Nuclear Inter Jura 2014 ROSATOM Rosatom State Nuclear Corporation Legal aspects of the BOO model when developing new nuclear power plant and construction projects Ilya Smirnov, Deputy CEO, General Counsel Olga Kirillova, Senior Legal Counsel Akkuyu NPP Power Generation JSC 21 October 2014 1

Factual background AKKUYU NGS AŞ ROSATOM 435 nuclear power plant units are under operation around the world 72 nuclear power plant units are under construction around the world (10 units – since 2013) Only one NPP (4 units) is under construction under the BOO model Помимо занятых в строительстве (только на строительной площадке в «пиковые годы» будет работать до 10 000 человек одновременно), на АЭС будут задействованы более 2500 человек эксплуатационного персонала, а во время плановых ремонтов будут привлекаться еще около 1200 человек.

Types of project models TOPICS COVERED AKKUYU NGS AŞ ROSATOM Types of project models Akkuyu NPP project structure Major challenges Lessons learned Questions Помимо занятых в строительстве (только на строительной площадке в «пиковые годы» будет работать до 10 000 человек одновременно), на АЭС будут задействованы более 2500 человек эксплуатационного персонала, а во время плановых ремонтов будут привлекаться еще около 1200 человек.

Newcomers which way to follow Turkey Bangladesh Vietnam Jordan Nigeria AKKUYU NGS AŞ ROSATOM which way to follow Turkey Bangladesh Vietnam Jordan Nigeria Belarus Kazakhstan Egypt … Помимо занятых в строительстве (только на строительной площадке в «пиковые годы» будет работать до 10 000 человек одновременно), на АЭС будут задействованы более 2500 человек эксплуатационного персонала, а во время плановых ремонтов будут привлекаться еще около 1200 человек.

Akkuyu Project Features Akkuyu Nuclear Power Plant is the First Rosatom BOO Construction Project Outside Russia AKKUYU NGS AŞ ROSATOM Akkuyu Project Features First Nuclear Power Plant in Turkey First Rosatom ВОО (build-own-operate) project. Under the IGA, Rosatom is responsible for engineering, construction, operation and maintenance of the plant. Legal basis: Intergovernmental Agreement, May 12, 2010 Project design: AES-2006 (VVER-1200) Total capacity: 4,800 MW. (4 x 1200 MW) Implementation period: 2011-2023 Total cost ~ $ 20 bln Power Purchase Agreement for 15 years, fixed price terms Support of the Russian and Turkish Governments Maximization of Turkish personnel involvement in construction and operation of the plant. Job creation potential – up to 10 000 for the construction only Akkuyu site, Turkey Помимо занятых в строительстве (только на строительной площадке в «пиковые годы» будет работать до 10 000 человек одновременно), на АЭС будут задействованы более 2500 человек эксплуатационного персонала, а во время плановых ремонтов будут привлекаться еще около 1200 человек.

Project Cooperation Between Russia and Turkey Covers a Wide Range of NPP Related Construction, Operation and Infrastructure Issues AKKUYU NGS AŞ ROSATOM Russian / PC responsibilities Joint responsibilities Turkish responsibilities NPP engineering, design field supervision Construction and assembly works Site allocation Construction management/ Supervision /Startup and Commissioning Infrastructure development, grid connection Physical protection Design documentation Emergency planning Site infrastructure Nuclear island and other special equipment and materials Public outreach Fuel supply Spent fuel management (subject to a separate IGA to be concluded) Ownership of NPP until decommission Operation, maintenance and upgrade Wholesale of electricity Decommissioning and decontamination Financing Nuclear liability insurance Radioactive waste disposal / treatment

Project organization structure AKKUYU NGS AŞ ROSATOM Rosatom State Corporation Board of Directors (shareholders) Project sponsor PC management General responsibility for Project implementation Rusatom Overseas CJSC Shareholder/ developer Akkuyu NPP JSC Tailor-made JSC incorporated in Turkey. Carries functions of customer, license applicant, NPP owner and GR coordinator in Turkey Operator, Owner of the NPP and electricity produced Owner’s Engineer* OJSC «INTERRAO Worley Parsons» Rosenergoatom Concern OJSC Technical expertise Cost control Schedule control Quality control Technical customer Licensing consultant Development of technical assignment for the design documentation Technical acceptance of equipment and services at all stages of project commissioning, NPP operation EPC 1** Hydrotechnical EPC 2** Nuclear island EPC 3** Turbine island EPC 4** Auxiliary buildings * Tender will be tentatively run in 2014 ** EPC structure to be further discussed 7 7

