“Economic” category

The Company's contribution to the country's economy

Economic performance of the Company is shown in created and distributed economic value table.

The created economic value present the main sources of the Company's income, namely, income from electricity production, transmission and sale, as well as from the sale of coal and obtained remuneration.

The created value is distributed between suppliers and contractors, employees of the Company, shareholders and lenders, the state, as well as local communities.

According to results of 2021, the created economic value amounted to 466 bln tenge and the distributed economic value amounted to 364 bln tenge, as a result, the undistributed economic value amounted to 102 bln tenge. According to the approved Development Plan for 2022–2026, it is planned to increase the created and distributed economic value.

INNOVATION ACTIVITY

Reduction of net carbon footprint is among strategic goals of “Samruk-Energy” JSC Development Strategy for 2022–2031.

To accomplish this strategic goal, the Company is working on scientific developments, establishing close relationships with research community and increasing the practical effect of scientific developments, including support for research work by domestic specialists. A considerable attention is paid to commercialization of R&D to obtain timely economic benefits from scientific developments.

Nowadays, gas utilization during firing coal at power plants is becoming relevant in Kazakhstan because of:

• Kazakhstan's obligations under the Paris Climate Agreement;
• tightening of environmental legislation of the Republic of Kazakhstan, including the risk of increasing payments for emissions in the event of refusal to switch to integrated environmental permits;
• a global trend towards reduction of financing for projects that did nothing to "greening" of the economy;
• strategic plans for development and transition to a "green economy": the doctrine (strategy) of achieving carbon neutrality of the Republic of Kazakhstan until 2060.

In this regard, the Company has launched research and development work to study the possibility of applying carbon capture and storage technologies at coal-fired power plants, gasification, and production of synthesis gas for coal chemistry.

The project aims to study existing and promising technologies for CO₂ capturing from flue gases of thermal power plants, to analyze the possibility of their integration into current technological schemes and disposal of captured CO₂ including an assessment of most promising technologies adapted to conditions of Kazakhstan, to conduct experiments for the production of synthesis gas from CO₂ and for the production of coal chemistry products.

The project is planned to implemented within 2022–2024.

The Company has another important initiative – the project designed to improve the technical and economic performance of firing high-ash coal at the Company's thermal power plants. For the purpose of this project, the possibility of introducing the technology of a system of fuel oil free startup of boiler units (plasma-fuel system) has been explored.

The implementation of the project will enable to address the tasks below:

• stabilization of combustion of a pulverized coal torch at reduced loads of boiler units;
• exclusion of fuel oil consumption during firing of high-ash coals;
• elimination of negative consequences of co-firing of coal and fuel oil in one furnace volume, which provides improved performance and reliability of boilers.

This technology has been successfully applied at power units from 200 to 1,000 MW in the People's Republic of China, the Russian Federation, Indonesia, etc.

The project implementation was approved by the resolution of “Samruk-Energy” JSC Board of Directors at the meeting on 31 May 2021.

“Energy efficiency” Aspect

Energy

The Company's energy policy focuses on the path towards energy conservation and efficiency that contributes to energy consumption and reduces environmental impact.

The company annually consolidates and analyzes data on energy consumption and key energy efficiency indicators across “Samruk-Energy” JSC group of companies, compares it with previous periods, and identifies opportunities for improvement.

The Company's energy conservation and energy efficiency activities rely on the methodology of the international standard ISO 50001 "Energy Management Systems".

There is Energy Conservation and Energy Efficiency Improvement Program for 2015–2025 at the Company. The Program is a fundamental document for planning and implementing activities in energy conservation and energy efficiency.

The Program aims to develop measures for effective and economically expedient use of fuel and energy resources.

The decrease in energy intensity of the gross commodity product across “Samruk-Energy” JSC group by 10.5% in 2025 compared to the base year 2014 is the outcome the Company expects.

Target instruments of the Program:

• setting target indicators and indicators of energy conservation and energy efficiency improvement across “Samruk-Energy” JSC;
• regularly control over the achievement of indicators established by conducting an energy-economic analysis in accordance with the developed methodology for calculating key indicators of energy efficiency;
• development, implementation and improvement of the energy management system at “Samruk-Energy” JSC group;
• implementation of organizational and technical activities focusing on energy conservation and energy efficiency improvement in accordance with the approved action plans for energy conservation and energy efficiency improvement;
• building an integrated system for automated accounting of energy resources consumption.

