4.4. Key Performance Indicators (KPI) System

The Key Performance Indicators System was used to sum up the results of Transneft’s economic activities in 2019The KPI system of Transneft was approved by the Board of Directors of Transneft on 30 November 2016 (Minutes No. 23).. The planned KPI values for 2019 had been approved by the Board of DirectorsResoltuion of the Transneft Board of Directors dated 27 December 2018 (Minutes No. 22).. The final assessment of all key performance indicators of Transneft’s economic activity at the end of 2019 is 100% (at the end of 2018, it was 100%).

Planned KPIs of Transneft for 2019 and their Achievement Results
KPI System in 2019 Plan for 2019 Execution status in 2019
Integrated indicator of trunk pipeline system reliability, environmental and industrial safety 100% Achieved
Specific trunk pipelines accident rate 0.072 emergency situations per 1,000 km of trunk pipelines Achieved
Reduction of specific air pollutant emissions during oil and petroleum products transportation via trunk pipelines 1% Achieved
Integrated operational activity efficiency indicator 100% Achieved
Operating expenses reduction percentage 2% Achieved
Reduction of specific electricity consumption during oil transportation over trunk pipelines under comparable conditions 0.5% Achieved
Raising labour productivity in oil and petroleum products transportation 2% Achieved
Integrated indicator of investment activities efficiency under the Programme of Trunk Pipeline Facilities Development, Technical Upgrading and Revamping 100% Achieved
Execution of the Development Programme financing plan 276,626 RUB mln Achieved
Execution of the Capital Investments Use Plan envisaged in the Development Programme 232,356 RUB mln Achieved
Execution of the Action Plan for Reduction of Capital Costs within the Development Programme 3,804 RUB mln Achieved
Keeping investment project deadlines 4 units AchievedOf the projects included in the KPI plan, the implementation of the Revamping Oil Trunk Pipelines for Transportation of Oil to Refineries in Krasnodar Territory project was not completed in 2019, as the construction of the Applicant’s facility (Afipsky Refinery) was not finished. The Ilsky Refinery was connected in 2019, the connection of the Afipsky Refinery is expected in 2020. In accordance with the amended LDP approved by the Board of Directors on 24 December 2019, the implementation of this project is postponed to 2020.
At the same time, the implementation of the ESPO PS — Komsomolsk Refinery Oil Pipeline Offshoot project, which was not completed in 2018, as the construction of the Applicant’s connection facility (Rosneft) was not finished, was completed in 2019.
The amended LDP adopted by the resolution of the Board of Directors dated 24 December 2019 (Minutes No. 22), also provides for a postponement of the completion date for this project to 2019. In accordance with Paragraph 8.7.3 RD-03.100.00-KTN-001-16, the planned KPI value is normalised taking into account the adjustments approved by the Board of Directors of Transneft. The normalised planned KPI for 2019 is 4 projects as well. Considering normalisation, the KPI performance is 100%.
Integrated indicator of the volume of work done within the TUR Programme 100% Achieved
Execution of the Pipe Replacement Plan (the line part) 1,001 km Achieved
Execution of the Storage Tank Construction and Revamping Plan 80 units Achieved
Integrated indicator of innovation activities’ efficiency 100% Achieved
Financing of innovative projects, including R&D, from own funds given as a percentage of Transneft’s revenue from oil transportation services (according to RAS) 1.41% Achieved
Number of titles of protection for intellectual property obtained during the reporting period and two previous years 93 pcs. Achieved
Integrated effect of in-house commercialisation of innovative projects, including R&D, for the reporting period and two previous years in terms of percentage of Transneft’s revenue from oil transportation services by RAS 1.48% Achieved
Quality indicator for the updated Investment Development Programme/IDP (in the year of the update) / IDP execution quality indicator (in subsequent years) 90% n/aThe Report on the IDP Implementation for 2018, approved at the meeting of the Board of Directors of Transneft on 30 May 2019 (Minutes No. 9), was submitted for assessment to the Ministry of Energy of Russia on 4 June 2019, to the Ministry of Education and Science of Russia on 4 June 2019, to the Ministry of Economic Development of Russia on 4 June 2019. Favorable conclusions on the Report were received from the ministries.
At the time of reporting, no meeting of the Interagency Commission for Technological Development under the Government Commission for the Modernisation of the Economy and Innovative Development of Russia on the issue of setting the values for the indicator quantifying the Ministry of Energy’s IDP implementation for companies with state participation has been held. Information on the planned date of the meeting is not available.
Total debt to EBITDA ratio no more than 2,5 Achieved
Integrated indicator of achieving additional KPIs set by executive orders and instructions of the shareholder, the President and the Government of the Russian Federation 100% Achieved
Return on invested capital (ROIC) not less than 7% Achieved
Amount of dividends 25.91 RUB bn Achieved
Annual volume of direct purchases from SMEs 18% Achieved

