of UCC subsidiary and |UCC share |Business area |Current status of project |
|affiliates | | | |
| | |Reconstruction of vitriol plant with |Investment stage: pre-commissioning activities |
|“JV Kazatomprom VP” LLP |90,11% |productive capacity of 180 thousand tons |ae in progress |
| | |annually in Stepnogorsk | |
| | |Construction of integrated gas chemical |Investment stage: design work are performed, |
|“KPI Inc.” LLP |51% |facility in Atyrauskaya oblast – First stage|selection of new ЕРС contractor |
| | |(polypropylene) | |
| | |Construction of integrated gas chemical |Investment stage: project DED is completed, new |
|“KLPE” LLP |50% |facility in Atyrauskaya oblast – Second |tender for construction, delivery of equipment |
| | |stage (polyethylene) |and engineering is issued |
|“Polymer Production” LLP |99,67% |Manufacturing of polymeric products |Investment stage: pre-commissioning activities |
| | | |for first line are performed |
| | |Manufacturing of phosphorus chloride and |1) Upon the project Manufacturing of caustic |
|“KHIM-plus” LLP |99,34% |glyphosate. Manufacturing of caustic soda |soda and chloride. Investment stage: |
| | |and chloride |Activities for selection of EPC contractor and |
| | | |engagement of debt financing are performed |
| | | | |
| | | |2) Upon the project Manufacturing of phosphorus |
| | | |chloride and glyphosate (herbicide). |
| | | |Pre-investment stage: |
| | | |State expert appraisal and feasibility study and|
| | | |work for strategic partner engagement are |
| | | |performed |
|“MC SEZ “ChemPark Taraz”JSC |100% (74%) |Establishment of “Chemical park Taraz |Investment stage: construction and assembly |
| | |Special Economic Zone (state participation |works at the external infrastructure facilities |
| | |is planned for 26%) |are performed |
|“KUS” LLP |99,9% |Infrastructure construction, electricity |Investment stage: ЕРСМ contract is concluded, |
| | |generation |design work is in process |
| “UCC Engineering” LLP |25% |Rendering of engineering services |Operating stage |
|“KGR” LLP |15% |Production of hydrocyanic acid and sodium |Pre-investment stage: project is suspended due |
| | |cyanide |to determination of licensor |
|“Butadiene” LLP |99,9% |Production of butadiene and artificial |Pre-investment stage: opinion of state expert |
| | |rubber |appraisal for feasibility study is obtained, |
| | | |negotiations for raw materials supply are held |
| | |Arrangement of petrochemical production on |Pre-investment stage: negotiations with raw |
|“Kapic FZCO” Company |50% |the basis of raw materials from the |materials suppliers are held |
| | |Karachaganak and Kashagan fields | |
|“Samruk Center of competence” |30% + 70% |Personnel training of production and |Pre-investment stage: feasibility study design |
|LLP |indirectly |technical staff |is held |
5. MAJOR TASKS FOR 2015
It is suggested to perform the following major initiatives and tasks for 2015:
1. Provision of ascension to planned capacity for production of vitriol acid and polymeric products;
2. Management and monitoring of investment projects of subsidiaries and affiliates according to its execution schedule;
3. Fulfillment of tasks of the Road map for UCC transformation;
4. Implementation of actions for taking of crisis response measures;
5. Implementation of redrafted Corporate governance code based on development and implementation of actions plan according to Gap-analysis results;
6. Approval of Master-plan for UCC development until 2022.
6. BRIEF OUTLINE OF CHEMICAL MARKET AND MARKET SHARE
Chemical industry is among the branches determining the economic development of the country, and defined in the State Program of Accelerated Industrial and Innovative Development of RoK for 2010–2014 (SPAIID) as one of top-priority economy sectors.
Also according to the State Program of Industrial-Innovative Development of RoK for 2015 - 2019 approved by the RoK President Decree on August 1, 2014 No. 874, chemical industry is among the RoK priority industries and is one of the largest suppliers of raw materials, half-finished products, materials for other branches of real sector of economy.
According to forecasts of Organization for Economic Cooperation and Development[1], by 2050 the annual output of sales growth in the global chemical industry will be equal 3% per annum. Moreover, the sales among the BRICS member countries will be twofold more bigger than OECD countries.
The forecasts1 worked out by the American Chemistry Council (ACC) also predict the considerable increase of chemical production in emerging countries within the period by 2021 and relatively low growth in developed countries. It is expected that China will have the highest growth rates in chemical industry which will exceed 10 percent annually until 2015. Annual growth rates of chemical production for Africa and Middle East according to forecasts will be equal more than 5 % from 2014 to 2021. The growth in Western Europe within this period according to expectations will be lower than 3 %. Expected growth rates in Russia and other Eastern Europe countries with developing economy will on an average fall within the range of 4 % to 6 % annually within the period until 2021.
Among the key external events of 2014 it needs to note the considerable reduction of world prices for raw hydrocarbons and depreciation of national currency that however has a positive impact on finished products exporters.
Brief outline of the Kazakhstani chemical market
During 12 months of 2014 considerable increase in production of nitrogen fertilizers by 49,37% and ammonia by 44,15%, admixture to cement by 31,69% as also washing agents by 21,24% was observed. The production of phosphoric fertilizers, vitriol acid and phosphorus was increased. Decreased the production of carbon dioxide – 26,01%, chromium trioxide – 14,77% and sodium tri-phosphate– 19,8% (Table 1).
In large the quantum index of chemical industry in January-December 2014 has increased by 0,4%.
Dynamics in manufacturing the chemical industry products
during 2012-2014
|Product name |Production output |QI% |
| |Jan-Dec 2012 |Jan-Dec 2013 |Jan-Dec 2014 |Jan-Dec 2014/13 |
|Carbon dioxide, tons |10 257 | 11 351 | 8 398 | 75,6 |
|Chromium dioxide (chromic anhydride), tons |23 747 | 23 215 | 19 784 | 85,2 |
|Chromic oxide, tons |28 768 | 30 915 | 32 954 | 106,6 |
|Chrome tanning agent, tons |11 537 | 12 200 | 13 267 | 108,7 |
|Phosphorus, tons |78 916 | 90 164 | 100 139 | 111,1 |
|Sulfuric acid in monohydrate, tons |1 538 915 | 1 904 262 | 2 277 720 | 109,4 |
|STP (Sodium tri polyphosphate), tons |53 097 | 50 153 | 40 198 | 80,2 |
|Sodium dichromate (sodium bichromate), tons |55 493 | 61 427 | 57 086 | 93,4 |
|Ethyl alcohol, thousand liters |19 361,4 | 22 431,7 | 18 110,5 | 65,8 |
|Ammonia, tons |88 477 | 116 220 | 167 541 | 144,4 |
|Nitrogen, mineral or chemical fertilizers, tons |147 654 | 189 356 | 282 848 | 150,9 |
|Phosphoric, mineral or chemical fertilizers, tons |62 483 | 69 151 | 82 424 | 115,1 |
|Styrole polymer in primary forms, tons |1 183 | 1 459 | 1 547 | 87,6 |
|PUR in primary forms, tons |6 304 | 5 972 | 5 679 | 93,8 |
|Paints and lacquers on the basis of polymers, tons|55 906 | 76 191 | 67 913 | 88,1 |
|Paint filler paste, tons |2 233 | 1 850 | 4 315 | 159,3 |
|Washing agents, tons |2 951 | 5 558 | 6 739 | 111,9 |
|Admixtures for cement building mortar or concrete,|641 644 | 686 215 | 903 723 | 113,3 |
|tons | | | | |
Source: Statistical agency of the Republic of Kazakhstan
In value terms the production level of chemical products for January-December 2014 was equal 229 601 mln KZT. In comparison with the same period in the prior year the production level has increased by 24%.
At that, continuous growth of chemical production in Kazakhstan with annual accession rate of more than 20% is observed since 2010.
Core indicators of chemical industry
of the Republic of Kazakhstan during 2010 - 2014[2]
|Indicator |2010 |2011 |2012 |2013 |2014 |
| |actual |actual |plan |actual |plan | |
|Revenue, total |362 |997 |1 154 |2 469 |9 971 |864% |
|Expenses, total |1 754 |3 441 |7 914 |3 765 |16 009 |202% |
|Profit/(loss) per annum, which |(1 288) |(2 403) |(6 276) |(1 270) |(5 911) |94% |
|fall on Sole participant of UCC| | | | | | |
Revenue increase in 2014 was generally conditional upon the revenue growth from sales of solid sulphur for the “СКЗ-U” LLP due to growth in volume of saleable solid sulphur as well as selling price increase.
Reduction of expenses in the period under review is generally associated with saving in G&A expenses and prime cost due to revision of project implementation schedule.
Whereby we note that in 2014 the UCC subsidiaries and affiliates were at the investment activity stage, operating activities have been not performed within this period. Accordingly the sales of finished products and acquisition of income from main activity of subsidiaries and affiliates have not been performed within accounting period. Eventually according to results of 2014 the loss of UCC group of companies which fall on UCC Sole participant was equal 1 270 mln KZT.
In 2015 due to coming to operational stage of such companies as “JV SAP KAP” LLP and “Polymer Production” LLP increase of income and expense is planned by 764% and 112% accordingly.
UCC assets portfolio includes 12 subsidiaries and affiliates, which include 7 subsidiaries, 2 affiliates, 3 jointly controlled entities. UCC assets profile has 4management level, including the UCC Sole participant– “Samruk-Kazyna” JSC.
UCC portfolio is formed by 11 investment projects, including 9 production projects for establishment of new producing units for chemical and petrochemical products output and 2 infrastructure projects for establishment of common infrastructure of “NIPT” SEZ and “KhimPark Taraz” SEZ.
Total staff of UCC group of companies is equal 603 persons, including the operating personnel - 211 person, including “JV SAP Kazatomprom” LLP – 126person, “Polymer Production” LLP - 20 person, “KPI Inc.” LLP – 65 person.
Key performance indicators for 2012-2014
|Name of items |2012 |2013 |2014 |
| |actual |actual |plan |actual |
|ROACE, % |(4,8) |(4,2) |(5,7) |(1,4) |
|EBITDA margin, % |(409.2) |(289.8) |(384.8) |(171.2) |
|Employee turnover, % |22,0 |25,6 |15,8 |25,8 |
|Degree of involvement, % |75 |83 |75 |74 |
|Number of industrial accidents |0 |0 |0 |0 |
|per thousand persons | | | | |
Considering that the company is at the investment development stage and is target unprofitable, basic financial coefficients of efficiency are negative. At that we observe the upward trend arising by means of growth in sales of solid sulphur over a period of 2012 to 2014.
Actual value of employee turnover in 2014 as compared to 2013 has slightly increased. At that the actual has exceeded the target value in 2014. This is associated with current state at the labor market, including the high competition for human resources as well as insignificant number optimization performed in 2014.
Indicator of employee engagement degree for 2012-2014 was on high level, that is evidenced by favorable and stable situation in the company avoiding the need of active correcting actions.
The cases of industrial injuries in the UCC group of companies were not recorded within the accounting period.
At that we note that within the frameworks of transformation program the new strategic coefficients of efficiency designed to increase of the company shareholder value (EVA, increment value) are modified and implemented since 2015.
Dynamics of UCC equity capital growth
(over last three year)
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Equity capital growth was performed by means of contributions on the part of Sole participant for provision of funding for UCC investment activity.
Quantity and value of UCC assets
(over last three years)
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The growth of UCC assets is associated with growth of UCC investment projects portfolio in chemical and petrochemical industries. Appreciation of assets value is conditioned upon UCC investments to subsidiaries and affiliates within the share projects con-funding.
8. OPEATING ACTIVITY
At the present time the investment activity is core business area of UCC.
During performance of investment activity UCC is governed by the Fund investment policy approved by the Fund Board of Directors dated June 26, 2014, which purpose is improvement of effectiveness and transparence of the companies investment activity, including by way of enhancement of efficiency in cooperation between the Fund and subsidiary companies within investment processes.
In 2014 UCC has performed the management of the following projects:
1) Reconstruction of vitriol plant with capacity of 180 thousand tons annually in Akmolinskaya oblast:
– Construction and assembly works at the vitriol plant are completed;
– Pre-commissioning activities are commenced.
2) Construction of integrated gas chemical facility in Atyrauskaya oblast, first stage (polypropylene):
– Project appraisal of 2 class is performed;
– Adjustment of feasibility study and DED of the project is started;
– Construction of temporary in-site motor roads is commenced;
– Competitive tendering for selection of new ЕРС contractor is extended.
3) Construction of integrated gas chemical facility in Atyrauskaya oblast, second stage (polyethylene):
– Activities for appraisal of project value (ОВЕ stage) is completed;
– New tendering for selection of ЕРС contractor is issued due to unacceptably high cost of current ЕРС contract;
– Activities for attracting of debt financing is carried on.
4) Manufacturing of polymeric products in Atyrauskaya oblast:
– Replacement of General contractor is performed;
– Financial close is performed;
– Pre-commissioning activities upon the project are commenced;
– Construction of plant is commenced;
– Assembling of part of manufacturing equipment of main processing lines is commenced.
5) Production of caustic soda and chlorine:
− Application for debt financing is filed to Eurasian Development Bank (further - EDB), preliminary indicative financing terms are obtained;
− Market reseaches are performed;
− Tender for selection of ЕРС contractor is issued;
− Conclusion of memorandum for sales pf products: caustic soda, chlorine hydride.
6) Production of phosphorus chloride and glyphosate (herbicide):
− Feasibility study of the project is developed and sent to state expert appraisal;
− Negotiations with potential strategic partner on his participation in the project are held.
