IFRS Financial Results for 1H2014 - PowerPoint PPT Presentation

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IFRS Financial Results for 1H2014
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IFRS Financial Results for 1H2014

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  1. IFRS Financial Resultsfor 1H2014 August 29, 2014

  2. Disclaimer • The information contained in this presentation has been prepared by the Company and presented on an “as is” and “as available” basis, and, consequently, you shall bear the risks associated with the use of and reliance upon such information. The recipient shall not rely upon the information contained herein or its completeness, accuracy, or objectivity, for any purposes. The information contained herein shall be verified for authenticity, completeness, and updates. • Some information contained in this presentation may contain forecasts and assertions concerning future events or financial performance of ROSSETI (“Company”) and its subsidiaries. Such assertions are based on numerous assumptions related to the current and future plans of the Company’s business strategy and the conditions in which such strategy will be pursued in the future. We caution you that such assertions shall not guarantee certain results in the future and are connected with risks, uncertainty, and assumptions that may not be predicted with full certainty. Consequently, the actual results and outcomes of activities may be substantially different form the presumptions or forecasts stated in such assertions with respect to any future events. Such assertions are made as of the date of this presentation and are subject to change without notice. We have no intention of updating such assertions to bring them into line with any actual results. • This is not a prospectus or advertisement of any securities. This is not an offer or invitation to sell, or a recommendation to subscribe to or buy any securities. Nothing contained herein shall form the basis of any contract or commitment whatsoever. 2

  3. May 16, 2014 February 10, 2014 February 10, 2014 March 27, 2014 April 28, 2014 May 20, 2014 May 26, 2014 The Procurement Policy is approved. The Company’s GDRs were admitted to trading on the Moscow Exchange on May 28, 2014. Standard & Poor’s assigned a BBB- long-term credit rating to Rosseti. Moody’s affirms ROSSETI’s Ba1 corporate rating and revises the rating outlook from developing to stable. The Innovative Development, Energy Conservation, and Energy Efficiency Enhancement Policy is approved. A strategic cooperation agreement is signed with State Grid Corporation of China. The Strategy for Developing and Improving the Internal Control System of ROSSETI and Subsidiaries and Dependent Companies is approved. Key Corporate Highlights 3

  4. Key Financial Results Revenue bn RUB (adj.1) EBITDA bn RUB +6,0% +8,6% +5,0% +27,5% (adj.2) Net debt bn RUB Net income bn RUB 1 - Adjusted EBITDA is calculated as EBITDA excluding losses from impairment of available-for-sale investments, promissory notes and accounts receivable; 2 - Adjusted net profit is calculated as net profit for the period excluding losses from impairment of available-for-sale investments, promissory notes, accounts receivable and deferred income tax expense related to them. 4

  5. Key Financial Indicators • Revenue grew mainly due to increased revenue from electricity transmission as a result of the average tariff of electricity distribution servicesgrew. • Operating expenses increased due to the growth of the price of electricity distribution services provided by other distribution grid companies (specifically, because of tariff grew of territorial grid organizations), personnel expenses (related to the indexation of salaries in accordance with the current Industry Agreement dated 1 July 2013 and from the increase in personnel expenses due to the commissioning of new facilities), amortization expenses (related to the commissioning of facilities as part of the investment programme), and provisioning for accrued for estimated liabilities, including provisioning for legal proceedings (mainly in relation to electricity distribution services contracts of territorial grid organizations). • The key factors contributing to a rise in EBITDA and Net Profit were the accelerated growth of revenue above the growth of operating expenses and decrease in financial expenses related to the reduction of losses from impairment of investments (specifically, the recognized impairment losses on shares in Inter RAO as a result of the decrease in their market value in the 1st half of 2013). • Adjusted EBITDA went up due to increased operating profit (resulting from higher revenue from electricity distribution) and profit before tax and because of a rise in interest expenses (resulting from the Company’s increased loan portfolio) and higher depreciation and amortization (as a consequence of putting into operation new capital assets covered by the capex program). • Adjusted Net Profit was up due to a growth in revenue from electricity transmission services. • The Group’s increased net debt was due to the growth of the loan portfolio as the Company attracted loan facilities to finance its investment programme. 1 - Adjusted EBITDA is calculated as EBITDA excluding losses from impairment of available-for-sale investments, promissory notes and accounts receivable; 2 - Adjusted net profit is calculated as net profit for the period excluding losses from impairment of available-for-sale investments, promissory notes, accounts receivable and deferred income tax expense related to them. 3 - Definite relative figures had been reclassificated for making comparable with reporting period data. 5

