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1H 2013 IFRS Financial Results
29 August 2013
Тюменьэнерго
Russian Grids at a Glance
Geography of activity, million square kilometers 9 675 13 903
Number of substations 461 886 891
Transformer capacity MVA 404 335
Total transmission grid length, thousand km 2 110 132
Electricity transmitted bn. kWh 649,9 498,3
Electricity losses bn kWh 52,7 21,9
Volume of energy losses, % 8,11 4,24
Number of employees , thousand people 188,3 24,5
Conventional units, thousand. c.u. 12 571 1 140
2
Russian Grids - is one of the largest infrastructural companies in
the world: holds interests in and manages interregional, regional
distribution grid companies, and electricity transmission company -
FGC UES
The company was formed on June 14th, as part of the Grid`s
management restructuring following the transfer of the Russian
government`s stake in Federal Grid Company to the Russian Grids
Distribution lines 68 regions
Transmission lines 72 regions
* The recorded results for 2012
JSC FGC UES
Leading Market Position
Key operating indicators* distribution lines transmission lines
Operational Overview
3
395 404
323 335
0
100
200
300
400
500
2011 1H2013
MRSK FSK
Electricity Distribution Volume bn kWh
Total Transformer Capacity in Operations GVA (end of period)
Substations*
Units (end of period) Transmission Grid Length in Operations* `000 km (end of period)
310 305
258 257
200
220
240
260
280
300
320
1H2012 1H2013
Ты
сячи
MRSK FSK
453
462 854 891
0
200
400
600
800
1000
420
430
440
450
460
470
2011 1H2013
MRSK (left scale, thousand units) FSK (right scale, thousand units)
2 087
2 110
125 132
0
20
40
60
80
100
120
140
160
180
200
2 000
2 020
2 040
2 060
2 080
2 100
2 120
2011 1H2013MRSK(left scale thousand km.) FSK (right scalethousand km. )
The main stages in grid sector restructing
November 22, 2012
May 08, 2012
4
The President of the Russian Federation signed Decree “On Joint Stock Company Russian Grids”
July 10, 2012
The agreement for the transfer of MRSK Holding sole executive body powers to Federal Grid Company was signed
The Russian Government signed the directive to transfer the powers of IDGC Holding’s sole executive body to FGC UES.
May 06, 2013
The government of the Russian Federation approved the Strategy for Development its grid structure (№ 511-r)
April 03, 2013
The amendments to the Company's Articles of Association were registered and the information about the Company on the Uniform State Register of Juridical Persons was altered accordingly
June 14, 2013 Shares of Federal Grid Company has been transferred to Russian Grids
April 04, 2013
The Extraordinary General Meeting of Shareholders of JSC Russian Grids approved increase in the authorized capital of the Company by means of the placement of additional shares and approved the agreement for the procedure for controlling and voting shares in JSC FGC UES
June 17, 2013
The agreement for the procedure for controlling and voting shares in JSC FGC UES was signed between Russian Grids and Federal Property Management Agency
Key Financial Results
5
RUB.bn.
Revenues grew mainly due to the increased electricity sales revenue resulting from granting the Supplier of Last Resort status to Russian Grids subsidiaries and dependent companies
in 11 constituent entities of the Russian Federation.
Operating expenses went up chiefly due to the increased depreciation deductions resulting from putting capital assets into operation under capex programs, increasing provisions for
impairment of receivables, and raising expenses related to electricity purchased for resale, which is offset by the relevant electricity sales revenue.
Major factors in the decrease in EBITDA and net profit are that financial investments (shares in INTER RAO UES) and bills and notes depreciated in the amount of 26.5 billion rubles
and a provision for impairment of receivables was established in the amount of 21.6 billion rubles.
With the above factors excluded, EBITDA (adjusted) shows a rise as compared with the corresponding period last year while net profit (adjusted) demonstrates an inconsiderable
decrease due to the increased depreciation deductions related to the implementation of capex programs.
