Unipro PJSC
Annual Report for 2020

Risk management

Corporate risk management system

Effective risk management is one of the most important prerequisites for sustainability of Unipro PJSC business.

The current integrated risk management system is aimed at the timely identification of risks, as well as the implementation of measures to manage them. The Company regularly reviews the planning, controlling and reporting processes in order to improve the efficiency and predictability of its financial position.

In order to reduce the negative impact of potential hazards and to use favourable opportunities, the Corporate Risk Management System (CRMS) operates at Unipro PJSC.

The key elements of the risk management system are the Company’s strategy, internal regulations, including the Regulations on CRMS, controlling, planning, internal control and audit system, risks and opportunities reports, as well as operation of the Risk and Finance Committee.

Scheduled reports are provided on a quarterly basis. Moreover, the Company establishes a procedure for compiling and reviewing urgent reports in case of emerging material risks.

Reports on the most material risks and opportunities are laid before Unipro PJSC Audit Committee and the Board of Directors for consideration. At specific requests, materials are proposed for close scrutiny by the Audit Committee of the Board of Directors of the Company that provide detailed understanding of assessment procedures and methods of managing the most material risks, such as the aggregated risk of business interruption, COD delay risks and risks of increased draft budget of Berezovskaya GRES Power Unit No. 3 reconstruction and repair project, the Company liquidity crisis management.

At Unipro PJSC, the effectiveness of CRMS is assessed as follows:

  • the management informs annually the Board of Directors on the results achieved in the field of risk management in the framework of corporate reports;
  • twice a year, the Risk and Finance Committee evaluates the effectiveness of the CRMS operation in terms of involvement in the process of all relevant functional and legal structures of the Company;
  • an independent audit of the risk management system is conducted annually.

The Risk and Finance Committee of Unipro PJSC comprises heads and representatives of the key business units who are in charge of operational, legal and financial activities.

The Committee ensures implementation of the credit and market risks management strategy, prepares recommendations for the Company’s executive bodies on risk management, reviews and approves risks and probabilities reportsм

Performance of the risk management system in 2020

Amidst the spread of COVID-19, Unipro PJSC paid special attention to development, implementation and progress monitoring of activities mitigating the adverse impact of the pandemic. The meetings of Central and Local Crisis Management Groups with the involvement of the Company Management were held on a regular basis. Right from the very beginning of the pandemic outbreak, the crisis liquidity management plan was developed on the basis of different risk scenarios and potential subsequent decrease of the Company cash flow. The risk owners and respective functions use a wide range of preventive measures to counter the spread of coronavirus infection, including remote working and various sanitary and epidemiological controls, such as continuous body temperature monitoring of employees, face mask requirements, social distancing, disinfection, and Covid tests. In the event that the epidemiologic situation deteriorates significantly, each branch has developed plans for emergency actions aimed at switching to an isolated mode of the plant operation: The Company’s agenda related to mitigation of adverse impact of the pandemic is being continually pushed at the platforms of the Market Council Association, in the Ministry of Energy of Russia and in the Ministry of Economic Development of the Russian Federation

In the reference period, the Risk and Finance Committee also paid attention to monitoring the risks of the project to restore Power Unit No.3 of Berezovskaya GRES, and to the progress of the fire hazard reduction recommendations issued during (Uni)performance inspections.

In 2020, the Treasury Operations and Risk Management Department focused on organizing the process to identify and assess risks as well as develop corresponding preventive measures with regard to projects aimed to implement the thermal power plant modernization program, update the Insurance Policies for construction and installation works under the Berezovskaya GRES Power Unit No. 3 recovery project, and consolidate the reports on risks associated with the spread of COVID-19 infection.

The insurance coverage against the damage to property and losses caused by business interruption was resumed for 2021, and the insurance coverage with respect to contracted works during the repairs and technical refurbishment was extended. In addition, additional insurance coverage was purchased for contract works carried out as part of modernization projects.

The Company Management (Deputy General Directors, Directors, Assistant General Directors, and Branch Directors) are the risk portfolio owners and are responsible for risk identification and management within the area of their competence.

With the existing risk management system, the Company ensures that the risks are timely detected, estimated, managed, and controlled.