  6. Revenue Structure Revenue from electricity distribution services accounted for over 81% of revenue in the 1st half of 2014 Revenue Structure • The growth in revenue from electricity transmission services was largely due to the higher average tariff of electricity distribution services; • The rise in electricity sales revenue was due to higher electricity tariffs; • The rise in revenue from network connection services was due to the larger number of signed network connection contracts as a result of the implementation of the Action Plan (Road Map) “Enhancing the Affordability of the Power Infrastructure” approved by the Decree of the Government of the Russian Federation No. 1400-r of August 09, 2013. 1–Definite relative figures had been reclassificated for making comparable with reporting period data. 6

  7. Operating Expenses Structure Operating expenses change factors • Personnel costs: increased due to wage indexation in accordance with the current Sectorial Wage Rate Agreement and due to the commissioning of new facilities under the capex program. • Electricity distribution expenses: increased primarily due to higher tariffs of territorial grid organizations. • Depreciation and amortization and impairment: increased as a consequence of putting into operation new capital assets covered by the capex program. • Purchased electricity for resale: increased due to higher tariffs of purchased electricity. • Taxes except profit tax: increased largely because of property tax raised by amendments to tax legislation (gradually abolished tax relief on property related to power lines since January 1, 2013). • Impairment of receivables: decreased due to substantial provisioning in 2013 in connection with the supplier of last resort functions taken on and performed by ROSSETI subsidiaries in 12 Russian regions. • Other expenses: increased due to provisioning for estimated liabilities for certain subsidiaries. 7 1–Definite relative figures had been reclassificated for making comparable with reporting period data.

  8. Debt Position Total debt breakdown bn RUB Debt maturity structure bn RUB Average weighted rate trends Credit ratings • Rosseti –“BВВ-” S&P(March2014), “Ba1” Moody’s (July 2010) • Lenenergo– “Ba2” Moody’s(November 2009) • MOESK - “Ba2” Moody’s, “BВ” S&P, “ВВ+“Fitch • (October2007 /January 2012/August 2013) • 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 Volga - “Ba2” Moody’s(October 2012) • FGC UES - “Baa3“Moody’s, «ВВВ» Fitch, «ВВВ-» S&P (February 2006/ October 2013/March 2014) 8

  9. EBITDA adj. Analysis 9

  10. Net Income adj. Analysis • * - Including deferred income tax expenses 10

  11. Free Cash Flow 11

  12. Key Balance Sheet Indicators Key factors affecting changes in balance sheet indicators Assets Liabilities • Key factors contributing to changes in the value of non-current assets: • increased value of property, plant and equipment largely due to putting into operation new facilities under the capex program; • increased non-current accounts receivable due to a rise in overdue receivables for electricity distribution services. • Key factors contributing to changes in the value of current assets: • higher costs of building materials and a growth in inventories due to certain subsidiaries’ switching over to using their own resources to carry out repairs; • considerably increased cash and cash equivalents due to a rise in cash at banks, including as a result of bank deposits closed as at the balance sheet date. • Key factors contributing to changes in the structure of equity: • increased retained earnings resulting from the reporting period. • Key factors contributing to changes in the structure of liabilities: • increased trade and other payables resulting from a rise in advance payments received for network connection services due to the larger number of signed network connection contracts; • increased loans and borrowings aimed at implementing the capex program; • increased other provisions due to additional provisioning for estimated liabilities (mainly in relation to electricity distribution services contracts of territorial grid organizations, including retail operations arising from the supplier of last resort functions performed by certain subsidiaries). 12

  13. Areas covered by the capex program 2015-2019* • Capex program Sources of financing in 1H2014 New capacity and lines commissioning (`000 km) Financing dynamics bn RUB (incl. VAT) • Capex program for 2015–2019:* • Commissioning of transformer capacity: 107,5 GVA • Commissioning of power lines: 99,000 km * Targets, pending approval from federal executive authorities 13

  14. Thank you! 14

  15. Appendix 15

  16. Financial Position Statement 16

  17. Comprehensive Income Statement 17

  18. Cash Flow Statement 18