1 Adjusted EBITDA is calculated as EBIDTA less impairment of available-for-sale investments, impairment promissory notes and provision for impairment receivables. 2 Adjusted net profit is calculated as net profit not taking into account impairment of available-for-sale investments, impairment of promissory notes, provision for impairment receivables and deferred income tax liabilities referred to them.
1H 2013 1H 2012 Change, %
Indicators FSK MRSK Total FSK MRSK Total
Revenue 17,2 331,6 348,8 11,2 302,8 314,0 11.1%
Operating expenses 60,5 257,0 317,5 45,3 222,3 267,6 18.6%
EBITDA (40,4) 107,3 66,9 (46,6) 133,9 87,3 -23.4%
EBITDA1 (adj.) (15,1) 130,1 115 (33,7) 138,7 105 9,5%
Operating profit (42,9) 75,9 32,6 (33,8) 81,2 47,4 -31%
Net profit (65,5) 63,4 (2,1) (46,4) 71,2 24,8 -
Net profit2 (adj.) (45,2) 81,5 36,3 (36,1) 75,1 39 -6,7%
Net debt 188,4 178,7 367,1 123,3 144,6 267,9 37%
Key Financial Results (II)
314,0
348,8
290
300
310
320
330
340
350
360
1H2012 1H2013
Revenue, RUB. bn.
105 115
0
20
40
60
80
100
120
140
1Н2012 1Н2013
EBITDA (adjusted1), RUB. bn.
39
36,4
20
25
30
35
40
45
50
1Н2012 1Н2013
Profit for the period (adjusted2), RUB. bn.
+ 11%
382,0 367,1
0
100
200
300
400
2012 1Н2013
Net Debt position, RUB. bn.
6 1 Adjusted EBITDA is calculated as EBIDTA less impairment of available-for-sale investments, impairment promissory notes and provision for impairment receivables. 2 Adjusted net profit is calculated as net profit not taking into account impairment of available-for-sale investments, impairment of promissory notes, provision for impairment receivables and deferred income tax liabilities referred to them. .
- 4%
+ 9.5%
Revenue Structure Analysis
Revenue Structure 1 H 2013
1Н 2013 1 H 2012 Change
Rub bn. Rub bn. Rub bn. %
Electricity distribution 281.923 273.461 8.462 3.1
Electricity sales 51.539 20.375 31.164 153.0
Technological connection services 10.382 14.885 -4.503 -30.3
Other 4.998 5.266 -0.268 -5.1
Total 348.842 313.987 34.855 11.1
Electricity distribution
81%
Electricity sales 15%
Technological
connection services
3%
Other 1%
7
The gain in revenues is due to the increased electricity sales income
resulting from granting the Supplier of Last Resort status to Russian Grids
subsidiaries and dependent companies in 11 constituent entities of the
Russian Federation.
The rise in the electricity distribution revenue is due to electricity
distribution tariffs raised from July 1, 2012.
The network connection revenue went down primarily due to the provision
of network connections on preferential terms and as a result of
implementing the road map that makes it possible to substantially improve
the conditions for connecting customers to Russia’s energy infrastructure.
Operating Cost Structure
Operating cost structure 1H2013
1H 2013, RUB bn. 1H 2012, RUB bn. Change, %
Indicators FSK MRSK Total FSK MRSK Total FSK MRSK Total
Personnel costs 14.455 57.431 71.886 12.555 52.040 64.595 15.1% 10.4% 11.3%
D&A 24.756 31.996 56.752 16.116 32.141 48.257 53.6% -0.5% 17.6%
Electricity transmission 1.164 53.498 54.662 0.811 50.688 51.499 43.5% 5.5% 6.1%
Losses compensation 6.165 37.150 43.315 5.604 39.666 45.270 10.0% -6.3% -4.3%
Purchased electricity 0.843 27.924 28.767 0.827 11.801 12.628 1.9% 136.6% 127.8%
Allowance for receivables 2.344 14.607 16.951 0.003 4.783 4.786 781% 205.4% 254.2%
Other 10.797 34.414 45.211 9.429 31.172 40.601 14.5% 10.4% 11.4%
Total operating expenses 60.524 257.020 317.544 45.345 222.291 267.636 33.5% 15.6% 18.6%
19% 81% 100% 8
Major factors in the rise in operating expenses:
Increased depreciation deductions resulting from putting
new facilities into operation under capex programs.