Besides, some risks may still emerge that are currently unknown or insignificant. These risks may negatively affect the future performance of Unipro PJSC.

Plans for 2021

In the coming year Unipro PJSC will continue its continuous optimization and improvement of the CRMS. The persistent task is to maintain the risk management function in terms of risk owners’ influence on the quality of risk management processes at a high level. In 2021, special focus will be given to implementation of the Environmental, Social and Governance (ESG) Risk Management Policy).

Key risks102-33

Most significant net risks of Unipro PJSC at year end 2020

Report on Unipro PJSC Risk Management in 2020

Risk materiality level at year end 2020

Assessment of risk materiality

Major risks

Significant risks

Material risks

Dynamics of risk materiality in 2020

No changes



Risk category

Risk subcategory and preventive measures

Assessment of materiality and risks dynamics

Market risks

Commodity risks

The main sector exposed to the commodity/market risk is the day-ahead market (DAM), where pricing is based on an arm’s length principle. Due to significant excess capacities formed in the market as a result of stagnation of power consumption and large-scale commissioning of capacities by generators under investment programmes, the competition between generators and pressure on the free price are increasing.

In the context of the COVID-19 coronavirus pandemic and economic downturn throughout the world, commodity/market risks of the Company may increase. A decrease in the power consumption will adversely affect free price levels in the DAM, the power plants load and the yield of business


The Company minimises the foreign exchange risk by hedging future liabilities in foreign currency

Credit risks

Unipro PJSC manages credit risks by assessing fair practices of counterparties, by setting and controlling limits on transactions with financial institutions

The majority of the Company’s counterparties under energy and capacity wholesale contracts are regional energy retail companies that do not consume electricity but resell it to end consumers and, therefore, depend on the ability or willing of such end consumers to pay for the power supplied to them.

The economic downturn that hit Russia in the context of COVID-19 pandemic did not affect the amount of bad debt to the Company in 2020. Nevertheless, the worsening of payment discipline and decline in payment for power and heat supply services are observed in retail markets, including at housing and community facilities and in budgetary organisations. The non-payment situation may worsen in many areas of the economics, including in the power industry, in the near future. Failures to pay or delays in payment for the supplied power and capacity may affect the Company’s revenue level and performance

Financial risks

Tax risks

Tax risks of the Company are caused by:

  • reformation of the state oversight function;
  • invariability of business tax conditions and length of the investment planning horizon;
  • state readiness to support business initiatives by means of legal tax tools;
  • gaps and contradictions in the tax legislation.

Tax risks affect the Company activities to the same extent as those of any other players in the wholesale electricity market, which is typical for conducting business in the Russian Federation.

The Company closely follows-up on trends in changes to the tax legislation and law-enforcement practices related to tax cases in order to timely incorporate these changes into its tax obligations

Operational risks

Asset-related operational risks

Business interruption risks

This risk is caused by any factors that can lead to business interruption. Meanwhile, this risk includes both a direct stoppage in production resulting from physical damage of the equipment, and a consequential business interruption resulting from material loss at an outside facility that does not belong to the Company, and is not maintained or managed thereby.

The main factors when assessing the possible losses include turbine oil catching fire, damage of the turbine wheelspace, explosion of the boiler at ignition, fuel oil spill fire in the boiler room, explosion in the chemical water treatment ammonia storage, washout of the water gathering pond dam, etc

To reduce probability of negative events, the Company undertakes the following measures:

  • establishing a four-tier system of industrial control and industrial safety management;
  • carrying out equipment maintenance in line with a strict schedule;
  • ongoing monitoring of the state of waterworks;
  • high-quality training of the personnel (especially the employees operating hazardous facilities), assessment of their knowledge, special training (technical workshops, simulator training), advanced training, and analysis of their reliability based on investigations of incidents and near misses;
  • ensuring systematic work with the personnel to increase their reliability manifesting itself in the absence or minimisation of consequences of any accidents/incidents resulting from human errors;
  • performing close technical investigations of accidents, process incidents and significant defects with the identification of system-level (root) causes and development of accident prevention measures using various tools, including the Cause Tree and BSCAT methodology;
  • organising a system to monitor the implementation of the accident prevention measures developed based on the investigation results, integrating them in corporate procedures, maintenance and repair documentation, including them, if necessary, in the financial programmes of the Company, and ensuring their use with the similar equipment at all power plants of the Company;
  • implementing a risk-oriented approach to planning targeted measures improving the equipment reliability and implemented as part of repair and modernisation operations by generating risk maps for each equipment group, analysing previous and forecasting future forced unavailability;
  • calculating and analysing the reliability indicators for equipment groups to forecast its forced unavailability and ensure that investments are used to minimise such forced unavailability;
  • implementing the recommendations of risk engineers from insurance companies (following the audits) that are based on the best practices in improving the reliability and fire safety of equipment, buildings and structures;
  • identifying and evaluating hazards and threats using the BowTie methodology, developing safeguards;
  • ensuring thorough supervision over the maintenance personnel in terms of their strict compliance with the procedures for the maintenance and technical acceptance of repaired equipment by the customer’s representatives;
  • using a system for periodic assessment of the technical condition of equipment, calculation of the technical condition index in accordance with the industry procedure and its consideration when planning technical impacts;
  • involving specialised contractors to assist with technical condition diagnostics and assessment;
  • conducting on-site inspections to assess equipment maintenance readiness and assess the completed repairs;
  • analysing changes in the equipment performance indicators and cost/ performance ratios;
  • implementation of a comprehensive programme for the equipment replacement and per-unit reconditioning;
  • implementation of a comprehensive programme for advanced training of the production personnel;
  • standardising repairs, including by developing maintenance data sheets and maintenance workflow specifications;
  • providing employees with incentives intended to reduce the equipment damage rate and forced unavailability (including targeted reduction of the bonus rate depending on the contribution of specific employees to the forced unavailability value);
  • insuring business interruptions and property damage.

Risk of business interruption due to the spread of coronavirus infection COVID-19

One of the major risks in the Russian electric power industry associated with the spread of coronavirus infection is force majeure related to hindered supply of equipment and components, as well as the work of personnel against the restrictive measures. These facts impede both repair works and implementation of investment projects, which, along with the likely deterioration of the financial situation, may lead to a cut of investment programs by energy companies.

The production risks related to the pandemic can be attributed to the following areas:

  • limitation of available capacity due to the risk of quitting by a critical number of operating staff who directly operate the equipment due to a disease or quarantine;
  • limitation of available capacity when reaching the ultimate life, an individual resource due to a delay in the supply of components and spare parts for maintenance, repairs, of extension of the resource and keeping the equipment operational due to the shutdown of manufacturers, lack of domestic substitutes (for foreign equipment), closure of borders and other logistic issues;
  • limitation of available capacity when reaching the ultimate life, an individual resource due to the fact that it is impossible to perform technical diagnostics, industrial safety expert examinations, repairs and maintenance due to unavailability of experts, work restrictions, and financial difficulties of specialpurpose organizations, as well as without foreign domain experts for equipment diagnostics and repair;
  • limitation of available capacity in case of failures in the supply of operational goods (chemicals, ion-exchange resins, chemical reagents, components of devices for ongoing analytical control of the flow process, etc.).

Steps taken in these areas are as follows:

1. To ensure the protection of the operating staff, all branches have taken steps to prevent the spread of the COVID-19 coronavirus infection that include:

  • arranging for remote work of the maximum possible number of employees not involved in the equipment control;
  • additional public health measures aimed at lowering contacts among employees of various shifts and the same shift;
  • monitoring the health condition of the staff when they access the plant;
  • infection testing in employees who arrive after vacations and business trips, seconded personnel of the Company and contractors;
  • special procedure for access of repair crews, including contractors;
  • more frequent cleaning and disinfection of workplaces by both single purpose companies and the plant staff;
  • use of special personal protective equipment;
  • arranging for the places for staff meals and the manner in which the staff can take a shower that ensure the required social distance;
  • organisation of regular testing for infection among the employees who do not work remotely, as well as contact persons;
  • mass vaccination of employees who have given their consent.

When a significant number of personnel is absent on sick leave or in connection with quarantine, a three-shift work was organised instead of a four-shift mode.

