REPORT for 2015 year

2.7. Key performance indicators system

When summing up of the results of production and commercial activity of Transneft PJSC in 2015 year, a system of key performance indicators (hereinafter - KPI system), approved by the Transneft PJSC Board of Directors on 24.12.2014 year (Minutes № 27), is used. Acheivement of indicators included in the KPI system, directly affects the remuneration of employees of Transneft PJSC, including the remuneration of the sole executive body (detailed data are given in Appendix № 11).

Content of KPI system indicators for 2015 year

Indicator

Value

1.

Oil and oil products trunk pipelines leak rate

accidents/1000 km per a year

2.

Reduction of specific emissions of pollutants into the atmosphere during oil and oil products transportation through the trunk pipelines

5,0 %

3.

The reduction in comparable terms of specific energy consumption used for the transportation of oil through the trunk pipelines

2,0 %

4.

ПIncrease of operational efficiency in the amount of

5,9 %

5.

Unit operating costs for oil transportation

17,0 RUR / 100 tkm

6.

Volume of the approved investment programme  financing

137 033,3 mln. RUR (incl. VAT)

7.

Total Debt to EBITDA ratio

less 2,5

8.

A comprehensive indicator of KPI achievement specified by the shareholder, the President or the Government of the Russian Federation is complex and its value is determined basis on the values of the indicators  included into its content

100%

8.1

ROE

7,49 %;

8.2

Dividends volume

planned value is the value contained in the Resolution   of the General Meeting of Shareholders of Transneft PJSC dated 30.06.2015 year №541-p, according to which the amount of dividends for 2014 year amounted to 2 946 mln RUR

8.3

Investment expenditures reduction volume

5 275,3 mln RUR

8.4

Operation costs reduction per cent

3,2 %

8.5

Share of direct purchases from the subjects of small and medium business

6,0%

8.6

R&D and investment projects volume of financing 
(in percentage of earning)

1,4%

The degree of achievement of all of these key performance indicators is estimated at 100% due to better results in comparison with the established target values. The exception is the indicator “The amount of funding of the approved Investment Programme”, a negative deviation of which is at a rate of - 0.2% is not significant.

Fulfillment of the plan for a number of KPIs following the results of 2015 year is due to both the increase in the volume of oil and oil products transportation in accordance with the received requests of consumers of the Company services - oil producing and oil refining companies, so well as due to implementation by the Company of the package plan for improvement of production activities, increase of productivity, energy efficiency, reduction of operating and capital costs, which are often implemented ahead of the planned schedule.

When considering by the Board of Directors of the issue on the establishment of target values of key performance indicators of economic activity of Transneft PJSC for the next 2016 year the KPI system was changed pursuant to paragraph 4 of the List of orders of the President of the Russian Federation dated 07.05.2013 year № Pr-1474 year (Directive of the Government of the Russian Federation dated 04.25.2014 № 2579p-P13) and in accordance with Minutes of the meeting with the Deputy Minister of the Russian Federation A.V. Dvorkovich dated 11.17.2014 year № AD-P9-181pr, as well as in accordance with the “Recommendations on the key performance indicators of innovation activity included in long-term development programmes, and the system of key performance indicators used to motivate the management of state companies”, attached to the orders of the Deputy Prime Minister of the Russian Federation A.V. Dvorkovich dated 15.09.2015 №AD-P36-6296, and other received in 2015 year  orders of the Federal bodies of executive power of the Russian Federation.

The advanced “System of key performance indicators of economic activity of Transneft PJSC and the target values of KPIs for 2016 year were approved by the Transneft PJSC Board of Directors on 23.12.2015 year (Minutes № 32).

An improved set of indicators of the KPI system for 2016 year

Indicator

Value

1.

Reliability, environmental and industrial safety score of trunk pipelines system

100 %

1.1

Trunk pipeline leak rate

0,142 accidents/1000 km per a year

1.2

Reduction of specific emissions of pollutants into the atmosphere during oil and oil products transportation through the trunk pipelines

1 %

2.

Operating activity integrating efficiency indicator

100 %

2.1

Percentage of operating costs reductions

2 %

2.2

The reduction in comparable terms of specific energy consumption used for the transportation of oil through the trunk pipelines

1 %;

2.3

Increase of operational efficiency within oil and oil products transportation

1,7 %

3.

Integrating efficiency indicator of Investment programme  of development, technical upgrading and revamping of trunk pipelines

100%

3.1

Execution of the Development programme  financing plan

326 313 mln. RUR (incl. VAT)

3.2

Execution of the plan of capital costs development under the Development programme

318 047 mln RUR (w/o VAT)

3.3

Execution of measures on capital costs reduction under the Development programme

8 588 mln RUR

3.4

Execution of the terms of the investment projects implementation

4 units

4

Comprehensive performance index of physical volumes of work within the TPD Programme

100%

4.1

Execution of the plan on substitution of the pipe on the linear par

1 482 km

4.2

Execution of the plan on tanks construction and revamping

63 units

5

Integrating efficiency indicator of  innovative measures

100%

5.1

Volume of financing of the innovative projects, including R&D, at its own expense in percentage to total Transneft PJSC earnings for the oil transportation services  (according to RAS)

1,4 %

5.2

The number of security documents according to the results of intellectual activity obtained for the accounting period and the previous two years

90 pcs.

5.3

The combined effects of the internal commercialization of innovative projects, including R & D, for the accounting period and the previous two years in percentage to total Transneft PJSC earnings for the services on oil transportation (according to RAS)

1,45 %

5.4

Quality indicator of realized Investment development programme (in the year of its indicator of Investment development programme implementation (in subsequent years)

70 %

5.5

Total Debt to EBITDA ratio

less 2,5

6

A comprehensive indicator of KPI achievement specified by the shareholder, the President or the Government of the Russian Federation is complex and its value is determined basis on the values of the indicators  included into its content

100%

6.1

ROIC

7 %

6.2

Dividends volume

2 934 mln RUR

6.3

Share of direct purchases from the subjects of small and medium-sized enterprises

10 %