Increased expenses related to electricity purchased for
resale as a result of granting the Supplier of Last Resort
status to Russian Grids subsidiaries and dependent
companies in 11 constituent entities of the Russian
Federation.
Increased expenses associated with provisioning for
impairment of receivables in the amount of 12.2 billion rubles
in relation to the energy retailers that lost the Supplier of
Last Resort status.
24% 22% 23%
41%
12% 18%
2%
21% 17%
10%
14% 14%
1% 11% 9% 4%
6% 5%
18% 13% 14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FSK MRSK Total
Other
Allowance for receivables
Purchased electricity forresaleLosses compensation
Electricty distribution
D&A
Personnel costs
Balance sheet
Key parameters
9
RUB bn
1H 2013 2012 Change, %
Indicators FGC IDGC Total FGC IDGC Total
Assets 1 018,9 987,3 2 006,2 1 022,4 970,5 1 993 0.7%
Non-current assets 943,4 799 1 742,4 939,5 792,7 1 732,2 0.6%
Current assets 77,1 186,7 263,8 82,9 177,9 260,8 1%
Total equity and liabilities
Equity 1 217,6 1 217,6 1 222,4 1 222,4 0%
Total liabilities 315,1 473,4 788,5 304,3 466,3 770,6 2%
Non-current liabilities 230,2 262,8 493,0 237,7 256,3 494,0 -0.2%
Current liabilities 84,9 210,6 295,5 66,6 210 276,6 6,8%
Borrowings
Debt breakdown of group «Rugrids» RUB bn.
Debt breakdown of group «Rugrids» RUB bn.
10
Credit ratings
Russian Grids – “Ba1” - Moody’s (July 2010)
Lenenergo – “Ba2” Moody’s (November 2009)
MOESK - “Ba2” Moody’s, “BВ” S&P, «ВВ+» Fitch (October
2007 / January 2012)
MRSK of Centre - “BB” S&P (November 2009)
MRSK of Volga - “Ba2” Moody’s (October 2012)
MRSK of Centre&Volga - “Ba2” Moody’s (October 2012)
MRSK of Urals - “Ba2” Moody’s (October 2012)
FGC UES - «Baa3» Moody’s, «BBB» S&P
Interest Rate Dynamics
+ 3,6 % 249,0 89,7
68,6
45,0
After 2015 2015 2014 2H2013
8,52% 8,56% 8,72% 8,68% 8,70%
8,78%
9,30%
9,57%
8,88%
9,14%
7,80%
8,00%
8,20%
8,40%
8,60%
8,80%
9,00%
9,20%
9,40%
9,60%
9,80%
01.07.2012 01.10.2012 01.01.2013 01.04.2013 01.07.2013
Average rate Weighted average rates for new borriwings
215,6 223,6
224,6 232,6
0
100
200
300
400
500
2012 1H2013
FGC IDGC
CAPEX Highlights
Financing structure 1H 2013 (transmission lines) RUB bn.
Russian Grids’ CAPEX priority areas:
Program for the Development of the Sochi Region’s
Electricity Networks for the Period until 2008–2014 to Ensure
the Functioning of the XXII Olympic Winter Games and the XI
Paralympic Winter Games in Sochi in 2014 by Kubanenergo
The Renovation program of 6-110 kV cable line in St.
