Value Creation

Value (integrated value) generated by the Fuel Company is not only about marketable product and increased profitability of TVEL FC enterprises. It is also about a great variety of other economic, social and environmental activities.

With its considerable presence in the national economy and likewise considerable impact — economic, social and environmental — on the regions of its presence, TVEL FC is seeking to maximize positive effects of its activity despite specific environmental impact of its production facilities and indirect environmental impact of its key products (e.g. at the back end of the nuclear fuel cycle).

The Company conducts its activities with due account for a great number of external and internal factors and in close cooperation with stakeholders * Chapter “Outcomes” Section “Social Capital”. . This cooperation is characterized by the fact that tangible and intangible resources (financial, environmental, production, human, social and intellectual capitals * Under the International Integrated Reporting Standards, “the Capitals” implies resources and relations that serve as the sources and results of value (integrated value) creation process. ) used by the Company are controlled by the Company itself and by TVEL FC and its stakeholders. Therefore, conversion of capital in the course of activities is of great importance to the Company and its team.

This business model describes the activity of TVEL FC to create value as a system of the used capitals, production process, and products and results obtained. The purpose of the system is to implement strategy and achieve short-, mid-and long-term goals. The business model embraces factors in the risks inherent in activity of the Company and the ability of the latter to manage them. This business model represents inputs used by TVEL FC personally and in conjunction with stakeholders, and outputs that contribute to capital changes.

Since any business seeks to make profit which in turn happens to be the source of development of the Company, Financial Capital is most vital to TVEL FC. Capital gains secure current operations and promote investments thereby generating other outcomes used by the Fuel Company.

Conversion of natural capital under this business model takes place in the course of production activities of the Fuel Company. The Company is engaged in two businesses: production of nuclear and non-nuclear products. Nuclear production chain is shown in details from uranium concentrate to fuel assemblies (“the TVS”) * Nuclear products manufacture is described in greater detail in 2012 TVEL JSC Annual Report — Section “Business Model” and on Website www.tvel.ru. .

High-tech base, modern equipment, machinery and materials (production capital) comprise one of the most important factors for efficient business and functioning of the Fuel Company.

Research and development (Intellectual Capital) related to improvement of the industrial and technological base provide considerable boost to TVEL FC business and the entire nuclear industry and science on the whole.

Priorities for the nuclear industry are availability of highly qualified specialists (Human Capital) and development and improvement of their skills. It is impossible to overestimate the degree of business dependence on competent staff and impact of human capital on the Company.

The relationship between TVEL FC and its suppliers and contractors, clients and customers, partners and society (Social Capital) has a considerable impact on the business and make “Social Capital Management of TVEL FC” one of the priority topics of this Report.

For more details about TVEL FC projects that comprise its Social Capital — see Section “Stakeholders Engagement”.

Being a responsible company that exists in the system based on stakeholders engagement, TVEL FC generates value for itself and for its stakeholders alike.

Activities of TVEL FC yield positive results for stakeholders, such as:

• dividends;
• taxes and deductions;
• promotion of nuclear and radiation security;
• development of sectoral research and fundamental science;
• development of personnel within the regions of presence;
• promotion of social accord and business activity in the regions of presence.

Management System is the focal point of TVEL FC business model. It is management technologies help the Company to convert resources in an efficient manner and generate value through capital growth.

More details regarding the performance results broken down by capitals described in TVEL FC business model are available in the relevant sections of this Report.