Equity Structure JSC “Concern Rosenergoatom” AKKUYU NGS AŞ ROSATOM Paid Capital – 4.36 Billion TL (source – Russian budget) JSC “Concern Rosenergoatom” JSC “Atomstroyexport” JSC “Inter Rao” JSC “Atomenegroremont” JSC “Atomtehenergo” JSC “Rusatom Overseas” Future New shareholder - investor (up to 49 % of shares) Current Shareholders of AKKUYU NPP JSC Subject to consent to the Turkish Party under IGA 8

Akkuyu NPP JSC registration Electricity generation license Stages of the project Preparation Construction O&M Decommissioning Single responsibility of the “Project company” for all stages of the project and deadlines 1 stage 2 stage 3 stage 4 stage 13/12/10 2017 Akkuyu NPP JSC registration 03/11 1st concrete 2083 2017 Start site survey Commissioning 2023 – 1 unit 2024 – 2 unit 2025 – 3 unit 2026 – 4 unit Construction license, Electricity generation license 9

Lessons learned: Regulatory challenges New electricity law market No experience of the Turkish Party in regulating and licensing of NPP The comprehensive Nuclear Energy law and the Law of Civil Liability for Nuclear Damage need to be adopted Challenges in understanding of local regulations and their implementation Lack of understanding of “nuclear” by government agencies and companies Possibility of changes in regulations without consent of NPP owner Public fear of nuclear 10

Lessons learned: Regulatory Setting up regulatory base prior to licensing Acceptance of the regulatory base of the supplier country in case of lack of host country base Established effective system of consultations with government bodies and relevant agencies Working groups on the key issues of project implementation and NPP operation INIR mission to Turkey (November 2013) Work with public opinion Student’s education, training for officials, regulatory bodies’ personnel Assistance in development of regulatory basis and regulatory agency expertise SOLUTIONS 11

Lessons learned: Host Country Undertakings Challenges No responsibility of the host country for Issues touched upon by the IGA but referred to separate IGA’s that may be concluded in the future Meeting deadlines in decision making which may lead to schedule delays Reprocessing spent fuel of Russian origin in the RF Cost overruns in case of delayed construction Cooperation regarding the nuclear fuel cycle 12

Lessons learned: Host Country Undertakings Setting forth the financial responsibility of the host country for ensuring infrastructure solutions (INIR) Local government owned companies among equity partners Country guarantees to purchase fixed amount of electricity at a pre-determined price Alternative to treasure guarantees – entering into a Host Government Agreement Negotiating follow up IGA’s or Host Government Agreements 13

Lessons learned: Amending local laws IGA The parties shall as permitted by the applicable laws and regulations of the RF and the Republic of Turkey support and cooperate with the Project Company in connection with the Project Local laws Law N 3573 on Reclamation of Olive Cultivation and Fertilization of the Wild Olive Growths Law N 3621 on Coasts Decree on State Incentives in Investments N 2012/3305 14

Strategy of Operating the NPP Open Issues AKKUYU NGS AŞ ROSATOM Option Challenges and Limitations 1: Who is employed at the NPP? 1.1. 100% Akkuyu staff 1. Development and implementation of business processes 2. Language of operation (initially Russian) vs language of examination for licensed operators (???) 3. Recognition of diplomas and engineering qualification 4. Licensing in Turkey of the personnel educated in Russia 1.2. Own operating staff, outsourced supporting staff 2: Who provides outsourced services? 2.1. Concern Rosenergoatom 1. Contract to provide operating services 2. Authorization by TAEK 3. Liability (incl. nuclear) of the service provider 4. Requirements of TAEK to be developed 2.2. Foreign provider 15

Strategy of Operating the NPP In-house vs. Outsource AKKUYU NGS AŞ ROSATOM Own Operating Personnel Outsourced Services (while retaining knowledgeable customer capability): Physical Protection (except for own Security Service) Administrative and supporting functions Repair and maintenance work, replacement of spent fuel Transportation logistics Retail sale of electricity Rad waste management Training of personnel Metrology and monitoring 16

General Considerations HR Strategy General Considerations AKKUYU NGS AŞ ROSATOM General Considerations Safety Quality Economic Efficiency Industry benchmarking Availability of qualified local personnel in Turkey Staffing: Deputy CEO for Operations (new open position introduced into the org.structure) His direct reports: Chief Engineer Director for Safety and Quality Control – dotted line reporting to the CEO 17

HR Strategy Open Issues AKKUYU NGS AŞ ROSATOM Local staff vs Expats? What is the optimal headcount of the NPP (currently 0.8 person per 1 Mwt)? Where shall we hire people from? How Much – Where – When: What level of personnel localization in different categories of employees can (should) be achieved at the initial phase, in 5 years and in 10 years? Development of specialized higher education in TR vs training at the Akkuyu Training Center Program of training of licensed personnel (required for application to TAEK for the construction license – burning issue for Q1 2015) 18

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