Petersburg (Lenenergo)
Comprehensive program of measures to decrease power
losses (N.-Caucasus)
Power assets for technological connection of “Gazprom
invest Zapad”- pipeline Nord Stream (Lenenergo)
220 kV substation for Nadym - Salekhard (Tumenenergo)
Operation for the external electricity supply to the
Raspadskaya Mine and enhanced the reliability of electricity
supply to the Mezhdurechensk District, Kemerovo Region
10,8
5,9
6,4 19,4
4,6
3,8
6,0
Technical upgrades and reconstruction
New construction
Programmes of particular importance
Technological connection services
Distribution lines
Electricity metering and efficiency
RUB 56,9 bn
12,5
10,4
7,5
4,0
4,9
5,4
1,7 2,0 Transmission lines development
Renovation of Fixed Assets
Government Programmes
Other
Delivery of HPP, NPP, TPP capacity
Enhancement of reliability of power supply in Moscow, St. Petersburg and Tyumen Agreements with regional governments
Technological connection services
RUB 48,4 bn
Financing structure 1H 2013 (distribution lines) RUB bn.
11
12
93
148 149
170
57
167 185 180
157
48
0
50
100
150
200
2010 2011 2012 2013 1H 2013
Distribution lines Transmission lines
8,8 9,3
14,1
10,7
2,3
11,8
18,5 17,8
14,6
2,3
0,00
5,00
10,00
15,00
20,00
25,00
2010 2011 2012 2013 1H 2013
Distribution lines Transmission lines
16,9
20,8
28,8
21,1
7,5
2,8 3,0 3,6 3,2 1,2
0
5
10
15
20
25
30
2010 2011 2012 2013 1H 2013
Distribution lines Transmission lines
92
116 137
160
26 33
159
187
140
12 0
50
100
150
200
2010 2011 2012 2013 1H 2013
Distribution lines Transmission lines
CAPEX Highlights (II)
Commissioned capacity, RUB bn Financing Dynamics,incl. VAT, RUB bn
Installation of transmission and distribution lines,
thousand km Commissioned capacity, thousand MVA
13
RAB Regulation: a Transformed Approach to Financing
Regulatory Asset Base (RAB) Regulation
On 21 May 2012, the Russian Federal Tariff Service approved tariffs under RAB regulation for 2012 – 2014
Federal Grid Company tariffs increased by 11.0% starting from 1 July 2012, by 9.4% from 1 July 2013,
and will grow by another 9.4% from 1 July 2014
Return on initial invested capital in 2014 has been raised from 9.1% to 10.0%, and now equals the return on new invested capital
RAB base is accounted for once assets are commissioned and placed on the Company’s balance sheet
RAB Return Calculation
2010 2011 From 1 July 2012 From 1 July 2013 From 1 July 2014
Return on initial invested capital 3.9% 5.2% 6.5% 7.8% 10.0%
Return on new invested capital 11.0% 11.0% 11.0% 10.0% 10.0%
Tariff growth 51.1% 32.9% for Q1,
26.4% for Q2 – Q4
11.0% 9.4% 9.4%
January 2010
• Switched to 3-year RAB regulation
September 2010
• Regulation period prolonged to 5 years
April 2011
• Tariff growth for 2011 has been smoothed out to 5%
May 2012
• FTS approved tariffs for 2012-2014
- long-term regulation method using tariff indexation - profit for development is not in excess of 12% of revenues used for maintenance
IDGC of Northern Caucasus
Kabardino-Balkarian Republic; Karachayevo-Cherkessian Republic; Republic of North Ossetia – Alania; Stavropol Territory
IDGC of Centre Belgorod Region; Voronezh Region; Kostroma Region; Kursk Region; Oryol Region; Smolensk Region; Tambov Region; Yaroslavl Region
IDGC of North-West Vologda Region; Republic of Karelia; Novgorod Region; Pskov Region
IDGC of South Astrakhan Region; Republic of Kalmykia; Rostov Region
IDGC of Siberia Altai Territory
IDGC of Center and Volga Region
Vladimir Region; Ivanovo Region; Kaluga Region; Kirov Region; Republic of Marij El; Nizhni Novgorod Region; Ryazan Region; Tula Region; Udmurtian Republic
IDGC of Volga Samara Region; Saratov Region; Ulyanovsk Region; Republic of Mordovia; Orenburg Region; Penza Region; Chuvashi Republic
IDGC of Urals Perm Region; Sverdlovsk Region; Chelyabinsk Region
MOESK Moscow; Moscow Region
LENENERGO Saint Petersburg; Leningrad Region