As part of performed work on energy conservation and energy efficiency, 63 activities were taken over the past year to reduce the consumption of fuel and energy resources, which enabled to save 523 thousand tons of standard fuel across “Samruk-Energy” JSC group.

The total energy consumption has increased in comparison with the past year and was 15.7 mln GJ, however at the same time the decrease is observed in comparison with the base 2014 year (17.7 mln GJ).

Consumption within the organization

Increased consumption of energy and fuel relates to the growth of electricity production at “Ekibastuz SDPP-1” LLP and “SDPP-2”
JSC, an increase in heat output at “APP” JSC.

In the reporting year, compared to the previous year, the total energy consumption from renewable energy sources increased to 4.8 mln GJ. In general, over the years, there is a positive trend towards an increase in energy consumption from RES, which is driven by the growth of RES share in the country’s electricity production.

ASPECT “MATERIALS USED”

The products of “Samruk-Energy” JSC are thermal and electric energy, as well as thermal coal.

The regulation of this industry is carried out by state bodies represented by the ME of the Republic of Kazakhstan and the Committee.

The company does not carry out any marketing communications regarding the manufactured product, including advertising and promotion.

List of materials used in our facilities in the manufacture of products.

In the production of electricity:

In the production of heat:

For auxiliary needs in the production of both types of products:

 “Samruk-Energy” JSC products are heat and electricity, as well as thermal coal, respectively, the requirements for environmental labeling and packaging are not applicable to manufactured products.

Electricity and thermal energy were produced using fossil fuels. Chemical reactions occurring during the combustion of coal, gas and fuel oil lead to the natural formation of a number of substances, which, in the absence of appropriate control, can lead to a loss of the required quality of the natural environment. For such control, Kazakhstan has a system of state regulation in the form of environmental and natural resource law (for more details, see the Environmental Category section).

In 2021, there were no cases of Company non-compliance with the requirements of the current legislation regarding the impact of products on health and safety.

Contribution of JSC "Samruk-Energy" to the development of "green" economy

The company regularly observes sustainable development principles and meet the requirements of standards in sustainability. Green financing mechanism is one of the key drivers that ensure the implementation of the ESG principles.

Green finance is a financial instrument aimed at the implementation of environmentally friendly, energy efficient and low carbon projects. green bonds, concessional lending, subsidies for green projects are main instruments of green financing. These financial instruments are essential for development of green projects. As of today, the required legal framework has been created in Kazakhstan for the issuance of green finance instruments, including the introduction of a taxonomy of green projects, a legislative definition of green finance, including green bonds, green loans, and other financial tools.

The Company developed a green finance policy throughout the 2021, that establishes the principles in sustainable finance to ensure transparency in the processes of attracting investments through green finance instruments. In accordance with the policy, the Company adheres to the Green Bonds Principles (GBP) and Green Loan Principles (GLP), designed for use by all participants in the green lending market, for maintaining the flexibility of loan products and maintaining the integrity of green lending market as it evolves.

The Company made a debut issue of "green" bonds in the amount of 18.4 bn tenge on the stock exchange of the Astana International Financial Center – Astana International Exchange in November 2021. Proceeds obtained from the placement of the bonds were used to finance green eligible projects that comply GBP and GLP. The Company received an independent opinion on the compliance of bonds with the green bonds’ principles (Second Party Opinion) during the issue of green bonds by the Company.

Financial aspects and other risks and opportunities for the business of "Samruk-Energy" JSC associated with climate change

Сlimate change issue has been discussed across the globe for decades. The United Nations Framework Convention on Climate Change (UNFCCC), signed in 1992 by more than 180 countries, confirms the concern of the global community on this issue.

The key features of this stage are decarbonization, diversification and digitalization aimed at solving the global challenges facing the world community in providing economies and populations with affordable energy resources, strengthening global energy security, and reducing human impact on the environment.

At the same time, bearing in mind that the energy sector is the largest source of emissions in Kazakhstan, producing about 80% of all greenhouse gas emissions in the country, and the share of “Samruk-Energy” JSC is 9% of total emissions, addressing the issue of the Company’s assets decarbonization today is a challenge. When developing the Company's Energy Transition Program, it is essential to strike a balance between achieving the goal of reducing the carbon footprint, ensuring reliable supplies of electricity to consumers at affordable prices, as well as maintaining jobs in the regions where the Company operates.