In the event that the epidemiologic situation deteriorates significantly, each branch has developed plans for emergency actions aimed at switching to an isolated mode of the plant operation:

  • lists have been made of the staff who will live at the plant or in detached residential facilities to ensure the independent operation of the plant,
  • the need has been determined for additional material and technical resources and services, including those for satisfying the daily living needs of the operation staff, their procurement has been ensured,
  • the organisational procedure for the plant interaction with third-party entities, the regime for the supply of materials, the provision of services and the performance of works in its territory have been determined.

2. As regards the risk factors related to a delay in the supply of components for repair, potentially problem-plagued nodes are being identified for their replacement. The possibility of agreeing upon the extension of operation with the manufacturers and regime restrictions is being studied. No critical points were identified as of the end of 2020.

3. As regards arrangements for foreign experts arriving in the Russian Federation to make the repair, the issue is being monitored whether or not the contractual obligations of the contractors engaging foreign experts may be performed. No critical points were identified as of the end of 2020. As regards the industrial safety expert examination and technical diagnostics services rendered by special-purpose organizations, there is preventive control of delay risks in place at each stage of the service rendering, the results of which are used to decide on the need for the contractors to mobilize extra personnel. In 2020, all scheduled opinions on extending the service life of equipment and buildings and structures were received without significant delays.

4. As regards the operational goods, their domestic substitutes are being studied, the sufficiency of emergency stock is being checked, the consumption of materials in the period of logistic and other restrictions caused by the pandemic is being streamlined

Asset-related project risks

Risks associated with Berezovskaya GRES Power Unit No. 3 recovery

On 01 February 2016, a fire outbreak occurred in the boiler house of Power Unit 3 at Berezovskaya GRES causing damage to the boiler. The fire was extinguished. Power Unit 3 of Berezovskaya GRES is currently under repair. There is a risk that the actual date of completion of emergency repairs of Berezovskaya GRES Power Unit 3 and the total cost of recovery may differ from the planned ones. The factors of this risk include unscheduled works (design and planning flaws, remedial works, accidents, etc.) and delays by contractors, including due to shortage of workers during implementation of measures to stop the spread of coronavirus infection COVID-19. In order to prevent from and contain COVID-19 outbreaking all the personnel was tested and a number of other measures were implemented. The risk of suspending the works at the construction site in case of an increase in the number of employees with the infection identified is still present.

The Company pays maximum attention to managing this risk through careful monitoring of the repair process. Moreover, the Company partially insured risks related to the project “Recovery of Power Unit No. 3 at Berezovskaya GRES”

Legal risks

One of the risk groups significantly affecting the activities of Unipro PJSC are legal risks, i.e. the risks of adverse effects as a result of any misuse or misunderstanding of legal rules when making or implementing any managerial decisions and carrying out activities, or due to a significant change in any legal rules during the performance of a transaction or managerial action versus the period when such transaction was agreed upon or such managerial decision was made. Generally, such risks are borne by the majority of businesses operating in Russia and affect the Company’s activities to the same extent as those of any other players in the wholesale electricity market. Since the Company does not operate in foreign markets, legal risks are only described with regard to its domestic market.

The Company’s core business activity covers generation and sales of electric and heat power, thus, legal risks related to the regulation of this area may have a significant impact on the Company’s situation.

The enforcement of industry regulatory laws and regulations is aimed at deregulating the electric power and capacity market, transitioning to market pricing of electric power and capacity, creating a legal framework for deregulated electric power and capacity market operations, developing a competitive environment in the sector of electric and heat power generation and sales, creating mechanisms of flexible and balanced tariff regulation that would ensure the availability of products and services for consumers as well as a reasonable level of revenue and return on Company’s investments.

Another important aspect for the Unipro PJSC activities is self-regulation exercised through Association NP Market Council and its activities related to setting detailed rules of operations in the wholesale market for electricity and power, approving regulations and standard contracts regulating such activities.

Taking into account that the government regulation in Russia tends to change frequently and fast, it cannot be guaranteed that the government would not cancel market deregulation and transition to the free market or would suspend reforms of the heat power market, or change – in any way that would be unfavourable for generation companies – its approaches to such reforms, retreat from the balanced approach to various types of tariff regulation in the industry, which, in its turn, may have an adverse impact on the Company’s activities and present a significant legal risk associated with the Company’s core business activity.