Kubanenergo Krasnodar Territory; Republic of Adygeya
TOTAL: 45 constituent entities
FGC UES
- long-term tariff regulation method providing return on invested capital
- tariffs are set taking account of service reliability and quality indicators
RAB LONG-TERM INDEXATION
Tariff Regulation in the Electric Grid Sector
RAB regulation
Regulation Methods
IDGC of Northern Caucasus
Republic of Dagestan; Republic of Ingushetia; Chechen Republic
IDGC of Centre Bryansk Region; Lipetsk Region; Tver Region
IDGC of North-West Arkhangelsk Region; Murmansk Region; Komi Republic
IDGC of South Volgograd Region
IDGC of Siberia Republic of Altai; Republic of Buryatia; Krasnoyarsk Territory; Kemerovo Region; Omsk Region; Republic of Tuva; Republic of Khakassia; Trans-Baikal Territory
Tyumenenergo Tyumen Region, Khanty-Mansijsk Autonomous District, Yamalo-Nenets Autonomous District
Yantarenergo Kaliningrad Region
TDC Tomsk Region
TOTAL: 23 constituent entities
Switching over to RAB from 2014 is under consideration for Yantarenergo and IDGC of South (Volgogradenergo)
Indexation-based regulation
14
For additional information:
Julia Martynova, IR
tel.: +7 (495) 995-53-33 (20-70)
e-mail: [email protected]
Web site: www.rugrids.ru
Thank you!
15
Appendix
16
Restructuring of Government Controlled Grid Assets
Minority
Shareholders
Russian
Federation
Minority
Shareholders
Federal Grid
20.4% 36.3%(1)
Russian
Grids
Regional IDGCs
63.7%(1) 79.6%
Minority
Shareholders
> 50% < 50%
79.6(2)
Minority
Shareholders
Russian Federation
87.0%(1,2)
Minority
Shareholders
Federal Grid Regional IDGCs
Minority
Shareholders
> 50% < 50%
Russian
Grids
13.0%(1,2)
20.4(2)
1. Represents ownership structure of common shares 2. Assuming only the Russian Federation converts its shares in the Transaction; exact ownership will depend on number of minorities that will exchange their shares in the Transaction 3. According to the President decree, the Russian Federation, Federal Grid and Russian Grids should sign a shareholders agreement, which will govern the participation of Russian
Grids’ representatives in Federal Grid management to ensure the sufficient Russian Federation control over Federal Grid
Share
hold
ers
Agre
em
ent(3
)
Current structure
Target structure
17
Statement of Financial Position
18
RUB mn 30 June 2013 31 December 2012
ASSETS
Non-current assets
Property, plant and equipment 1 680 119 1 639 737
Intangible assets 13 895 13 929
Investments in equity accounted investees 1 276 1 188
Non-current accounts receivable 7 617 12 559
Other investments and financial assets 33 872 60 687
Deferred tax assets 5 585 4 102
Total non-current assets 1 742 364 1 732 202
Current assets
Inventories 26 065 20 855
Other investments and financial assets 27 455 56 056
Current tax assets 5 202 5 300
Trade and other receivables 113 683 118 771
Cash and cash equivalents 91 398 59 815
Total current assets 263 803 260 797
Total assets 2 006 167 1 992 999
EQUITY AND LIABILITIES
Equity
Share capital 59 322 49 947
Share premium 27 120 16 244
Treasury shares (2 819) (2 819)
Reserve for issue of shares 286 197 19 751
Other reserves (4 440) (5 333)
Retained earnings 521 671 808 864
Total equity attributable to equity holders of the Company 887 051 886 654
Non-controlling interest 330 580 335 765
Total equity 1 217 631 1 222 419
Non-current liabilities
Loans and borrowings 379 109 381 868
Trade and other payables 16 332 15 061
Employee benefits 23 831 24 278
Deferred tax liabilities 73 777 72 818
Total non-current liabilities 493 049 494 025
Current liabilities
Loans and borrowings 79 365 59 906
Trade and other payables 205 038 200 539
Provisions 10 773 14 566
Current tax liabilities 311 1 544
Total current liabilities 295 487 276 555
Total liabilities 788 536 770 580
Total equity and liabilities 2 006 167 1 992 999
Statement of Profit or Loss