In accordance with the Methodological Recommendations on the Application of Key Performance Indicators of Business Entities in whose Authorised Capital the Participation Share of the Russian Federation or a Constituent Entity of the Russian Federation Exceeds 50 Percent, and Performance Indicators of Federal State Unitary Enterprises in order to Determine the Amount of Remuneration for their Management Personnel, approved by Directive of the Russian Government No. 1388-r dated 27 June 2019, by Executive Orders of the Russian Government No. 9054p-P13 dated 2 October 2019 and by other instructions of the federal authorities of the Russian Federation, the Company updated the Key Performance Indicators System of Transneft’s Economic Activities.Approved by the resolution of the Board of Directors of Transneft dated 27 November 2019 (Minutes No. 20). The updated KPI System will be taken into account when summing up the results for 2020.

Changes in the Key Performance Indicators

The integrated indicator titled the Integrated Indicator of Achieving Additional KPIs set by executive orders and instructions of the shareholder, the President and the Government of the Russian Federation is excluded, its indicators are transferred to other integrated KPIs:
  • The Return on Invested Capital (ROIC) to the Integrated Indicator of Investment Activities Efficiency, which is to supersede the Integrated Indicator of Investment Activities Efficiency under the Programme of Trunk Pipeline Facilities Development, Technical Upgrading and Revamping;
  • The Amount of Dividends and the Annual Volume of Direct Purchases from SMEs to the Integrated Operational Activity Efficiency Indicator.
The Integrated Indicator of the Volume of Work Done within the TUR Programme is excluded, and its indicators of the Execution of the Pipe Replacement Plan (the line part) and the Execution of the Storage Tank Construction and Revamping Plan are directly included in the Integrated Indicator of Innovation Activities Efficiency.
The new Integrated Indicator for Evaluating the Results of the Implementation of the Corporate Import Substitution Plan has been included, which includes the following indicators:
  • Share of foreign equipment in total equipment procurements;
  • Share of foreign goods (excluding equipment) in total goods procurements;
  • Share of foreign software in total software procurements;
  • Share of foreign works and services in total works and services procurements.
The indicator reflecting the Number of Titles of Protection for Intellectual Property Obtained during the Reporting Year, supplementing the existing indicator of the Number of Titles of Protection for Intellectual Property Obtained during the Reporting Period and Two Previous Years, was added to the Integrated Indicator of Innovation Activities Efficiency.
PLANNED KPIS OF TRANSNEFT FOR 2020Resoltuion of the Transneft Board of Directors dated 24 December 2019 (Minutes No. 22).
KPI System in 2020 Plan for 2020
Integrated indicator of trunk pipeline system reliability, environmental and industrial safety 100%
Specific trunk pipelines accident rate 0.072 emergency situations per 1,000 km of trunk pipelines
Reduction of specific air pollutant emissions during oil and petroleum products transportation via trunk pipelines 1%
Integrated operational activity efficiency indicator 100%
Amount of dividends 42,326 RUB mln
Operating expenses reduction percentage 2%
Annual volume of direct purchases from SMEs 20.0%
Reduction of specific electricity consumption during oil transportation over trunk pipelines under comparable conditions 0.5%
Raising labour productivity in oil and petroleum products transportation 1.7%
Integrated indicator of investment activities efficiency 100%
Return on invested capital (ROIC) 7%
Execution of the Development Programme financing plan 240,415 RUB mln, VAT included
Execution of the Capital Investments Use Plan envisaged in the Development Programme 218,585 RUB mln, excluding VAT
Execution of the Action Plan for Reduction of Capital Costs within the Development Programme 4,095 RUB mln, excluding VAT
Keeping investment project deadlines 1 units
Execution of the Pipe Replacement Plan (the line part) 1,005 km
Execution of the Storage Tank Construction and Revamping Plan 75 units
Integrated indicator of innovation activities efficiency 100%
Financing of innovative projects, including R&D, from own funds given as a percentage of Transneft’s revenue from oil transportation services (according to RAS) 1.42%
Number of titles of protection for intellectual property obtained during the reporting period and two previous years 95 pcs.
Number of titles of protection for intellectual property obtained during the reporting period 40 pcs.
Integrated effect of in-house commercialisation of innovative projects, including R&D, for the reporting period and two previous years in terms of percentage of Transneft’s revenue from oil transportation services by RAS 1.49%
Quality indicator for the updated Investment Development Programme/IDP (in the year of the update) / IDP execution quality indicator (in subsequent years) 90%
Total debt to EBITDA ratio 2.5
Integrated indicator for evaluating the results of the implementation of the corporate import substitution plan 100%
Share of foreign equipment in total equipment procurements 3%
Share of foreign goods (excluding equipment) in total goods procurements 7.5%
Share of foreign software in total software procurements 25%
Share of foreign works and services in total works and services procurements 0.5%