7) Establishment of the “Chemical Part Taraz” SEZ:
− Construction of external infrastructure facilities is commenced: highway, railway, gas supply, water conduit, external power supply, ground leveling along the SEZ section;
− Construction of networks of external electric power supply and internal infrastructure facilities is commenced: on-site roads, networks, facilities, etc.;
− Active work for encouragement of investment and new participants to the SEZ territory is commenced;
− Activities for conclusion of 2B contracts are made with the Jurong company (Singapore);
− Conception of “anchored” project for production of ammonia, methanol and products on its basis is developed.
8) “National Petrochemical Technopark” SEZ:
− Feasibility study for Karabatan and Tengiz sites is developed and favorable opinion of state expert appraisal is obtained;
− Financial feasibility study is developed for construction of gas turbine plant within the territory of the “NIPT” SEZ and favorable opinions were obtained from authorized government bodies;
− ЕРСМ contract for construction of gas turbine plant is concluded.
9) Production of hydrocyanic acid and sodium cyanide:
− Favorable opinion of state expert appraisal was obtained for the project feasibility study;
Implementation of project was suspended until obtaining of positive reply for acquisition of license for production of sodium cyanide.
10) Production of butadiene and artificial rubber:
– Negotiations for supply of raw materials (butane) are in progress;
– Opinion of state expert appraisal for feasibility study is obtained.
11) Arrangement of petrochemical production on the basis of raw materials from the Karachaganak and Kashagan fields (third stage):
– Preliminary feasibility study is developed;
– Negotiations with potential raw materials suppliers are in progress.
General information on productive capacity
(target)
|No. |Name of the project |Scheduled productive capacity |Scheduled time of |
| | | |production start |
| |Reconstruction of vitriol plant with productive |Sulphuric acid-180 thousand tons/year | |
|1 |capacity of 180 000 tons annually | |2015 |
| |Construction of integrated gas chemical facility in |Polypropylene – 500 thousand tons/year |2018 |
|2 |Atyrauskaya oblast (stage 1) | | |
| |Construction of integrated gas chemical facility in | | |
|3 |Atyrauskaya oblast (stage 2) |Polyethylene – 800 thousand tons/year |2019 |
| |Manufacture of polymeric products in Atyrauskaya |PP bags – 48 mln. pcs/year; | |
|4 |oblast |BOPP -14 738 tons/year; |2015 |
| | |PE film –4 125 tons/year. | |
|5 |Production of caustic soda and chloride |Caustic soda – 40 thousand tons/year; | |
| | |Chlorine hydride – 40 thousand tons/year; |2016 |
| | |Calcium chloride – 15 thousand tons/year | |
| |Production of phosphorus chloride and glyphosate |Glyphosate – 10 thousand tons/year; Phosphorus | |
| | |chloride– 13,6 thousand tons/year; |2017 |
|6 |Production of hydrocyanic acid and sodium cyanide |Sodium cyanide – 25 thousand tons/year |___ |
|7 |Production of butadiene – first stage |Butadiene– 250 thousand tons/year |2020 |
| |Arrangement of petrochemical production on the basis |High density polyethylene – 400 thousand tons/year |2022 |
|8 |of raw materials from the Karachaganak and Kashagan |MEG– 520 thousand tons /year | |
| |fields |PP – 590 thousand tons /year. | |
| | |SAP – 60 thousand tons /year | |
| | |Butadiene– 169 thousand tons/year | |
| | |Benzol – 480 thousand tons /year | |
| | |Low-density polyethylene – 400 thousand tons /year | |
|9 |Construction of NIPT SEZ infrastructure facilities in | | |
| |Atyrauskaya oblast (GTS) |Electrical energy– 310 Megawatt/year |2018 |
8.1. INFORMATION ABOUT MAJOR TRANSACTIONS OF 2014
1) Agreement on basic conditions of purchase and sale of 10% of UCC participatory interest in the charter capital of the “KHIM-plus” LLP was concluded in May between the UCC and CMEC Company (resident of PRC).
2) “KUS” LLP was established in September for the purposes of construction of infrastructure facilities within the “NIPT” SEZ territory as well as electricity generation.
3) “MC SEZ “ChemPark Taraz” JSC in cooperation with UCC has performed work according to requirements of clause 4 of Article 17 of the RoK Law” Concerning special economic zones in RoK” for transfer of 26% of “MC SEZ “ChemPark Taraz” JSC shares to the government.
4) In December UCC has performed the repurchase of share in amount of 25% in the charter capital of the “KLPE” LLP at the “Sat & Company” JSC.
5) Charter capital of the “MC SEZ “ChemPark Taraz” JSC was formed in amount of 9,3 bln KZT by placement of ordinary shares of the “MC SEZ “ChemPark Taraz” JSC.
6) Two new participants of the “ChemPark Taraz” SEZ are registered: “QADAM Industries” LLP for production of pesticides and “Kyzylorda Munai Gaz” LLP for methanol production.
7) 24,5 bln KZT is allocated for construction of “NIPT” SEZ infrastructure facilities within the State Program of Industrial-Innovative Development from the National Fund of the Republic of Kazakhstan.
There is no financial backing in the form of guarantee obtained from the state and other obligations towards state assumed by the UCC during report year.
8.2. BORROWING STRUCTURE IN UCC
UCC in its activity is governed by Internal credit policy of the Fund group and the Policy for management of debt and financial soundness approved by the Fund BoD as of September 7, 2012.
The borrowings have been not acquired by UCC during report period. Upon the current borrowings the specified standards are observed according to abovementioned policies.
9. CORPORATE MANAGEMENT
Corporate management of UCC is based on the following guiding principles formalized in the Corporate Governance Code:
− Principle of protection of rights and interests of Sole participant;
− Principle of good management of UCC by Supervisory and Management board;
− Principle of UCC independent activity;
− Principles of transparence and fairness for disclosure of information on UCC activity;
− Principles of validity and ethics;
− Principle of effective dividend policy;
− Principle of effective personnel policy;
− Principle of environment protection;
− Policy for settlement of corporate conflicts and conflict of interest;
− responsibility.
In the area of UCC corporate management the fundamental documents including the Corporate governance and corporate ethics code, Regulation on Supervisory board, Management board, Audit commission, Secretary of UCC Supervisory board, etc. have been accepted prior to beginning of reporting period.
The following measures have been taken for the purposes of improvement of UCC corporate management in reporting period:
− Guidance on corporate management of UCC subsidiaries and affiliates was approved;
− Diagnostics of UCC corporate management was performed by efforts of UCC Audit commission;
− Plan of corrective and/or preventive actions was developed according to results of corporate management diagnostics;
− Analysis of condition of subsidiaries and affiliates corporate management was performed and recommendations for enhancement and improvement of corporate management level were provided;
− Policy for UCC risk management was updated;
− Risk register, risk chart, actions plan for risk management in UCC for 2014 were approved;
− Policy for risk management and Rules for identification and assessment of risks in UCC subsidiaries and affiliates wherein 50% share and more is owned by the UCC was approved;
− Analysis of transparence and effectiveness of information disclosure processes in UCC is performed;
− Changes are made to the Policy for advanced training and engagement of external experts by SB members;
− corrections are amended to the Rules of review and implementation of investment projects;
− Innovative-technological strategy of UCC by 2020 adjusted for the Fund Industrial innovation policy was approved;
− Plan of UCC succession was approved;
− Strategic plan of UCC Audit commission for 2014-2016 was approved;
− Consolidated chart of UCC stakeholders was approved;
− Methodological recommendations for carrying out of benchmarking in the UCC group of companies have been accepted;
− Composition of UCC SB was elected for 5 year term of powers;
− Composition of UCC Management board was elected for 3 year term of powers.
The information on observation by UCC of Corporate governance code provisions reflecting the interests of Sole participant is given below.
Information about adherence to provisions of
the UCC Corporate governance code
|Article/standard of UCC Corporate governance code |Information on observation/failure to observe the standard in 2014 |
|24. Responsibility between the Chairman of Supervisory board in |Observed. |
|charge of ensuring the Supervisory board activity and Chairman of |Responsibility between the Chairman of Supervisory board in charge of |
|Management board in charge of UCC current activity shall be clearly|ensuring the Supervisory board activity and Chairman of Management board in|
|separated and formalized in relevant UCC internal documents. |charge of UCC current activity is clearly separated and formalized: |
| |Chairman of SB– in Regulation on UCC Supervisory board (Order of the |
| |“Samruk-Kazyna” JSC No.28-п dated 25/04/2011), Chairman of Management board|
| |– in the UCC Charter. |
|26. System of performance appraisal of each Supervisory board |Partially observed. |
|member shall provide the incentive of their work for the benefit of|Performance appraisal of UCC SB is performed within the hearing by Sole |
|Sole participant and UCC. |participant since 2013. |
| |Payment of remuneration to SB members is not established by UCC internal |
| |documents according to Regulation on representatives of the “Samruk-Kazyna”|
| |JSC in the Boards of Directors and Supervisory boards of the |
| |“Samruk-Kazyna” JSC companies. |
|35. UCC for the purposes of ensuring the possibility for taking by |Observed. |
|Sole participant of reasoned decisions provides the timely |Management board of UCC on a regular basis submits the information to the |
|disclosure before the Sole participant of accurate information on |Sole participant on UCC activity, including but not limited to: |
|UCC, including its financial situation, economic indicators, its |- audited annual financial statement; |
|operating results, ownership and management structure. |- annual report of UCC; |
| |- report on results of Development plan performance on a quarter basis; |
| |- continuous information on the progress of investment projects |
| |implementation; |
| |- results of performed audits of financial and economic activity of UCC; |
| |- information stipulated by Regulation on UCC information policy. |
|39. UCC follows the statutory regulations and UCC internal document|Observed. |
|defining the UCC dividend policy. |UCC dividend policy in relation to subsidiaries is approved by decision of |
|41. Dividend policy of UCC shall be transparent and accessible for |UCC Management board dated December 19, Minutes No. 59/14. |
|study by Sole participant, potential investors and community of the|The purpose of dividend policy is provision of balance of UCC and |
|Republic of Kazakhstan. |subsidiaries interests, predictability and transparence of approach during |
| |determining of size of dividends, conditions and order of payment. |
| |Dividend policy establishes the basic principles of relations for UCC and |
| |UCC subsidiaries regarding payment of dividends for stock of shares or |
| |participatory interest owned by UCC. |
| |General principles of dividend policy are: |
| |Principle of provision of guaranteed payment by the Partnership of dividend|
| |to the Fund as well as carrying ut of payments and expenditures connected |
| |with instructions of the Partnership Sole founder; |
| |Principle of ensuring the Partnership activity financing, including the |
| |financing of new types of activity and investment projects implemented at |
| |the expense of the Partnership; |
| |Principle of requisite for funding by subsidiary of expenses for |
| |development, including its investment activity. |
| |Dividend policy of UCC in relation to subsidiaries and affiliates is posted|
| |on the UCC corporate web-site. |
| |Along with that UCC in relation to Sole participant is governed by the Fund|
| |dividend policy in relation to subsidiary companies approved as of October |
| |2, 2012 No.39/12 |
|46. In its activity UCC follows the principles of maximally careful|Observed. |
|and rational attitude towards environment according to legislation |Standards and principles of maximally careful and rational attitude towards|
|requirements and generally accepted ecostandards. |environment are formalized in the UCC Policy in the area of environment |
| |protection (Minutes of SB meeting as of 21/12/2009 No.08/09). |
| |During 2014 the orders and penalizing on breach of RoK legislation in the |
| |area of environment protection have been not imposed to UCC subsidiaries |
| |and affiliates. |
|59. Basic principles for prevention of conflict of interest are |Observed. |
|formalized in the UCC Corporate ethics code approved by Supervisory|Basic principles for prevention of conflict of interest are formalized in |
|board. |the UCC Corporate ethics code (Minutes of SB meeting dated 02/08/2010No. |
| |03/10; 25/12/2012 the additions are made by SB, Minutes No. 10/12), as well|
| |as in the Policy for settlement of corporate conflicts and conflict of |
| |interests (Minutes of SB meeting as of 25/07/2011 No.04/11). |
| |Corporate conflicts cases undefined. |
|64. Specific structures, procedures and practice of corporate |Observed. |
|management are governed by the UCC Charter and internal documents, |The following documents are accepted in UCC as part of processes structure |
|including Regulations on: |and corporate management practice: |
|1) Supervisory board; |- Regulation on UCC Supervisory board (decision of the “Samruk-Kazyna” JSC|
|2) Management board; |dated April 25, 2011, Minutes No.28-п); |
|3) Secretary of Supervisory board; |- Regulation on UCC Management board (decision of the “Samruk-Kazyna” JSC |
|4) Audit commission; |dated April 5, 2010, Minutes No. 24-п); |
|5) risk management; |- Regulation on Secretary of UCC Supervisory board (BoD decision dated |
|6) disclosure of information. |December 25, 2012, Minutes No.10/12); |
| |- Regulation on Secretariat of UCC Supervisory board (BoD decision dated |
| |June 24, 2010, Minutes No. 02/10); |
| |- Regulation on UCC Audit commission (decision of the “Samruk-Kazyna” JSC |
| |dated August 6, 2013, Minutes No. 42/13). |
| |- Policy for UCC risk management (BoD decision dated May 15, 2014, Minutes |
| |No. 07/14); |
| |- Rules for identification and assessment of UCC risks (BoD decision dated |
| |May 15, 2014, protocol No. 07/14); |
| |- Regulation on Risk Committee (Management board decision dated October 16,|
| |2013, Minutes No. 58/13); |
| |- Regulation on UCC information policy (BoD decision dated December 29, |
| |2011, minutes No. 07/11). |
|70. Interrelations between UCC and subsidiaries and affiliates are |Observed. |