and Other Comprehensive Income
19
RUB mn
Six months ended
30 June 2013
Six months ended
30 June 2012
Revenue and government subsidies 348 842 313 987
Operating expenses (317 544) (267 636)
Other income, net 1 315 1 043
Results from operating activities 32 613 47 394
Finance income 5 285 5 279
Finance costs (35 511) (19 722)
Net finance costs (30 226) (14 443)
Share of profit of equity accounted investees
(net of income tax) 12 92
Profit before income tax 2 399 33 043
Income tax expense (4 486) (8 242)
(Loss)/profit for the period (2 087) 24 801
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Net change in fair value of available-for-sale financial assets (109) (102)
Change in fair value of available-for-sale financial assets transferred to profit or loss - 30
Foreign currency translation differences for foreign operations 81 23
Income tax on items that are or may be reclassified subsequently to profit or loss 20 14
Total items that are or may be reclassified subsequently to profit or loss (8) (95)
Items that will never be reclassified to profit or loss:
Remeasurements of the defined benefit liability 1 032 94
Income tax on items that will never be reclassified to profit or loss (131) (18)
Total items that will not be reclassified to profit or loss 901 76
Other comprehensive income/(loss) for the period, net of income tax 893 (19)
Total comprehensive (loss)/income for the period (1 194) (24 782)
(Loss)/profit attributable to:
Owners of the Company (1 840) 16 300
Non-controlling interest (247) 8 501
Total comprehensive (losses)/income attributable to:
Owners of the Company (947) 16 281
Non-controlling interest (247) 8 501
(Loss)/earnings per share
Basic and diluted (loss)/earnings per ordinary share (0,01) 0,11
Statement of Cash Flows
20
RUB mn
Six months ended
30 June 2013
Six months ended
30 June 2012
OPERATING ACTIVITIES
Profit for the period (2 087) 24 801
Adjustments for:
Depreciation and amortization 56 752 48 257
Finance costs 35 511 19 722
Finance income (5 285) (5 279)
Loss / (gain) on disposal of property, plant and equipment 1 128 190
Share of profit of equity accounted investees (net of income tax) (12) (92)
Gain from disposal of subsidiaries 12 -
Other non-cash transactions 154 (372)
Income tax expense 4 486 8 242
Operating profit before working capital changes and reserves 90 659 95 469
Change in trade and other receivables 10 509 (6 536)
Change in financial assets related to employee benefit fund 71 259
Change in inventories (5 210) (4 943)
Change in trade and other payables (553) 12 575
Change in employee benefit liabilities (256) (377
Change in provisions (3 793) 2 749
Cash flows from operations before income taxes and interest paid 91 427 99 196
Income taxes paid (6 256) (6 088)
Interest paid (17 576) (14 121)
Net cash flows from operating activities 67 595 78 987
INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangible assets (86 003) (108 262)
Proceeds from sale of property, plant and equipment 2 115 1 093
Acquisition of investments and placement of bank deposits (32 874) (45 744)
Proceeds from sale of investments and withdrawal of bank deposits 62 586 53 809
Dividends received - 17
Interest received 3 349 2 705
Net cash flows used in investing activities (50 827) (96 382)
FINANCING ACTIVITIES
Proceeds from loans and borrowings 86 076 43 382
Repayment of loans and borrowings (69 997) (26 436)
Purchase of non-controlling interest in subsidiaries (764) (4 948)
Proceeds from shares issued 500 5 734
Dividends paid - (29)
Payment of finance lease liabilities (1 000) (2 290)
Net cash flows used in financing activities 14 815 15 413
Net (decrease) / increase in cash and cash equivalents 31 583 (1 982)
Cash and cash equivalents at the beginning of the period 59 815 74 480
Cash and cash equivalents at the end of the period 91 398 72 498