Based on expert opinion, “Samruk-Energy” JSC considers climate risk in setting the context of the organization and SWOT analysis when developing an energy transition strategy. To be fair, it should be noted that global decarbonization trends, largely set by developed countries as opportunities, entail more risks and challenges for emerging markets. On the one hand, a delay in following global development trends leads to social costs associated with anthropogenic impact on the environment and limited access to up-to-date technologies and financial resources, but on the other hand, forcing the transition can result in a loss of competitiveness of the economy, deindustrialization, and an increase in electricity prices, job cuts in traditional industries, not to mention the issues associated with the need to ensure the reliability of energy supply.

Recognizing the importance of power industry’s influence on the environment, “Samruk-Energy” JSC supports the government’s endeavors to achieve carbon neutrality and at this stage sets itself the task of maintaining the share of conventional generation, retrofit of existing plants and minimizing the impact on the environment by implementing renewable energy projects, introducing the best available technologies, as well as the development of alternative energy.

The main directions and goals to reduce the carbon intensity of the Company's processes and products are specified in the long-term Development Strategy, the Company's Environmental Policy, and the Energy Transition Program of “Samruk-Energy” JSC.

SWOT-analysis of “Samruk-Energy” JSC standing in the context of climate change issue

“Samruk-Energy” JSC Energy Transition Program for 2022–2060

The main drivers of the energy transition have been global trends in combating climate change, including:

1. The Paris Agreement, adopted in December 2015 at the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), designed to give an incentive to states around the world to reduce greenhouse gas emissions and thereby contribute to curbing the rise in the temperature of the earth's atmosphere not higher than 2℃.
2. International and carbon regulation and the introduction of a cross-border carbon mechanism "Carbon Border Adjustment Mechanism" (CBAM) in the EU under the "European Green Deal". This mechanism will have significant implications for EU trading partners, including Kazakhstan. If successfully implemented, after the initial introduction on January 1, 2023, CBAM will be the first example of the introduction of border charges for greenhouse gas emissions.
3. Tightening of the RK Environmental Code from July 1, 2021, under which the requirements for greenhouse gas emissions into the atmosphere were strengthened and the system of emissions trading of the Republic of Kazakhstan was introduced.
4. The next annual Address to the people of Kazakhstan dated September 1, 2021, in which the Head of State Qassym-Zhomart Toqayev noted the global trend towards the greening of industry and the economy and set the goal of achieving carbon neutrality by 2060.
5. Commitment to the 17 global sustainable development goals of the United Nations, including those that address combating climate change and protecting the environment.

"Samruk-Energy" JSC includes three large energy generating organizations, SDPP-1, SDPP-2 and APP, which produce electricity using traditional fuel (gas, coal), as well as one of the largest enterprises in the world that mines open-pit coal – Bogatyr Komir.

Coal is a strategic resource, the most accessible, inexpensive and, accordingly, the most demanded source of energy. The country's coal industry ensures the generation of about 70% of electricity in Kazakhstan, and completely satisfies the fuel needs of the population and the domestic sector.

In the coming decades, traditional energy sources will still play an important role in the country's energy system. Given the prevailing share of traditional generation in the Company's assets, reducing CO² emissions from the use of fossil fuels will be a key area of the Company's activities.

Recognizing the importance of power industry’s impact on the environment, “Samruk-Energy” JSC supports the government endeavors in achieving carbon neutrality and at this stage is committed to maintaining the share of conventional generation, upgrading of existing plants and reducing carbon footprint by implementing renewable energy projects, deploying the best available technologies, as the development of alternative energy.

As of today, the Company has developed the Energy transition program. The implementation of “Samruk-Energy” JSC Energy Transition Prog will require expanding the competences of the concerned ministries and the expert community in coordinating and substantiating decisions in the field of environmental policy of the state, which are of a long-term nature. The energy transition program has not only domestic but also international significance.

In the future, the Program should be supported by many concrete decisions and actions. Now, the main directions of development have been formed, considering the scenarios. At the same time, the development of technologies, new eco-trends, and the receipt of new information on changes in legislation (calculations of carbon offsets, cross-border carbon tax, taxonomy, etc.) will contribute to updating the Program in the future.