|performed via relevant bodies within the limits of legislation and |Interrelations between UCC and subsidiaries and affiliates are performed |
|approved corporate procedures. |strictly within the limits of legislation and approved corporate procedures|
| |according to Charters of UCC and subsidiaries and affiliates, UCC Guidance |
| |on corporate management of subsidiaries and affiliates, Corporate |
| |governance code of UCC and subsidiaries and affiliates, Regulations on |
| |bodies of subsidiaries and affiliates and other UCC internal documents. |
| |The management of subsidiaries and affiliates is performed only through |
| |representatives of UCC in GMS/GMP, BoD/SB of subsidiaries and affiliates. |
| |The management of subsidiaries and affiliates through UCC representatives |
| |in BoD/SB covers the following processes: |
| |Materials reviewing to the meeting of BoD/SB of subsidiaries and affiliates|
| |by UCC representatives; |
| |Initiating of questions for submitting to BoD/SB of subsidiaries and |
| |affiliates; |
| |Voting of UCC representatives at the meeting of BoD/SB of subsidiaries and |
| |affiliates. |
| |UC representatives in subsidiaries and affiliates represent and defend the |
| |UCC interests at the BoD/SB of subsidiaries and affiliates and where |
| |necessary at GMS/GMP of subsidiaries and affiliates. |
|74. Supervisory board performs the objective assessment of |Observed. |
|following the approved promising directions with due account for |Redrafted Development strategy of USS for 2012-2022 was approved by BoD |
|market situation, UCC financial status and other factors having |decision dated 20/03/2013. In 2014 the Supervisory board of UCC has taken |
|impact on UCC financial and economic activity. |note of annual report for UCC for 2013. |
| |According to results of 1 quarter, 1half year and 9 months of 2014 the SB |
| |has reviewed and discussed the results of UCC Development plan performance |
| |for 2014-2018. |
| |Monitoring report by each project of UCC subsidiaries and affiliates as |
| |well as risk reports are reviewed on a regular basis, no less than one |
| |quarter. |
|81. Determination of the number of members, term of office of |Observed. |
|Supervisory board and early termination of powers of Supervisory |According to subcl. 2) of cl. 40 Уof UCC Charter approved by decision of |
|board members refers to exclusive competence of the Sole |Management board of the “Samruk-Kazyna’ JSC dated December 24, 2012, |
|participant. |Minutes No. 57/12 determination of the number of members, term of office of|
| |UCC SB, election and early termination of powers of UCC SB members as well |
| |as determination of amount and conditions of remuneration payment to the |
| |UCC SB members refer to the Sole participant competence. |
| |The active component of UCC SB with term of powers of 5 years was |
| |re-elected in 2014 by decision of the Fund Management board dated March 5, |
| |Minutes No.07/14 б |
|87. Review and acceptance of decisions for strategic issues of UCC |Observed. |
|activity is performed only at the Supervisory board meetings with |Review of strategic issues of UCC activity is performed only at the SB |
|voting in person. |meetings with voting in person. |
| |The following questions have been reviewed in 2014 at the SB meetings in |
| |presentia on a quarter basis: |
| |Approval of progress report for Development strategy of Fund in a part of |
| |UCC activity for 2013; |
| |approval progress reports for implementation of UCC Development plan; |
| |approval of progress reports for UCC Sole participant expectations; |
| |approval of UCC risk reports; |
| |approval of monitoring reports of UCC investment activity; |
| |approval of redrafted UCC Policy for risk management; |
| |approval of redrafted Rules for UCC risks identification and assessment; |
| |approval of Guidance on corporate management of UCC subsidiaries and |
| |affiliates; |
| |approval of innovative-technological strategy of UCC until 2020; |
| |approval of redrafted List of top-priority investment projects of UCC. |
|92. Supervisory board performs the official and overall assessment |Observed. |
|of its work. Assessment results are discussed at the Supervisory |Supervisory board performs the official and overall assessment of its work.|
|board meeting. | |
| |Information on execution of Action plan of UCC SB for 2 half year of 2013 |
| |was reviewed on January 23, 2014 (SB decision, Minutes No. 01/14). |
| |Information on execution of Action plan of UCC SB and execution of SB |
| |decisions according to results of 2013 was reviewed on March 13, 2014 (SB |
| |decision, Minutes No. 03/14). |
| |Progress report for Action plan of UCC SB for 2014 was reviewed on July 18,|
| |2014 (SB decision, Minutes No. 11/14). |
| |Progress report for UCC SB instructions for 9 months of 2014 was reviewed |
| |on November 11, 2014 (SB decision, Minutes No.17/14). |
|146. UCC discloses information about all material events of its |Observed. |
|activity, in particular, on its financial status, plans and |The annual reports on UCC activity are posted on the UCC corporate |
|operating results, data on its corporate management practice, |web-site, wherein the information on corporate management practice, |
|timely publishes the corporate events calendar and other |corporate events calendar are included, also the audited annual |
|significant information. UCC timely prepares other important |consolidated financial statement of UCC is posted in separate web-site |
|documents, quarterly reports, corporate action notices. |section. UCC key events are published on regular basis. |
| |Data on UCC affiliated persons is submitted to the “Samruk-Kazyna” JSC on a|
| |quarter basis. |
|153. UCC employees are obliged not to disclose the confidential |Observed. |
|internal(official” information for the time of exercise of |Approved the Instruction on ensuring of preservation of official and |
|occupation. UCC sets the time limits for non-disclosure of |commercial secret in UCC (Minutes of the Management board meeting dated |
|specified information after termination of their labor activity in |November 21, 2009 No.9), according to which during employment the UCC |
|the UCC. |employees sign the relevant agreement on non-disclosure of confidential |
| |internal (official) information. |
|154. UCC prepares the financial statement according to |Observed. |
|International Financial Reporting Standards. |UCC Management approved the half-yearly financial statement, Sole |
| |participant approves the audited annual financial statement. |
| |UCC financial statement is prepared according to International Financial |
| |Reporting Standards. |
|158. Supervisory board delivers information on results of performed|Observed. |
|audits of UCC financial and economic activity to the Sole |UCC SB accepts decision on preliminary approval of annual (public) report |
|participant. Supervisory board responsibility for submission of |of UCC, annual financial statement of UCC and sends for approval of Sole |
|reasonable and clear estimation is applied to interim and other |participant. |
|public reports, reports for regulatory bodies as well as to |UCC B on a quarterly basis reviews the results of financial and economic |
|information subject to mandatory submission according to |activity of subsidiaries and affiliates, audits performed by the UCC Audit |
|legislative requirements. |commission. |
|161. For execution of monitoring over financial and economic |Observed. |
|activity of UCC Management board the Audit commission is elected |By the decision of Sole participant dated August 28, 2013 the composition |
|for a term not exceeding five years. Members of the Management |of Audit commission was determined in the UCC in number of 3 person with |
|board cannot be the Audit commission members in the meantime. |term of powers 2 years: Chairman of Audit commission and 2 members of Audit|
| |commission. |
| |The members of UCC Management board are not the members of Audit |
| |commission. |
|164. With a view to obtain the absolute opinion on accuracy and |Observed. |
|objectivity of financial reporting the UCC performs the audit of |UCC performs the audit of annual financial statement for expired year with |
|annual financial statement for expired year with involvement of |involvement of outside auditor (audit organization) according to |
|outside auditor (audit organization) according to legislative |requirements of Sole participant. In 2014 the outside audit organization |
|requirements. |was engaged– “Ernst & Young» LLP. |
|172. UCC selects the service providers primarily on competition |Observed. |
|basis in accordance with legislation in force. |UCC performs the selection of service providers according to Rules for |
| |procurement of the “Samruk-Kazyna” JSC, applicable legislation and approved|
| |Instruction for arrangement and carrying out of procurement of goods, works|
| |and services in UCC (Minutes of Management board meeting dated 05/12/2012 |
| |No. 52/12) primarily on competition basis. |
| |69% of all procurements in 2014 have been performed on competition basis |
| |(by open tender and price quote inquiry). |
9.1. POLICY FOR CLEARING OF CONFLICT OF INTEREST
The officials and employees shall procure that their personal activity and interests be in agreement with performance of duties in UCC. Serious violations associated with the conflict of interests may harm the UCC image and dent public confidence thereto. In this regard the officials and employees shall avoid situations which may even create the appearance of the conflict of interest. In 2011 for the purpose of reconcilement and settlement of disputes the Policy for settlement of corporate conflicts and conflict of interest is accepted in UCC.
Ombudsman represented by Secretary of the UCC Supervisory board is appointed according to the Corporate ethic code in UCC. The basic functions of Ombudsman are collection and confidential review of addresses regarding non-observance of provision of the Corporate governance code and Corporate ethics code of UCC as well as consultation of employees, officials upon the provisions of these Codes, initiation of disputes consideration for violation of Codes provisions.
Also in 2014 UCC has developed and approved by UCC SB decision the Policy of notification on alleged violations in UCC. This Policy was elaborated for the purposes of establishment of grounds for enhancement of transparency and accountability in the UCC activity by enabling the employees of UCC and UCC group companies responsibly declare ion their concerns related to practice violative the statutory regulations or UCC in-house documents. Also this Policy defines the major provisions focused on regulation of order for submission of alleged violations, its review, taking measures according to results of review as well as sets the grounds for support of UCC and UCC group of companies staff during filing of notices on relevant violations within UCC.
For 2014 the corporate conflicts and conflicts of interest were not detected in UCC, notices on alleged violations were not received.
9.2. MANAGEMENT STRUCTURE AND MANAGEMENT BODIES OF UCC
Superior body – Sole participant;
Supervisory body – Supervisory board;
Executive body – Management board;
Regulatory body – Audit commission.
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Functions of UCC bodies
Decisions of Sole participant accepted within his competence are binding for SB and Management board of UCC.
Decisions of SB accepted within his competence are binding for UCC Management board.
Sole participant accepts the key decisions for UCC activity by decisions of Sole participant and representation of his officials as part of UCC SB.
UCC SB defines the long-term UCC development strategy, approves the medium-term development plans, motivational key performance indicators of senior officials, monitors the management board activity. SB performs its functions according to Regulation on Supervisory board approved by the Fund Order dated April 25, 2011.
Management board performs the implementation of strategy and development plans of UCC, execution of decisions and instructions of Sole participant and SB, submits the regular reporting on UCC activity to the Sole participant and SB. Management board performs its activity according to Regulation on Management board approved by the Fund Order dated April 5, 2010.
Audit commission performs the control over financial and economic activity of the UCC Management board. Audit commission carries out its activity according to Regulation on Audit commission approved by the decision of the Fund Management board dated August 6, 2013.
Appointment of members of UCC collective bodies
The appointment of members of SB members fall within the competence of Sole participant and performed according to its internal procedures.
The appointment of Management board members fall within the competence of Sole participant and performed according to its internal procedures.
Audit commission election refers to the competence of Sole participant and performed according to its internal procedures.
9.3. COMPOSITION OF THE UCC SUPERVISORY BOARD. UCC SUPERVISORY BOARD OPERATION REPORT
Composition of the UCC SB as of December 31, 2014 consists of 4 persons with terms of powers 5 years:
− Yerdebai Dauren Imanzhanuly– Deputy Chairman of the Board of the “Samruk-Kazyna” JSC, Chairman of SB;
− Salimgereyev Malik Zhanabayevich – Chief Director for asset management of the “Samruk-Kazyna” JSC, member of SB;
− Pirogov Alexei Georgiyevich – Deputy Chief Director for asset management of the “Samruk-Kazyna” JSC, member of SB;
− Mynsharipova Saya Naimanbaikyzy – Director of Audit and Control Department of the “Samruk-Kazyna” JSC, member of SB.
Due to termination of term of powers the UCC SB the active composition of the UCC SB was re-elected for five year term of powers by decision of the Fund Management board dated March 5, 2014, Minutes No. 07/14.
Yerdebai D.I. was newly re-elected as a Chairman of SB by UCC SB decision dated March 12, 2014, Minutes No. 03/14.
Biography of members of the UCC Supervisory board
Yerdebai Dauren Imanzhanuly –Chairman of the UCC SB, representative of the “Samruk-Kazyna” JSC
Date of first and date of current election to UCC SB: Elected to composition of SB by decision of the Management board of the “Samruk-Kazyna” JSC, Minutes No. 30/13 dated June 4, 2013. Elected as Chairman of SB by decision of SB dated June 14, 2013, Minutes No. 06/13.
Citizenship: Republic of Kazakhstan
Date of birth: November 20, 1977
Education:
Kazakh state academy of management, international economist (1998)
Work experience (over last 5 years):
• 2007 - “SAT&Company» LLP, First Deputy of Director General;
• 2009 - “Kazakhstan Petrochemical Industries Inc.” LLP, Director General;
• 2009 – “United Chemical Company” LLP, Chairman of the Board;
• 2013 – “Samruk-Kazyna” JSC, Deputy Chairman of the Board.
Work and membership in the Board of Directors /Supervisory boards of other organizations at the present time:
• Member of the Board of Directors of the “KazMunaiGaz” JSC; “MC “NIPT” SEZ” JSC.