Moreover, the independence of the Russian judicial system and the reliability of mechanisms protecting it against any economic, political and social impact have not been tested enough in practice yet. The judicial system suffers the shortage of competent staff and lack of funding, as well as an overload due to a great number of court cases pending. The enforcement of judgment may prove to be difficult.

Frequent reforms to the organisation of courts and amendments to the procedural legislation, including the matters of competence of the court and its jurisdiction over a case, together with changes in approaches applied by courts to any particular category of cases, bring even more incertitude to the judicial system operations. The said factors make it impossible to predict the outcome of court proceedings in Russia and guarantee the efficiency of remedies. Moreover, sometimes claims may be brought to courts or administrative authorities, or a prosecution may be initiated for some political, competitive, administrative or other reasons rather than on legal grounds. Such actions can also be initiated against Unipro PJSC with no guarantee of impartial trial.

The Company carefully and regularly studies changes in judicial practice related to its activities so as to ensure their timely consideration and take them into account in any then-current proceedings held with participation thereof. The judicial practice is analysed at the level of both the Supreme Court of the Russian Federation and commercial courts; the Company also examines the legal position of the Constitutional Court of the Russian Federation on certain law enforcement matters

Political and regulatory risks

The Russian wholesale electricity market regularly undergoes changes, which affects both the structure of the electricity market and relations between its participants.

According to the Company’s estimates, the important industry-specific risk that may significantly affect Unipro PJSC is the risk of change in functioning rules for the electricity and capacity market. Increase in the share of the regulated component in the wholesale market negatively affects the Company’s yield because it reduces the share of more efficient sales at non-regulated (free) prices

Risks insurance management

In Russia, Unipro PJSC has the reputation of a leading insurer, whose experience is exemplary for the market.

The Company forms its insurance coverage according to the corporate Insurance Policy of Uniper SE under the supervision of corporate insurance broker Uniper Risk Consulting GmbH (URC).

The risk insurance function in Uniper SE is responsible for the implementation of measures related to the solution of insurance tasks within the perimeter of the entire Uniper group.

Together with the risk owners (legal entities, including Unipro PJSC) and the responsible functions of the group, the insurance function determines whether it is necessary to use insurance contracts concluded by Uniper, coordinated programmes, regional or individual insurance contracts to cover the risks considered. Insurance tasks are solved taking into account commercial, legal, and regional aspects.

The insurance function is performed by achieving the following goals:

  • provision of centralized access to the insurance markets for Uniper group companies;
  • support of legal entities and functional units in the analysis to identify, study, evaluate and quantify the risks to be insured;
  • development, presentation and provision of riskadequate and cost-effective insurance coverage, e.g. by considering self-insurance options (through deductibles or franchise pooling) and using internal risk carriers (captive insurance companies);
  • ensuring standardized and efficient insurance claims management;
  • ongoing monitoring of insurance markets and effective insurance terms.


Currently, ESG-risks (environmental, social, and governance) are not considered as part of a separate group of risks. However, they are analysed at the risk management level as part of the current strategic risk register

Due to the specific nature of its activities, Unipro pays considerable attention to environmental risks.

Environmental Risk Management Pattern

Threats are traced at the stage of environmental SWOT analysis in branches. Then the environmental risks associated with the traced threats are identified and their significance is assessed according to the following components: occurrence (O), severity (S), and detection (D). Risk priority number (RPN) is calculated on the following formulae: RPN=S*O*D. Risks with RPN≥125 are considered unacceptable.

Risks are optimized through risk treatment by developing preventive measures to the extent that the risk becomes acceptable. The optimisation results and preventive actions are introduced in the environmental risk management program

Risk treatment measures might include:

  • avoiding the risk through the decision not to start or to stop the activity that gives birth to the risk;
  • acceptance or increasing acceptable level of risk for further use of a favourable opportunity;
  • eliminating the source of risk;
  • change in probability or possibility;
  • changing the consequences;
  • increase of detectability of the impact of arising risk (for example, improving monitoring);
  • sharing the risk with another party or with the other parties (including contracts and risk financing);
  • deliberate risk retention (at an acceptable level)