Holding of UCC suppliers and competitors shares: No
Salimgereyev Malik Zhanabayevich – member of UCC SB, representative of the “Samruk-Kazyna” JSC
Date of first and date of current election to UCC SB: Elected to the composition of SB by decision of the Management board of the “Samruk-Kazyna” JSC, Minutes No.08/12 dated January 31, 2012.
Citizenship: Republic of Kazakhstan
Date of birth: August 14, 1960
Education:
• Moscow Institute of oil and gas named after I.M.Gubkin, geologic engineer (1982),
• Candidate of geological and mineralogical sciences (1995),
• Work placement in the USA “Exploration and development of offshore oil-gas fields” (2005).
Work experience (over last 5 years):
• 2007 – Director of Petroleum Industry Development Department of the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan;
• 2010– “Samruk-Kazyna” JSC, Director of Directory for petroleum assets;
• 2012– “Samruk-Kazyna” JSC, managing Director.
Work and membership in the Board of Directors /Supervisory boards of other organizations at the present time:
• Member of the Board of Directors of the “MC “Kazakhstan Engineering” JSC.
Shareholding of suppliers and competitors of UCC: No
Pirogov Alexei Georgiyevich – member of the UCC SB, representative of the “Samruk-Kazyna” JSC
Date of first and date of current election to UCC SB: Elected to the SB composition by decision of the Management board of the “Samruk-Kazyna” JSC, Minutes No.20/12 dated May 2, 2012.
Citizenship: Republic of Kazakhstan
Date of birth: March 21, 1961
Education:
• Groznenskiy oil and gas community college, Engineer-oil worker (1980),
• KazPI named after V.I.Lenin, Mining Engineer (1992), D.Sc.in Engineering.
Work experience (over last 5 years):
• 2005 – Deputy Director General of the “KazTransOil” CJSC;
• 2009 – Managing director of the “KazTransOil” JSC for production;
• 2006-2012– Member of Management board of the “KazTransOil” JSC;
• 2012 – “Samruk-Kazyna” JSC, Director for industrial assets management.
Work and membership in the Board of Directors /Supervisory boards of other organizations at the present time: No
Holding of UCC suppliers and competitors shares: No
Mynsharipova Saya Naimanbaikyzy – member of UCC SB, representative of the “Samruk-Kazyna” JSC
Date of first and date of current election to UCC SB: Elected to the composition of the SB by decision of Management board of the “Samruk-Kazyna” JSC, Minutes No. 33/12 dated August 7, 2012.
Citizenship: Republic of Kazakhstan
Date of birth: October 19, 1970
Education:
• Kazakh State Economic University, Accounting and analysis of economic activities (1992),
• Executive MBA – MSU Graduate School of Business Administration (2010),
• Auditor – state license No.0000174 issued by the RoK Ministry of Finance,
• DipIFRS (АССА by IFRS) The Association of Chartered Accountants,
• “Professional and certified accountant” certificate
Work experience (over last 5 years):
• 2007 – “Damu” Entrepreneurship Development Fund” JSC, Chief accountant;
• 2008 – 2015 – “Samruk-Kazyna”’ JSC, Director of Audit and Control Department;
• Since February 17, 2015 – “MC “Kazakhstan Engineering” JSC, Deputy Chairman of the Board.
Work and membership in the Board of Directors /Supervisory boards of other organizations at the present time:
• Member of the Board of Directors – Independent Director of the “National Medical Holding” JSC,
• Chairman of the Audit Committee of the “National Medical Holding” JSC.
• Holding of UCC suppliers and competitors shares: No
UCC SB progress report
According to the UCC Charter and Regulation on Supervisory board the SB performs the overall management and control of Management board activity.
UCC SB activity is performed in accordance with annual work plan, information on execution of annual work plan by SB are reviewed at the SB meeting in presentia in the first quarter of year succeeding the accounting year.
19 SB meetings were arranged and held in 2014, of which 18 n-person meetings and 1 meeting in absentia.
The questions of preparation and implementation of investment projects, acquisition of assets, review of development plan and reports for its execution, approval of UCC internal regulations were permanently discussed at the SB meetings.
Total 87 questions have been reviewed at the meetings, by which the relevant decisions were accepted within the competence of SB, including:
− in investment activity and implementation of UCC projects were reviewed 11 questions;
− in hearing of reports in information of UCC and subsidiaries and affiliates activity (Sole participant expectations, execution of development plan, monitoring of projects, SB instructions, rick management, Audit commission inspection) - 35 questions;
− in approval of UCC internal documents (rules, policies, regulations, standards) -12 questions;
− in other aspects of activity (personnel appointments, foreign employees, efficiency coefficient, etc.) – 29 questions.
The following decisions were accepted in 2014 among the most important SB decisions:
1) approval of UCC risk management policy (redrafted);
2) approval of rules for UCC risk identification and assessment (redrafted);
3) introduction of additions to the list of UCC internal documents approved by UCC SB;
4) approval of Policy for notifications on alleged violations in UCC;
5) introduction of amendments and changes to the Policy for advanced training and engagement of external experts by the members of UCC SB;
6) approval of Rules for development, agreement, approval, adjustment, execution and monitoring of execution of UCC development plan and budget;
7) approval of Guidance on corporate management of UCC subsidiaries and affiliates;
8) approval of Rules for remuneration of labor and bonus payment to executive employees, Chairman and members of Audit commission, Secretary of UCC SB;
9) approval of Rules for performance appraisal and remuneration of UCC executive employees;
10) approval of list of redrafted top-priority UCC investment projects.
The quality and timeliness of execution of tasks set by the Sole participant before UCC were depended on decision accepted by UCC in 2014. Decisions of UCC have referred to such strategically important for UCC questions as implementation of Development plan, investment activity, etc.
The measures taken by SB for consideration of Sole participant opinions concerning UCC:
The follow-up of UCC Sole participant expectations for 2014 was performed on a quarter basis according to the Letter dated December 13, 2013 Ref. No. 12-1-40-02/5473, including reports for implementation of Development plan, monitoring reports, reports for risk management and Audit commission reports.
The measures taken for Sole participant expectations concerning UCC for 2014 were recognized by SB by way of relevant decisions acceptance and giving of specific instructions to the UCC Management board.
On February 17, 2014 according to decision of the Fund Management board dated September 4, 2013 at the SB of UCC the Actions plans for implementation of projects of UCC and operator companies were reviewed:
1) Construction of integrated gas chemical facility in Atyrauskaya oblast (first stage);
2) Reconstruction of vitriol plant with productive capacity of 180 thousand tons annually in Akmolinskaya oblast (Stepnogorsk);
3) Manufacture of polymeric products in Atyrauskaya oblast;
4) Establishment of :Chemical Park Taraz” Special Economic Zone in Zhambylskaya oblast;
5) Production of glyphosate, production of phosphorus chloride, production of caustic soda.
Report on specified projects implementation according to results of 9 months of 2014 was considered on December 12, 2014 and taken into account at the meeting of SB of UCC.
Participation of SB members in the meetings in 2014
| |Number of meetings held within the |Number of meetings with |Participation in meetings, % |
|Full name |period of being in SB |participation | |
|Yerdebai Dauren Imanzhanuly |19 |19 |100 |
|Salimgereyev Malik Zhanabayevich |19 |16 |84 |
|Pirogov Alexei Georgiyevich |19 |18 |95 |
|Mynsharipova Saya Naimanbaikyzy |19 |17 |89 |
General principles of remuneration of UCC SB members
Payment of remuneration to the SB members is not provided at the expense of UCC funds.
Payment of remuneration to the members of UCC SB was not performed in 2014.
9.4. COMPOSITION OF UCC MANAGEMENT BOARD. UCC MANAGEMENT BOARD OPERATION REPORT
The composition of UCC Management board as of December 31, 2014 consists of 5 persons with term of powers 3 years:
− Omarov Askhat Assanovich – Chairman of the Board;
− Krylova Tatyana Nikolayevna – Deputy Chairman of the Board;
− Osserbai Zhenis Alibekovich – Deputy Chairman of the Board;
− Amankabzhan Almat Amanovich – Managing director, member of the Board;
− Michael Dunster – Managing director, member of the Board
Due to termination of term of powers the UCC Management board has re-elected to the next term the composition of UCC Management board by decision of the Fund Management board dated March 5, 2014, Minutes No. 07/14: Omarov Askhat Assanovich- Chairman of the Board; Krylova Tatyana Nikolayevna – Deputy Chairman of the Board; Osserbai Zhenis Alibekovich- Deputy Chairman of the Board; Amankabzhan Almat Amanovich – Managing director, member of the Board.
The following changes have taken place within the composition of UCC Management board in 2014:
− By decision of the Fund Management board dated April 21, 2014, Minutes No. 15/14 Michael Dunster was appointed to an office of Managing director, member of the Board, this decision has taken effect from the date of receipt of permit to engage foreign labor as required by the law of the Republic of Kazakhstan dated May 19, 2014 No.АСТ004858.
Biography of UCC Board members
Omarov Askhat Assanovich – Chairman of the Board
Citizenship: Republic of Kazakhstan
Date of birth: June 08, 1973
Education:
• Building Institute of the Akmolinskiy University named after S. Seifullin, Mechanic engineer (1995);
• Eurasian National University named after L.N. Gumilev, Lawyer (2004);
• International Business Academy (2009).
Work experience (over last 5 years):
• 2007 – “BuildInvestmentsGroup” JSC, Chairman of the Board;
• 2011 – “BuildInvestmentsGroup” JSC, member of the Board of Directors;
• 2010-2012– “BI-Holding» LLP, member of Supervisory board;
• 2012 – “United Chemical Company” LLP, Deputy Chairman of the Board;
• 2013 – “United Chemical Company” LLP, Chairman of the Board.
Range of questions in charge of in UCC: overall management of UCC activity, performs functions assigned to the Chairman of the Board by the UCC Charter, decisions of Sole participant, Supervisory board, Regulation on UCC Management board.
Work and membership in the Boards of Directors /Supervisory boards of other organizations at the present time:
• Chairman of the Supervisory board of the “JV SAP Kazatomprom” LLP
Holding of UCC suppliers and competitors shares: No
Krylova Tatyana Nikolayevna – Deputy Chairman of the Board
Citizenship: Republic of Kazakhstan
Date of birth: February 07, 1953
Education:
• Kazakh Polytechnic University named after Lenin, Mining engineer-economist (1975)
Work experience (over last 5 years):
• 2006 – TCO “MC “KazMunaiGaz” JCS, Deputy Director of Department for share management;
• 2008– “Kazakhstan Holding for Management of State Assets “Samruk” JSC, Director of Economy and Finance Department;
• 2009 – “Samruk-Kazyna” JSC, Director of Department for Budget planning and economic analysis;
• 2009– “United Chemical Company” LLP, Deputy Chairman of the Board.
Range of questions in charge of in UCC: performs the coordination and monitoring of UCC activity regarding finance, efficient management of UCC financial resources, budget planning and budget management, implementation of accounting policy, audit, raising debt, carrying out of bank transactions, financial risk management, credit scoring of the UCC group of companies
Work and membership in the Boards of Directors /Supervisory boards of other organizations at the present time: No.
Holding of UCC suppliers and competitors shares: No
Osserbai Zhenis Alibekovich – Chairman of the Board
Citizenship: Republic of Kazakhstan
Date of birth: May 9, 1981
Education:
• Budapest State University of Economic sciences and State Administration, Faculty of International Economic Relations, Budapest (Bachelor program);
• Kazakh Economic University named after T.Ryskulov, Faculty of International Economic Relations, Almaty (Bachelor program);
• Moscow State Institute for International Relations, Faculty of International Economic Relations, Almaty (Master’s program);
• Akmolinskiy University of Technology and Business, Faculty of oil, gas and coal engineering;
• Eurasian National University named after L.N. Gumilev (Doctoral Program).
Work experience (over last 5 years):
• 2007-2008 – “Karabatan Power Station” LLP, Director General;
• 2008-2009 – “KPI Inc.” LLP, Managing Director for fund raising and cooperation with governmental agencies;
• 2009-2013 – “KPI Inc.” LLP, Deputy Chairman of the Board;
• 2013 – “United Chemical Company” LLP, Deputy Chairman of the Board.
Range of questions in charge of in UCC: performs coordination and control of activity of UCC and subsidiaries and affiliates regarding investment activity and assets management.
Work and membership in the Boards of Directors /Supervisory boards of other organizations at the present time:
• Chairman of the Supervisory board of the “KLPE” LLP
• Member of Supervisory board of the “Kapic FZCO” Company
Holding of UCC suppliers and competitors shares: No.
Amankabzhan Almat Amanovich – Managing Director, member of Board
Citizenship: Republic of Kazakhstan
Date of birth: January 5, 1979
Education:
• Kazakh Institute of legal science and foreign relations, Almaty (Lawyer)
• Eurasian Humanities Institute, Astana (Bachelor of economy and business)
Work experience (over last 5 years):
• 2008– Executive Office of the RoK President, Advisor of state-legal department;
• 2008 – RoK Ministry of Finance, Director of legal service department;
• 2010– Committee of Financial Monitoring of the RoK Ministry of Finance, Deputy Chairman;
• 2010 – RoK Ministry of Finance, Director of legal service department;
• 2013 – “United Chemical Company” LLP, Managing director, member of Board.
Range of questions in charge of in UCC: performs the coordination and control of UCC and subsidiaries and affiliates activity for legal issues, including observation by UCC and subsidiaries and affiliates of legislation of the Republic of Kazakhstan. Coordinates and controls the UCC activity regarding arrangement and carrying out of procurement.
Work and membership in the Boards of Directors /Supervisory boards of other organizations at the present time:
• Member of Supervisory board of the “KPI Inc.” LLP
Holding of UCC suppliers and competitors shares: No
Michael Dunster – Managing director, member of the Board
Citizenship: Great Britain
Date of birth: April 29, 1946
Education:
• Bachelor of Natural Science with a degree in Chemical Engineering
• Imperial College of Science and Technology, Chemical Engineering, London
Work experience (over last 5 years):
• 1989 – 2010 - Lyondell Chimie France Corp, Projects Director in China, Manager of project and design team, Technical director, Deputy project director and РО -11 project Director, Project manager in Netherlands, technical director for Europe, Project manager in France;
• 2010 -2013 – “KPI Inc.” LLP, Director of the “Construction of first integrated gas chemical facility in Atyrauskaya oblast” project;
• 2014 – “UCC Engineering” LLP, Director General.
Range of questions in charge of in UCC: coordinates and controls the UCC activity regarding management of technical and technological and innovative development
Work and membership in the BoD/SB of other organizations at the present time: No.
Holding of UCC suppliers and competitors shares: No.
Report of UCC Management board activity
In accordance with the UCC Charter the management of UCC current activity and management of its affairs are performed by the collective executive body –Management board of UCCе. Management board is eligible to make decisions by all issues of UCC activity not attributed by law or Charter to the competence of Sole participant and Supervisory board of UCC and holds the responsibility before the Sole participant and Supervisory board for performance of tasks imposed thereon. Management board shall execute the decisions of Sole participant and Supervisory board of UCC.
During 2014 the UCC Management board held 60 meetings (in 2013 – 77 meetings, in 2012 held 59 meetings, in 2011 - 43 meetings), whereon 293 questions were reviewed, of which 25 questions were submitted for consideration of UCC Sole participant and questions were submitted for consideration of UCC SB.
All questions submitted for consideration of Sole participant and SB within its competence have been previously reviewed and approved by the Management board. Among them the main block is presented by questions in investment projects in implementation of which UCC take part.
Among the basic questions by which the managerial decisions were accepted within the competence of Management board the questions of subsidiaries and affiliates activity were reviewed (“JV SAP Kazatomprom” LLP, “KPI Inc.” LLP, “KLPE» LLP, “UCC Engineering” LLP, “Polymer Production” LLP, “KHIM-plus” LLP, “MC “SEZ “ChemPark Taraz” JSC, “KUS” LLP, “Center of competence “Samruk” LLP, “Kapic FZC” company, “Butadiene” LLP), including review of development plans and results of subsidiaries and affiliates activity.
Several important decisions reviewed and accepted by the Management board in 2014:
− Regulation on UCC Risk Management Service;
− Redrafted Rules for review and implementation of UCC investment projects;
− Development program for accounting staff of UCC and its subsidiary companies for 2014-2018;
− Corporate standard of project management (CSPM) of UCC;
− Conception of integrated safety management system of UCC;
− Regulation on Information Technology Service of UCC;
− Instruction on accounting of fixed and intangible assets of UCC;
− Rules for planning, agreement and carrying out of payments to UCC;
− Amendments and additions to the Rules for preparation, agreement, signing, registration, storage and control for performance of contracts in UCC;
− Procedure of assessment for chief accountant of subsidiary companies fifty and more percent of voting shares (participation interests) of which are directly or indirectly owned by UCC on the right of ownership or discretionary management;
− Changes in instruction for fire safety of UCC;
− Policy in the area of engaging of audit organizations services in UCC;
− Consolidated chart of UCC stakeholders;
− Methodological recommendations for carrying out of benchmarking in the UCC group of companies;
− UCC dividend policy (in relation to subsidiaries and affiliates);
− Redrafted Rules of competitive selection for vacant offices in UCC;
− Annual procurement plan of UCC for 2015, etc.
The questions of activity of subsidiaries and affiliates wherein the UCC takes part within the frameworks of investment projects implementation were reviewed at the meetings of UCC Management board in the course of year on a timely basis within its competence.
Participation of Management board members in the meetings in 2014
| |Number of meetings in presentia held |Number of meetings in presentia |Participation in meetings, % |
|Full name |within the period of being in the Board |with participation | |
|OmarovAskhat Assanovich |60 |56 |93 |
|Krylova Tatyana Nikolayevna |60 |57 |95 |
|Osserbai Zhenis Alibekovich |60 |59 |98 |
|Amankabzhan Almat Amanovich |60 |56 |93 |
|Michael Dunster |27 |17 |63 |
General principles of remuneration for the members of UCC Management board
Amount of post salaries and terms of remuneration and bonus payment for the Chairman and Board members are defined in the UCC internal documents, including in the Rules for performance appraisal and remuneration of UCC executive employees approved by decision of UCC Supervisory board dated August 6, 2014.
The performance-based remuneration is paid in the UCC to the Chairman and Board members according to results of execution of efficiency coefficient approved in accordance with established procedure.
9.5. COMMITTEES UNDER GOVERNING BODIES
Committees are not provided under UCC Supervisory board.
6 Committees are established under UCC Management board for the purpose of systematization and regulation of activity:
Investment committee
The main purpose of Investment committee activity is making recommendations to the Board for assurance of UCC investment activity performance.
Numerical composition - 10 person.
27 meetings were held in 2014 whereon 41questions for implementation of UCC projects were reviewed.
Budget committee
The main purpose of the Budget committee is development of single position of UCC representatives in the subsidiaries and affiliates bodies upon the Development plans and/or subsidiaries and affiliates budgets submitted for consideration as well as ensuring of timely and high quality elaboration of the UCC Draft Development Plan and generation of suggestions for its adjustment and performance.
Numerical composition – 5 person.
21 meetings were held in 2014 whereon 45 questions were reviewed for consideration of Development plans of UCC and subsidiaries and affiliates as well as reports for its performance.
Credit committee
The main purpose of Credit committee activity is ensuring of timely and high quality drawing up of recommendations to the UCC Board for questions related to rendering to the UCC of credits (loans), financial assistance and issue of guarantees.
Numerical composition – 5 person.
7 meetings were held in 2014 whereon 8 questions for financing of investment projects of subsidiaries and affiliates were considered.
Risk committee
The main purpose of Risk committee is drawing up of recommendations to the UCC Management board in the area of establishment and development of risk management system and response to critical risks by development of suggestions and recommendations for ensuring of effectiveness of UCC risk management system and development of processes called upon to discover, measure, trace and control the UCC risks.
Numerical composition – 7 persons.
9 meetings were held in 2014 whereon 9 questions related to risks if UCC investment projects were reviewed.
Research and Development Board
The main purpose of Research and Development Board (RDB) is preparation of recommendations and suggestions for scientific, research and technology, technical and technological issues of UCC activity, assessment of condition and prospects for development of chemical industry of the Republic of Kazakhstan, determination of promising niches for investing to industry.
Numerical composition of НТС – 21 person, including the representatives of UCC, MINT, “Samruk-Kazyna Contract” LLP, “KPI Inc.” LLP, “KHIM-plus” LLP, “UCC Engineering” LLP, “D.V.Sokolskiy Institute of Organic Catalysis and Electrochemistry”, KazNU named after Al-Farabi, ENU named after L.N. Gumilev, “KBTU” JSC.
1 meeting of RDB was held in 2014 whereon 1 question of innovative and technological UCC development was reviewed.
Technical committee
The main purpose of technical committee (further - ТС) is preparation of recommendations for technical questions of investment projects of UCC subsidiaries and affiliates including design and construction of requisite infrastructure facilities.
Numerical composition - 23 person, including representatives of UCC, “MC SEZ “Chemical Park Taraz” JSC, “KAPIC FZCO” LLP, “KLPE” LLP, “Polymer Production” LLP, “KPI Inc.” LLP, “KHIM-plus” LLP, “JV SAP Kazatomprom” LLP, “UCC Engineering” LLP, “KUS” LLP.
4 meetings of UCC TC were held in 2014 whereon 12 questions of technical and technological development of UCC were reviewed.
9.6. AUDIT COMMISSION
According to the UCC Charter the Audit commission is regulatory body. Election of UCC Audit commission members refers to the Sole participant competence.
Audit commission is independent, permanent body of internal control in UCC, immediate subordinate and accountable to the Sole participant, performing control over financial and economic activity of UCC, assessment in the area of internal control and risk management, execution of documents in the area of corporate management and consulting for the purposes of improvement of UCC activity.
Audit commission performs its activity according to annual Work plan of Audit commission for inspections (revision) and unscheduled tasks by order of Sole participant, Supervisory board and/or Chairman of the UCC Supervisory board.
The composition of UCC Audit commission was determined in number of 3 person with the term of 2 years by decision of the “Samruk-Kazyna” JSC dated August 28, 2013 (Minutes No. 45/13): Chairman of Audit commission – Alimova B.Y., Audit commission members – Abdrakhmanov Z.К., Maldybekova D.D.
For accounting period the Audit commission has performed the performance appraisal of four UC structural subdivisions, inspection of financial and economic activity of five UC subsidiary and affiliates and diagnostics of UCC corporate management system.
9.7. ARRANGEMENTS WITH SUBSIDIARIES AND AFFILIATES
UCC arrangements with subsidiary and affiliates are performed within the corporate management during decision making by subsidiaries and affiliates bodies (General meeting of participants/shareholders, Supervisory board/Board of Directors, Audit commission).
The process of corporate management by subsidiaries and affiliates is regulated by the following documents:
– UCC Charter;
– Corporate governance code of UCC;
– Charters of UCC subsidiaries and affiliates;
– Guidance on corporate management of UCC subsidiaries and affiliates;
– Other documents regulating the corporate management in UCC and subsidiaries and affiliates (further – SA).
The corporate management in UCC is built on observation of the following management principles:
1. distinct distribution of competencies and powers of SA bodies (GMS/GMP, BoD/Sb, executive body), employees and officials of SA.
2. distinct allocation of responsibility of SA bodies (GMS/GMP, BoD/SB, executive body), employees and officials of SA.
3. nonintervention of UCC to SA operating activity, management by exercise of shareholder/participant rights and by cooperation with GMS/GMP and BoD/SB including via its representatives in GMS/GMP and BoD/SB.
Every year UCC strains after increase of corporate management level in SA. Annually on the basis of analysis of current condition of corporate management in UCC SA the recommendations are made for improvement of practice and improvement of regulatory framework of corporate management in SA on the basis of which the plans for improvement of corporate management are drawn.
The following bodies are established according to the Charters of all UCC SA:
− Superior body – Sole shareholder/General meeting of participants.
− Regulatory body/supervisory body – Board of Directors/Supervisory board;
− Executive body – Management board/Director General;
− The body performing the control of financial and economic activity / regulatory body – Audit commission/Internal Audit Service.
The corporate web-sites operate in 60% of UCC SA wherein the information on activity, products, projects, partners, procurement, news, management of UCC SA is posted.
9.8. RISK MANAGEMENT
For the purposes of ensuring the sustainable development of UCC group of companies the acceptance of corporate decisions is performed using the risk-oriented approach.
The general principles of UCC risk management process are:
1) Entirety – considering of integrated risk elements of UCC group in terms of corporate system of risk management;
2) Openness – prohibition on considering the corporate system of risk management as autonomous or single;
3) Structuredness – integrated system of risk management has a clear structure;
4) awareness– risk management is accompanied by the presence of objective, authentic and up-to-date information;
5) continuity– risk management process is performed on an ongoing basis;
6) cyclicality – risk management process represents the long-repeated built cycle of its principal components.
In 2014 the Policy for UCC risk management as well as Rules for UCC risk identification and assessment were updated with due account for updated legal framework for Fund risk management.
The activities for risk identification and assessment is permanently performed in UCC. The risk management process is performed for separation of significant risks which may have adverse impact on the UCC activity and achievement of its strategic goals and tasks. Identified risks and events are systematized in the form of register and risk chart. The form and level of register specification will be vary with the development of risk management system.
For decrease of risks probability the UCC takes the following measures:
− permanently monitors the execution of approved performance schedule of each investment project;
− performs the monitoring of subsidiaries and affiliates activity in a part of fund raising, placement of contracts for raw materials supply for production and sale of finished products;
− for debt raising for project financing the UCC carries out the work with second-tier banks, foreign banks as well as Institutes for development.
In 2014 UCC has quarterly submitted for consideration of the UCC Supervisory board the Risk report, including the report on execution of approved Actions plan for risk management.
The risk management system is implemented in 2014 in the UCC subsidiaries (50% and more) (regulatory documents regulating the risk management process are approved).
In 2015 the Risk management services plans to make the following arrangements:
− regular updating of identified risks in a part of assessment and control measures, including detection of potential risks;
− implementation of internal control systems in the UCC and SA.
9.9. ACCESSIBILITY AND DISCLOSURE OF INFORMATION
The basic principles for disclosure of information on UCC activity are regulated by the Regulation on UCC information policy as well as Instruction on assurance of official and commercial secret preservation in the UCC.
The UCC corporate management structure to the full extent provides the timely and accurate submission to the Sole participant and Supervisory board of information by all significant aspects of UCC activity, including financial standing, investment activity results, assets profile and management system.
Information on transparence and effectiveness of information disclosure processes in UCC is reviewed at the meeting of UCC SB once a year. The data submitted to the UCC Sole participant, including but not limited to:
• annual report;
• financial statement, including consolidated financial statement, audited consolidated financial statement;
• report on execution of Sole participant expectations;
• data on UCC affiliated persons;
• materials for hearing by the UCC SB at the Fund Board meeting according to results of 2013.
• Results of performed inspections of UCC financial and economic activity;
• Reports for investment projects, including the current status by projects and current situation by SPAIID projects;
• Monitoring report of UCC investment activity;
• Report for execution of Development plan;
• Reporting for procurement, including Plans for procurement of goods, works and services (for relevant year and long-term), reporting for contracts/long-term contracts for procurement of goods, works and services; reporting on local content share in delivered goods, performed works, rendered services;
• Risk report.
• Other information according to legislation, Charter, decisions of Sole participant and SB of UCC.
Information regarding taxation, state statistics is submitted in a mandatory manner according to the RoK law to the authorized government bodies, on a quarterly basis reporting is to be submitted to the RoK National bank.
The most informative information source for other persons interested in UCC activity is the UCC corporate web-site (.kz), modernized in the first quarter of 2014. Updated site with clear structuring, design and navigation is made in three languages- Kazakh, Russian, English, consists of main sections “About the company”, “Activity”, “For investors”, “Projects”, ”News”, “Press-center”, “Procurement”, “Contacts” as well as “Enterprise portal”. Alongside this visional Web links to Wikipedia (all purpose multi language popular Internet encyclopedia) and popular social networks are posted on the UCC front page.
Throughout the year for information support of UCC activity the informational content of web-site was regularly updated.
The work for UCC employees involvement to the Fund enterprise portal operation was also activated. UCC has become a first organization in the Fund group of companies which portal was integrated to the structure of Fund enterprise portal.
The internal portal has become a system of UCC internal information resource management for team operations in tasks, projects and documents, for effective internal communications, coverage of primary events of the UCC group of companies.
9.10. ISSUES SURROUNDING THE UCC PARTIES CONCERNED
During accounting period the UCC has performed the inspection of SA for observation of environmental regulations requirements, in the course of which the violations of ecological legislation have been not discovered. The schedule for carrying out of subsidiaries and affiliates inspection is approved with a view to statutory compliance in the area of environment protection, availability of requisite documents and carrying out of required actions for 2015.
In 2014 UCC has taken part in the round table for discussion of topical issues in ecology and environment pollution conducted by the Peoples’ Friendship University of Russia, Moscow. The UCC report on the subject of “Disposal of solid domestic waste” was included the Messenger of Peoples’ Friendship University of Russia magazine. Series: Ecology and Life safety.
The public hearings were conducted in August in Atyrau regarding preliminary assessment of environmental effect to the feasibility study of the “Construction of infrastructure facilities of the “NIPT” SEZ.
In November the MC “ChemPark Taraz” SEZ in liaison with the RoK National Chamber of Entrepreneurs and with the assistance of “National Export and Investment Agency “KAZNEX INVEST” JSC, Association of Kazakhstan economic zones entrepreneurs has arranged the meeting with the representatives of business structures of Astana and Akmolinskaya oblast.
The questions of development prospects and business risk of implemented producing operations and free economic area at large, questions of current status of SEZ infrastructure, sales cost and output of the “Production of glyphosate (herbicide)” project, etc. have been discussed at the meeting.
9.11. PRIMARY PR-EVENTS OF UCC
The presentation of vitriol plant in Stepnogorsk among the final projects of Program for Accelerated Industrial and Innovative Development in the nationwide TV link-up “National industrialization of Kazakhstan: results of 2014 an first five year plan” with participation of the President of Kazakhstan N. Nazarbayev has become a significant event for UCC group of companies. The event of Republic value has received wide coverage by Kazakhstani electronic and print media.
Besides the informational materials on UCC activity were published in mass media in accounting period:
– BNews (14/10/2014 – “Chemical Park Taraz” SEZ will be launched in 2017”;
– Kursiv. KZ (09/08/2014 – “20 thousand workers and specialists will build the petrochemical park in Atyrau”);
– Capital.kz (24/01/2014 – “It is planned to allocate on the order of 1,1 trn KZT for development of chemical industry”);
– Capital.kz (07/02/2014 – “Production of sodium cyanide and polypropylene will be organized in the RoK”);
– Trend (06/02/2014 – “Kazakhstan will kick-start production of sodium cyanide and polypropylene”).
10. STAFF POLICY
UCC in its activity adheres to principles of UN Global Compact such as:
− Elimination of all types of compulsory and obligatory labor;
− Non-admission of use of children compulsory labor;
− Non-admission of discrimination in any forms.
The key directions according to UCC Staff policy approved by UCC SB dated October 29, 2013:
1. improvement of labor forces quality;
2. management of labor productivity;
3. development of corporate culture;
4. management of organization chart, effective arrangement of business processes.
Implementation of staff policy is performed according to Action plan approved by UCC SB.
The following measures were taken in 2014:
The competitive selection of candidates for holding of 24 UCC vacant posts were performed. 24 persons were employed, of which 19- by competitive selection. 9 persons were appointed due to transfer within the UCC.
The ongoing monitoring for system of UCC executive employees performance management is performed on basis of key performance indicators and performance evaluation of achievement of target goas defined by the UCC Development Strategy for 2012-2022. The efficiency coefficients charts with target values of executive employees for 2014 are approved by the SB decision dated March 31, 2014. Report on performance of motivational effieicnecy coefficients for 2014 will be reviewed at the SB meeting in 1 quarter of 2015.
The assessment of administrative officers activity is performed in UCC according to results of 2014 according to the Rules for assessment of UCC administrative officers activity and UCC Chairman of the Board Order “Concerning the carrying out of assessment of UCC administrative officers activity according to results of 2014” dated November 10, 2014, in all 63 UCC employees have passed the activity assessment, among them 14 –managerial and senior executives, 49 – administrative officers. 12 UC employees working during less than 6 months were not liable for performance assessment.
Evaluating commission having studied the submitted materials at the meeting for job competence has represented the individual recommendations for employees being assessed:
− On adequacy of employee for the job – 63 employees;
− On recommendation for assignment to candidate pool for holding a post of senior category – 32 employees;
− On requalification- No;
− On inconsistency with job- No.
16 labor agreements with the employees were dissolved by agreement of the Parties during accounting period in the UCC. Scheduled turnover of staff for 2014 – 15,8%, actual turnover of staff for 2014 was equal 26%. In comparison with 2013 turnover of staff has increased by 0,5%.
For determination of personnel satisfaction degree (engagement degree) the Private foundation “Samruk-Kazyna” Corporate University in August-September 2014 has performed the UC personnel engagement survey by questionnaire survey.
Following the results of polling the indices by basic aspects are in positive zone at large:
− UCC personnel engagement degree was equal 74 % suggesting that situation in stable in UCC and active corrective actions are not required;
− UCC satisfaction degree - 79%;
− Personnel loyalty index - 69%;
− Index for support of UCC initiative - 65%.
In comparison with 2013 engagement index has reduced by 9% (in 2013 - 83%), loyalty index in comparison with 2013 has decreased by 13% (in 2013 - 82%),index of initiative support as compared to 2013 has decreased by 8% (in 2013 - 73%).
UCC performs the staff policy focused on securing to employees of fair wage, social safeguard, conditions for self-actualization and development.
Was implemented the system of assessment and bonus payment to employees determining the dependence of remuneration amount on execution of Target chart as well as development of individual development plans.
The complex enhancement of employees professionality involving the development of professional thinking and consciousness by participation in practical trainings, alignment meetings, conferences, forums, exhibitions, symposiums, round tables, webinars, on-the-job training, training programs is permanently takes place in UCC. According to the Rules of vocational training and development the employees receive the opportunity to improve their education level and qualification.
In 2014 UCC has arranged the seminars and webinars for training of SA staff to management of resources, risks and reports.
45 UCC employees have taken part in the individual training events. 3 corporate seminars to the following topic were arranged among other things:
− DipIFR;
− Operations performance management (CIMA Р1);
− Operations performance management (CIMA Р2).
Besides in 2014 UCC has performed the personnel competency assessment, “Competence as effieicnecy factor, competence assessment and development” seminar, where 35 company employees have taken part in, including the top management, SHL company was engaged for carrying out of assessment. Following the assessment results the SHL assessment center has recommended the directions for development. 3 corporate seminars were conducted upon the recommended directions, including the Strategic session for UCC top management.
These corporate seminar for employees (with trainers engagement) have been conducted in the UCC office with minimum days release of employees.
The disbursement of training costs was equal 30 638 thousand KZT under scheduled value 34 724 thousand KZT.
In 2015 it is planned to perform 100% participation of employees in training events for career enhancement according to Individual development plan and application of amount for training and re-training of UCC employees at the value of 34 479 thousand KZT.
11. SOCIAL RESPONSIBILITY
Assurance of priority to life, health and security of employees UCC refers to the primary overriding principles in its operations. UCC follows these principles according to the RoK law and generally recognized standards focused on elimination of occupational hazards impact on employees during labor activity.
UCC within the corporate social responsibility creates the necessary conditions for employees labor. The human capital is an important strategic resource of UCC since operating efficiency depends on qualification and team spirit of work collective.
The provision of financial assistance for health promotion during provision of annual paid labor vacation due to birth/adoption of child, due to death of employee/relatives, other compensatory payments and voluntary medical insurance in case of sickness of employee and his family members are provided for the UCC employees in accordance with the Rules for social support rendering.
UCC highly appreciates the health protection and safety measures for employees labor. The main goals of UCC stipulate the compulsory observance of all existing regulations and standards in the area of work safety and is a key condition for successful development of current business.
For maintenance and strengthening of physical and psychic health of UCC employees the carrying out of voluntary insurance in case of sickness of employee and his family members will be continued.
The UCC activities for ensuring of compliance with the requirements of labor safety and security have been performed in accordance with the law, legal and regulatory acts of RoK.
The cases of industrial injuries were not recorded in the UCC group of companies in 2014.
Activities for establishment and approval of Conception for integrated safety management system have been performed in 2014 for development of single and effective interaction system for safety precautions in UCC group of companies. This conception is based on principles of priority for conservation of employees life and health as well as compliance with laws in the area of ensuring the industrial, work and environmental safety. Provisions on regulatory documents of the Fund Central safety service were used in the guidance during development of this conception.
Along with that UCC performs works for collection of requisite information and guidance documents for development of regulatory and ruling documents for the whole UCC group of companies.
UCC group of companies fully realizes the responsibility for ensuring of work and health safety of UCC and SA employees.
The familiarization with in-house regulations which regulate the system of labor protection and occupational safety in UCC is performed on an ongoing basis during employment and in the course of year.
UCC group of companies follows the principles of minimization of hazardous emissions and wastes to environment. These principles and standards of maximally careful and rational use of resources and attitude of environment are formalized in the UCC Policy in the area of environment protection that is indicative of following by UCC the Corporate governance code in a part of careful attitude to natural resources.
In 2014 the UCC has taken part in the round table for discussion of topical issues in ecology and environment pollution conducted by the Peoples’ Friendship University of Russia, Moscow. UCC report to the topic of “Disposal of solid domestic waste” was included to the Messenger of Peoples’ Friendship University of Russia magazine. Series: Ecology and Life safety. The non-observance of environmental legislation was not discovered during UCC accounting period in UCC and its affiliates and subsidiaries.
The schedule for carrying out of subsidiaries and affiliates inspections is approved with respect to statutory compliance in the area of environment protection, availability of necessary documents and carrying out of required actions for 2015.
12. PROCUREMENT AND LOCAL CONTENT
The procedure for carrying out of UCC procurement of goods, works and services is regulated by the Instruction on organization and carrying out of procurement of goods, works and services in UCC and Rules for procurement of goods, works and services of the Fund and organizations fifty and more percent of voting shares (participatory interest) of which are directly or indirectly owned by the Fund on the right of ownership or discretionary management.
In 2014 UCC has performed the procurement of goods, works and services for a total amount of 546,3 mln. KZT, at that the share of Kazakhstani content in procurement was equal 54% versus 40% according to plan.
In 2014 UCC has performed 100% transfer of procurement performance by open tender using the Dutch auction and budget enquiry in the information system of e-procurement. Also was performed 100% transfer of reporting delivery by system of e-procurement plan and automated system for generation of reporting.
In 2014 the total saving in the group of companies was equal 10,1 %o of amount of procurement performed, including by means of e-procurement performance using the Dutch auction.
13. ACTIVITY OF SUBSIDIARIES AND AFFILIATES
• “JV SAP Kazatomprom” LLP
The main purpose of activity is production of industrial sulphuric acid.
“JV SAP Kazatomprom” LLP participants are: UCC – 90,11%, NAC “Kazatomprom” JSC- 9,89%.
Primary events for 2014:
− License for chemical production exploitation was obtained;
− Two additional subtypes of license were obtained for selection of precursors: Implementation, Production;
− Plant laboratory was accredited as testing laboratory in the RoK accreditation system;
− Taking-in of sulphuric acid necessary for start-up of plant was performed;
− Taking-in of first lot of raw materials– sulfur granules was performed;
– Nationwide TV link-up with participation of Head of State has passed, whereon the pre-commissioning activities were launched;
– Transfer of share in the charter capital of the “JV SAP Kazatomprom” LLP was performed from the “Mining company” LLP to the “NAC “Kazatomprom” JSC.
Social responsibility
Turnover of staff for 2014 was equal 23%, including among the management staff 25%, among production staff– 18% versus scheduled indicators 10%, 25% and 11% respectively.
The labor disputes and social conflicts were not recorded during accounting period.
By safety and accident prevention for 2014 the industrial accidents were not assumed in the “JV SAP Kazatomprom” LLP.
All the guarantees of employees rights to safety and protection of labor are observed:
− permits to employment of technology and engineering devices for industrial safety Were obtained;
− expert opinion for industrial safety was developed and performed and the Declaration of safety was registered in the RoK Committee on ES;
− activities for registration and accounting of chemical products performed in the RoK Ministry of Investment and Development;
− “Certificate for the right of conduct of operations in the area of industrial safety” was obtained;
− Contract for legal liability insurance of employer for infliction of harm to third parties was concluded.
− Permit for environmental emission were obtained. The excess of agreed MSW emission quota was not assumed.
The sponsor and charity support was not provided in 2014.
Tasks for 2015:
− Completion of pre-commissioning activities;
− Start-up of plant;
− Engagement to rated capacity;
− Finished products sale.
• “KPI Inc.” LLP
The main purpose of activity is construction of integrated gas chemical facility in Atyrauskaya oblast – 1 stage (polypropylene), infrastructure facilities upon the project and pipeline for supply of gas raw materials from factory buildings of the “Tengizchevroil” LLP.
Participants of the “KPI Inc.” LLP are: UCC – 51%, “ALMEX PLUS” Firm” LLP - 49%.
Primary events for 2014:
– ЕРС-contract with Sinopec Engineering (Group) Co. Ltd. was cancelled;
– The issue of fund raising within foreign agencies insurance was explored;
– Contract for adjustment of feasibility study and DED of the project was concluded;
– Competition for selection of new general contractor was opened;
– Construction of temporary in-site motor roads was commenced.
Social responsibility
Turnover of staff in 2014 was equal 21% with scheduled value 23%. In comparison with 2013 turnover of staff has decreased by 5% (abs.).
The labor disputes and social conflicts were not recorded in accounting period.
Industrial accidents were not allowed in 2014 by safety and labor protection in the “KPI Inc.” LLP.
Conditions and measures for employees safety and labor protection are created and taken in the “KPI Inc.” LLP. Technical inspections of activity of contracting organizations engaged to the building ground are performed weekly.
Activities for preparation of necessary procedures, provisions and other requisite documents for development, implementation of International Management Systems ISO 9001, ISО 14001 and OHSAS 18001 has been started, 165 units of procedures and policies regarding HSE are developed and adapted.
The violations of RoK Environmental code requirements were not discovered, penalties were not imposed and claims were not presented.
The sponsor and charity support was not provided in 2014.
Tasks for 2015
− Carrying out of work for fund raising;
− Updating of project feasibility study and DED;
− Selection of new General contractor and conclusion of ЕРС/ЕРСМ contract;
− Completion of temporary motor roads construction;
− Completion of DSW and commencement of in-site railroads construction.
• “KLPE” LLP
Main purpose of activity is construction of integrated gas chemical facility in Atyrauskaya oblast – 2 stage (polyethylene), production, sales of polyethylene and other manufacturable industrial products including the gas and petroleum chemistry products.
Participants of “KLPE” LLP (as of the end of 2014) are: UCC - 50%, LG Chem, Ltd. - 50%.
Primary events for 2014:
– Kick-off meeting with the project potential creditors – Korean and European export credit agencies has taken place;
– Activities for appraisal of the project cost (ОВЕ phase) are completed;
– Amendments to legislation are initiated in a part of possibility of application of International Building Code as well as engagement of foreign employees outside the quota and permits. The draft laws are under consideration in the RoK Parliament at the present time;
– Was accepted a decision on carrying out of new tender for procurements of building activity on a turnkey basis;
– Transaction for acquisition of 25 % share of UCC at the “SAT&Company” JSC was held in December (in 2015 – reregistration of the “KLPE” LLP).
Social responsibility
The overall index of staff turnover in 2014 was equal 9,1% at the scheduled value 3,1%. In comparison with 2013 this indicator has decreased by 3,3% (abs.).
The labor disputes and social conflicts were not recorded in accounting period.
Industrial accidents by safety and labor protection were not allowed in the “KLPE” LLP for 2014.
The violations of RoK Environmental code requirements were not discovered, penalties were not imposed and claims were not presented.
The sponsor and charity support was not provided in 2014.
Tasks for 2015:
− Endorsement of modification in legislation in a part of possibility of application of International Building Code as well as foreign employees engagement outside quota and permits;
− Determination of winning bidder for procurement of building works on a turnkey basis;
− Continuing of work for raising of debt financing.
• “Polymer Production” LLP
The main purpose of activity is implementation of “Production of polymeric products in Atyrauskaya oblast” investment project.
Participants of the “Polymer Production” LLP are: UCC - 99,67%, “Propylene Pack” LLP - 0,33%.
Primary events for 2014:
– Contract for procurement of works (construction of plant on a turnkey basis) which was concluded in 2013 was cancelled;
– Positive opinion for project feasibility study was obtained;
– Positive opinion of government expert review for project DED was obtained;
– Contract for procurement of works (for construction of plant on a turnkey basis) was concluded;
– Processing equipment for production of blow tubular film was obtained;
– Processing equipment of complete plant for production of flecon bags was obtained;
– Delivery of processing equipment of train for production of BOPP film was started;
– Assembling of part of processing equipment was started.
Social responsibility
The scheduled turnover of staff for 2014 was equal 20%, actual turnover of staff – 30,4%. In comparison with 2013 turnover of staff has decreased by 6,6% (abs.).
For determination of personnel satisfaction degree (engagement index) the research of engagement of the “Polymer Production” LLP personnel was performed according to Methodology for carrying out of research for personnel engagement agreed by the decision of the Fund Personnel committee dated March 20, 2013.
The research was performed by web-inquiry of the “Polymer Production” LLP employees. The general population was equal 40 employees, 38 employees have actually taken part in the inquiry (95% of total personnel number).
Following the inquiry results the indices by basic aspects are in good zone:
− Engagement index was equal 84%, that is generally indicative of stable and favorable situation in the “Polymer Production” LLP;
− Satisfaction index – 90%;
− Loyalty index – 83%;
− Index for support of initiative – 69%.
The labor disputes and social conflicts were not recorded in accounting period.
Industrial accidents by safety and labor protection were not allowed in the “Polymer Production” LLP for 2014.
Was concluded the contract on compulsory social insurance of employer civil responsibility for infliction of harm to employee health and safety during performance by him of labor (official) duties.
Department of health, safety and environment performs the ongoing monitoring for observance by the General contractor of legislation for occupational safety and health engineering. Upon all detected violations the Instructions to rectify legislation violations were issued. The penal sanctions according to concluded contract for CAW were applied in relation to the General contractor for detected violations.
“Polymer Production” LLP has obtained the sanitary and epidemiological finding, environmental permits for the period of plant construction, hazardous waste certificates are agreed for the period of construction. In 2014 authorized government bodies have not performed the inspections in the area of environment protection.
The violations of RoK Environmental code requirements were not discovered, penalties were not imposed and claims were not presented.
The sponsor and charity support was not provided in 2014.
Tasks for 2015:
− Assembling and commissioning and start-up of processing equipment;
− CAW for finishing of buildings, laying of on-site utilities, lighting networks, low current systems;
− Construction of auxiliary housing and buildings (SPS, containers for fuel, storm run-off, tare pavilion, shed for motor transport, etc.);
− Landscaping and site finishing;
− Putting into operation of plant;
− Generation of cognizable positive brand of the “Polymer Production” LLP;
− Development of marketing channels.
• “KHIM-plus” LLP
The main purpose of activity is implementation of “Production of phosphorus chloride and glyphosate” and “Production of caustic soda and chloride” investment projects.
Participants of the “KHIM-plus” LLP are: UCC – 99,34%, “Samruk-Kazyna Invest” LLP - 0,66%.
Primary events for 2014:
– Agreement on basic conditions of purchase and sale of 10% participatory interest of UCC in the charter capital of the “KHIM-plus” LLP was concluded between the UCC and CMEC;
– The application for raising of debt financing for implementation of the “Production of caustic soda and chloride” project was submitted to the Eurasian Development bank ;
– Contract for development of feasibility study of integrated chemical facility upon the “Production of phosphorus chloride and glyphosate (herbicide)” project was concluded;
– Selection of ЕРС contractor upon the “Production of caustic soda and chloride” project is commenced.
Social responsibility
The scheduled turnover of staff for 2014 was equal 10%, actual turnover of staff was equal 47%. The measures for optimization of G&A expenses were performed in the “KHIM-plus” LLP for the purposes of UCC Board decision dated May 28, 2014 in connection with which the positions were released and the vacancies with overall volume 20% were generated that has implied the deviation from the scheduled turnover of staff.
The labor disputes and social conflicts were not recorded in accounting period.
Industrial accidents by safety and labor protection were not allowed in the “KHIM-plus” LLP for 2014.
The violations of RoK Environmental code requirements were not discovered, penalties were not imposed and claims were not presented.
The sponsor and charity support was not provided in 2014.
Tasks for 2015:
− Conclusion of ЕРС contract;
− Conclusion of trilateral licensing agreement with the Asahi Kasei company within the EPC contract upon the project;
− Elaboration of DED in the mode of expert support (including the passing through phased expert review) within the EPC contract upon the project;
− Obtaining of the Bank’s decision on financing the company projects, signing of credit agreements;
− Execution of CAW.
• “MC SEZ “ChemPark Taraz” JSC
The main purpose of activity is organization and development of the “ChemPark Taraz” SEZ.
The founder (Sole shareholder) of the “MC SEZ “ChemPark Taraz” JSC is UCC – 100%.
Primary events for 2014:
– CAW upon the external infrastructure facilities (rail tracks, motor road, water pipeline, gas pipe line) have been started;
– Management board of the Fund has approved the alienation to the state of 26% of voting shares of the “MC SEZ “ChemPark Taraz” JSC by the gift agreement;
– Were obtained the consolidated opinion of government expert review for gas trunk line, offsite motor road, local opinions of government expert review for first stage pumping station, railway siding, external power supply to HV line 220 kWatt, for internal infrastructure facilities upon 1 launch area: general layout, internal motor road, grading and levelling and enclosure.
Social responsibility
The scheduled turnover of staff for 2014 is 15 %, actual turnover of staff for 2014 was equal 41,4 %. In comparison with 2013 turnover of staff has increased by 16,4%.
The labor disputes and social conflicts were not recorded in accounting period.
Industrial accidents by safety and labor protection were not allowed in the “MC SEZ “ChemPark Taraz” JSC for 2014.
The following types of mandatory insurance are provided according to model contract “On approval of model contracts for carrying out of activities as a participant of special economic zone” approved in the “MC SEZ “ChemPark Taraz” JSC:
1. Compulsory insurance of employer civil responsibility for infliction of harm the employee life and health during performance by him of labor (official) duties;
2. Compulsory environmental insurance during performance of ecologically dangerous types of economic and other operations within the territory of special economic zone related to responsibility for compensation for damage inflicted to:
− Environment and (or) recovery of environment condition to condition preceding its deterioration;
− Life and health of citizens as a result of accidental environment pollution;
− Third parties property owing by him on the right of ownership, economic jurisdiction, operational management and other legal foundation as a result of accidental environment pollution.
The violations of RoK Environmental code requirements were not discovered, penalties were not imposed and claims were not presented.
The sponsor and charity support was not provided in 2014.
Tasks for 2015:
− Completion of project DED development;
− Completion of construction of SEZ external infrastructure facilities;
− Attraction of investors to the SEZ territory.
• “UCC Engineering” LLP
The main purpose of activity is rendering of expert and consulting services for project management, carrying out of technical audit, safety expert review, development of feasibility study, marketing and financial and economic analysis.
Participants of the “UCC Engineering” LLP are: UCC – 25%, Tecnimont S.p.A. (Italy) – 35%, Officium Projects Ltd. (Belgium) – 40%.
Primary events for 2014:
– Was obtained the favorable opinion of government expert review for the feasibility study of first phase of project: “Production of butadiene and artificial rubber”: “Production of butadiene – first stage”;
– Was obtained the favorable opinion of government expert review for the feasibility study of “Construction of “NIPT” SEZ infrastructure facilities (Karabatan and Tengiz sites);
– was obtained the positive opinion of government expert review for adjustment of feasibility study of the “NIPP” SEZ (285 ha site).
Social responsibility
The scheduled turnover of staff for 2014 – 40%, actual turnover of staff was equal – 39%. In comparison with 2013 turnover of staff ha decreased by 27% (abs.).
The labor disputes and social conflicts were not recorded in accounting period.
Internal control system for occupational safety and health engineering and fire safety in the office operates in the company.
Following the results of 2014 the incidents with infliction of harm to life and/or health of corporate employees were not recorded.
The sponsor and charity support was not provided in 2014.
Tasks for 2015:
– backlog gain;
– extension of client base;
– preliminary work for acquisition of first category license for project activities;
– optimization of organizational chart.
14. LIST OF ABBREVIATIONS
|Sole participant/ Fund |“National Welfare Fund” Samruk-Kazyna” Joint-stock company; |
|UCC |“United Chemical Company” Limited Liability Company”; |
|RoK |Republic of Kazakhstan; |
|SA, Группа компаний ОХК |Subsidiaries and affiliates of UCC – legal entities the shares/ participatory interests of which |
| |are owned by UCC on the right of ownership or discretionary management; |
|BoD/SB |Board of Directors/Supervisory board; |
|GMS/GMP |General meeting of shareholders/ General meeting of participants; |
|“JV SAP Kazatomprom” LLP |“Joint venture Sulphuric acid plant Kazatomprom” Limited Liability Partnership; |
|“KPI Inc.” LLP |“Kazakhstan Petrochemical Industries Inc.” Limited Liability Partnership; |
|“KLPE” LLP |“KLPE” Limited Liability Partnership; |
|“KGR” LLP |“KAZGOLD REAGENTS” Limited Liability Partnership; |
|“MC SEZ “Chemical Park Taraz” JSC |“MC SEZ Chemical Park Taraz” Joint-stock company; |
|“KUS” LLP |“Karabatan Utilities Solutions” Limited Liability Partnership; |
|SEZ “NIPT” |Free economic zone “National Industrial Petrochemical Technopark” (Atyrauskaya oblast) |
|FS |Feasibility study |
|SEZ |Special Economic Zone |
|DED |Design and estimate documentation |
|DSW |Design and survey work |
|CAW |Construction and assembling works |
| | |
| | |
| | |
15. CONTACT INFORMATION OF THE “UNITED CHEMICAL COMPANY” LLP
REPUBLIC OF KAZAKHSTAN
010000, ASTANA, 8 KUNAYEV STR. “B” BLOCK
TELEPHONE/FAX: +7 (7172) 277-127
WEB-SITE: .kz
E-MAIL: info@.kz
CHIEF MANAGER OF CORPORATE DEVELOPMENT DEPARTMENT: +7 (7172) 277-127 (int.126)
E-MAIL: seitbattalova@.kz
DESIGN DEVELOPMENT: “Aldarkose” Studio
16. INDEPENDENT AUDITORS REPORT
To the Participant and Management of the “United Chemical Company” LLP
We have audited the accompanying consolidated financial statements of the “United Chemical Company” LLP and its subsidiaries (further- the Group), which comprise the consolidated statements of financial position as of December 31, 2014, consolidated report on cumulative loss, consolidated statement of changes in equity and consolidated cash flow statement year then ended as well as information on significant aspects of accounting policy and explanatory information.
Management's Responsibility for the Consolidated Financial Statements
The Group Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards and system of internal control required in opinion of the management for preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with International Auditing Standards. Those standards require that we observe the ethical norms as well as plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the “United Chemical Company” LLP and its subsidiaries as of December 31, 2014 as well as its consolidated financial results and cash flows for the year then ended in accordance with the International Financial Reporting Standards.
Ernst & Young LLP
Bakhtiyor Eshonkulov (signature) Yevgeniy Zhemaletdinov
(Stamp) (Stamp)
Auditor/Audit Partner Director General of the
Auditor qualifying certificate “Ernst & Young” LLP
No. МФ-0000099 dated August 27, 2012 State license for performance of audit activity within the territory of the Republic of Kazakhstan: series МФЮ-2, No. 0000003 issued by the Ministry of Finance of the Republic of Kazakhstan dated July 15, 2005
February 10, 2015
17. CONSOLIDATED FINANCIAL STATEMENT
Consolidated statement on total loss
for year ended on December 31, 2014
| In thousand KZT | Notes |2014 |2013 |
|Sulphur sales income | |1 341 840 |782 233 |
|Cost of sales | |(1 005 116) |(567 757) |
|Gross margin | |336 724 |214 476 |
|Operating income | |- |19 458 |
|General and administrative expenses |4 |(2 695 371) |(2 600 514) |
|Operating loss | |(2 358 647) |(2 366 580) |
|Financial income | |372 782 |184 082 |
|Financial costs | |(6 189) |- |
|Forex gain (loss) | |172 486 |(12 889) |
|Share in profit /(loss) of associated companies and |8 |5 675 |(229 798) |
|joint ventures | | | |
|Other non-operaitng income | |576 614 |11222 |
|Loss before taxation | |(1 237 279) |(2 413 963) |
|Expenses for income tax |5 |(58 482) |(30 394) |
|Net loss for accounting period | |(1 295 761) |(2 444 357) |
|Other total income fo acocunting period | |- |- |
|Tota loss for year net of taxes | |(1 295 761) |(2 444 357) |
|Loss falling within: | | | |
|Participant of controlling company | |(1 269 759) |(2 402 578) |
|Non-controlling interest | |(26 002) |(41 779) |
| | |(1 295 761) |(2 444 357) |
Deputy Chairman of the Board for Economyc and Finance
(Stamp of the United Chemical Company)
Krylova T.N.
(signature)
Chief accountant
Arkabayeva M.A.
(signature)
Consolidated statement ofn financial position
As of December 31, 2014
In thousand KZT Notes 2014 2013
|Assets | | | |
|Long-term assets | | | |
|Residual cost of fixed assets without regard to | |25 716 117 |10 373 910 |
|reserves for onerous obligation | | | |
|Minus: utilization of reserve |12 |(4 400 869) |- |
|Book value of fixed assets |6 |21 315 248 |10 373 910 |
|Intangible assets | |80 249 |80 359 |
|Advances paid for long-term assets |7 |9 865 922 |2 202 723 |
|Investment to associated companies and joint ventures|8 |56 721 176 |44 282 154 |
|VAT recoveravle | |1 031 287 |813 227 |
|Accounts receivable | |110 812 |110 782 |
|Other long-term assets | |578 698 |328 902 |
|Restricted cash |13 |315 625 |3 574 256 |
|Inventory | |34 738 |176 467 |
| | |90 053 755 |61 942 780 |
|Current assets | | | |
|Inventories | |112 836 |21 123 |
|Accounts receivable and other assets | |435 738 |263 434 |
|Deferred borrowing costs |13 |83 211 |355 638 |
|VAT recoverable | |891 475 |301 396 |
|Prepayment for corporate income tax | |- |600 |
|Funds in credit institutions |9 |2 746 008 |3 385 846 |
|Cash and cash equivalents |10 |26 955 056 |5 042 674 |
| | |31 224 324 |9 370 711 |
|Total assets | |121 278 079 |71 313 491 |
|Equity and liabilities | | | |
|Capital | | | |
|Charter capital |11 |113 107 922 |62 365 262 |
|Additional paid-in capital |11 |4 164 225 |4 164 225 |
|Accumulted loss | |(24 238 156) |(6 087 212) |
|Capital falling within the controlling company | |93 033 991 |60 442 275 |
|participant | | | |
|Non-controlling interest |11 |680 623 |618 625 |
|Total equity | |93 714 614 |61 060 900 |
|Long-term obligations | | | |
|Loans |13 |8 244 413 |8 249 167 |
|Interest payable |13 |- |196 986 |
|Current liabilities | | | |
|Accounts payable | |1 402 283 |640 238 |
|Short-term part of long-term borrowings |13 |4 849 343 |- |
|Interest payable |13 |220 683 |763 396 |
|Taxes payable | |31 562 |33 505 |
|Reserve for onerous obligation |12 |12 480 316 |- |
|Other current liabilities | |334 865 |369 299 |
| | |19 319 052 |1 806 438 |
|Total equity and liabilites | |121 278 079 |71 313 491 |
Deputy Chairman of the Board for Economyc and Finance
(Stamp of the United Chemical Company)
Krylova T.N.
(signature)
Chief accountant
Arkabayeva M.A.
(signature)
Consolidated statement of cash flow
for the year ended on December 31, 2014
In thousand KZT Notes 2014 2013
|Cash flow from operaitng activity | | | |
|Locc before taxation | |(1 237 279) |(2 413 963) |
|Adjustment for: | | | |
|Depreciation and amortization |4 |61 206 |44 557 |
|Financial income | |(372 782) |(184 082) |
|Financial costs | |6 189 |- |
|Accrued reserves | |66 543 |107 400 |
|Expenses for reserves for doubrful debts, |4 |1 399 |1 298 |
|depreciation of advances paid and unliquid | | | |
|inventory | | | |
|Losses from disposal of fixed assets | |3 577 |357 |
|Foreign exchange difference | |(170 315) | |
|Income from good buy of additional share in the|8 |(294 460) | |
|“KLPE” LLP | | | |
|Income in (profit)/loss of associated companies| |(5 675) |229 798 |
|and joint ventures | | | |
| | |(1 941 597) |(2 214 635) |
|Change in inventory | |48 617 |(192 388) |
|Change in accounts receivable and other assets | |(36 129) |35 390 |
|Change in deferred borrowings commission | |(83 932) |(355 638) |
|Change in VAT recoverable | |(739 770) |(428 346) |
|Change in taxes recoverable | |(95 158) |- |
|Change in accounts payable | |(49 610) |113 757 |
|Change in taxes payable | |(1 343) |11 781 |
|Change in other current liabilities | |(100 977) |(123 598) |
| | |(2 999 899) |(3 153 677) |
|Paid inocme tax | |(58 482) |(30 394) |
|Received interest | |330 521 |175 983 |
|Paid interests | |(1 243 576) | |
|Net application of funds in operting activity | |(3 971 436) |(3 008 088) |
|Cash flow from investment activity | | | |
|Acquisition of fixed assets | |(13 027 353) |(3 513 140) |
|Advances paid for fixed assets | |(7 928 806) |- |
|Acquisiton of intabgile assets | |(18 666) |(35 849) |
|Acqusition of addiitonal participatory interest|8 |(12 112 540) | |
|in the “KLPE” LLP | | | |
|Acquisiton of subsidiary organiztions | |(840) | |
|Contributions to charter capital of associated | |(74 243) |(16 557 554) |
|and joint ventures | | | |
|Disposal of fixed assets | |5 154 |2 406 |
|Distributing of bank deposits | |(3 086 517) |(3 385 846) |
|Bank deposit taking | |3 726 355 | |
|Restricted cash |13 |3 258 631 |(3 574 256) |
|Repayment of loans | |- |1 300 000 |
|Acquisiton of other long-term assets | |(211 857) |(29 766) |
|Net application of funds in investment activity| |(29 470 682) |(25 794 005) |
|Cash flow from financial activity | | | |
|COnstributions to charter capital |11 |50 742 660 |21 937 233 |
|Other payments to non-controlling owners | |- |(638 263) |
|Taking-in of bank loan | |4 523 840 |3 314 736 |
|Receipt from non-conttrolling interest | |88 000 |19 770 |
|Net cash inflow from financial activity | |55 354 600 |24 633 477 |
|Net increase in cash and cash equivalents | |21 912 382 |(4 168 616) |
|Cash and cash equivalents as at beginning of |10 |5 042 674 |9 211 290 |
|year | | | |
|Cash and cash equivalents as at the end of the |10 |26 955 056 |5 042 674 |
|year | | | |
Material non-cash transactions – additional disclosure
The following non-cash disclosure were eliminated from the consolidated statement on cash flow:
- in 2014 the Company has recognized the reserve for onerous obligation to amount of 16 881 185 thousand KZTas other transactions with the Shareholder. On account of this reserve the Group also reduced the balance sheet value of capital work in progress to amount of 4 400 869 thousand KZT. 100% subsidiary of the Company- “”MC SEZ Chemical Park taraz” JSC deals with implementatino of this project (Notes 16, 12).
- During 2014 the Group has been capitalized the interest expense as part of capital work in progress to amount of 1 286 799 thousand KZT (2013: 708 282 thousand KZT) (Note 6).
Deputy Chairman of the Board for Economyc and Finance
(Stamp of the United Chemical Company)
Krylova T.N.
(signature)
Chief accountant
Arkabayeva M.A.
(signature)
Consolidated statement on changes in equity
for the year ended on December 31, 2014
|Falls within controlling company |
In thousand KZT |Notes |Charter capital |Additional paid-in capital |Accumulated loss |Total |Non-controlling interest |Total equity | |As of January 1, 2013 | |40 428 029 |4 164 225 |(3 684 634) |40 907 620 |1 906 204 |42 813 824 | |Net loss for the year | |- |- |(2 402 578) |(2 402 578) |(41 779) |(2 444 357) | |Total loss for the year | |- |- |(2 402 578) |(2 402 578) |(41 779) |(2 444 357) | |Contributions to the Charter capital |11 |21 937 233 |- |- |21 937 233 |- |21 937 233 | |Non-controlling interest | |- |- |- |- |(1 245 800) |(1 245 800) | |As of December 31, 2013 | |62 365 262 |4 164 225 |(6 087 212) |60 442 275 |618 625 |61 060 900 | |Net loss for the year | |- |- |(1 269 759) |(1 269 759) |(26 002) |(1 295 761) | |Total loss for the year | |- |- |(1 269 759) |(1 269 759) |(26 002) |(1 295 761) | |Contributions to the Charter capital |11 |50 742 660 |- |- |50 742 660 |88 000 |50 830 660 | |Other transactions with the Shareholder |12 |- |- |(16 881 185) |(16 881 185) |- |(16 881 185) | |As of December 31, 2014 | |113 107 922 |4 164 225 |(24 238 156) |93 033 991 |680 623 |93 714 614 | |
Deputy Chairman of the Board for Economyc and Finance
(Stamp of the United Chemical Company)
Krylova T.N.
(signature)
Chief accountant
Arkabayeva M.A.
(signature)
-----------------------
[1] GCO Global Chemicals Outlook
[2] According to data of the Committee for statistics of MNE of RK
-----------------------
CFD
DDIP
ITS
DEP
DMPH
DOPLC
DMOCA
ARD
CDD
LD
DTD
DMISCA
Managing directors-Directors of Management board
Managing director
Managing Director-member of the board
Managing Director-member of the board
Deputy Chairman of the Board
Deputy Chairman of the Board
Supervisory board Secretary
Management Board
Chairman of the Management Board
Risk management service
Supervisory board
Sole participant
Audit Commission
2014
2103
2012
Mln KZT
UCC assets value (mln KZT)
Number of UCC subsidiaries and affiliates
2014
2013
2012
Subsidiaries and affiliates
Management board
Supervisory board
Audit commission
Sole participant
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