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JSC Russian Grids financial results for 2013

JSC Russian Grids financial results for 2013 24.04.2014

24 April 2014. Moscow, Russia – JSC Russian Grids (LSE: RSTI) (the “Company”), the largest electricity distribution and transmission grid company in Russia, today announces its audited financial results in accordance with the International Financial Reporting Standards (IFRS) for the year ended 31 December 2013.

    Key financial indicators:
  • Revenue: RUB 759.8 bn (FY 2012: RUB 652.2 bn)
  • EBITDA: RUB (58.6) bn (FY 2012: RUB 168.8 bn)
  • Adjusted EBITDA 1: RUB 233.2 bn (FY 2012: RUB 211.4 bn)
  • Net (loss) /profit: RUB (159.4) bn (FY 2012: RUB 43.9 bn)
  • Adjusted net profit 2: RUB 74.0 bn (FY 2012: RUB 77.9 bn)
  • Net cash flows generated by operating activities: RUB 151.0 bn (FY 2012: RUB 153.0 bn)
    Key operating results:
  • Electricity transmission: 706 bn kWh (FY 2012: 707.4 bn kWh)
  • Technological connection services: 30,622 MW (FY 2012: 20,381 MW)
  • Electricity sale: 34,765,000 kWh (FY 2012: 24,345,000 kWh)
    Key corporate highlights:
  • Issue of 113,207,158,894 additional ordinary shares.
  • Registration of amendments to the Company’s charter concerning the change of the Company’s name from MRSK Holding to JSC Russian Grids on 4 April 2013.
  • Completion of restructuring by including shares of Federal Grid Company owned by the Russian Federation into the Company’s authorised capital and placement of additional ordinary shares among the existing shareholders.
  • Appointment of Oleg Budargin as CEO of the Company.
    Subsequent events:
  • Assumption of the guaranteed supplier function by some subsidiaries.
  • Affirmation of “Ва1” credit rating and change of the outlook from “developing” to “stable” by Moody's.
  • Assignment of long-term credit rating of 'BBB-' by Standard & Poor's.
  • Development of the consolidated investment programme for 2015-2019.

Commenting on the results of 2013, Andrey Demin, First Deputy Director General for Economic Affairs and Finance of JSC Russian Grids, said:

“2013 saw a large-scale restructuring of the Company through the successful additional share issue and inclusion of Federal Grid Company in the Russian Grids Group. The restructuring represented an important milestone that helped create new opportunities for increasing administrative and operating efficiencies and ensuring more systemic grids infrastructure development.

At the same time, 2013 saw the slowing economic growth and consequent tightening of the tariff policy by the government, including the cancellation of tariff indexation in 2014 and restriction of growth to the inflation level in 2015-2016. Impairment of fixed assets and the downward revision of long-term electricity tariff estimates had a negative effect on the non-adjusted EBITDA and net income in 2013, while there was positive dynamics on the adjusted EBITDA y-o-y.

Our revenue in 2013 grew by 16.5% y-o-y to RUB 759.8 bn as certain subsidiaries started performing the guaranteed supplier function which enabled them to purchase electricity in the wholesale market and sell it in the retail market, in addition to providing electricity transmission services.

In 2014, we will focus on decreasing operating and investment expenses in order to increase our financial and operating efficiency and strengthen the financial position of the Company.”


FINANCIAL SUMMARY

billions, RUB FY 2013 FY 2012 Change %
Revenue 759.8 652.2 16.5
Operating  expenses 914.5 564.5 62.0
Operating expenses (excl. impairment of property, plant and equipment, accounts receivable and advances paid) (655.2) (550.3) 19.1
incl. amortisation (115.9) (97.7) 18.6
Operating (loss)/profit (148.8) 91.1 -
Operating profit (excl. impairment of property, plant and equipment, accounts receivable and advances paid) 110.6 105.3 5.0
EBITDA  (58.6) 168.8 -
Adjusted EBITDA 233.2 211.4 10.3
Net (loss)/profit (159.4) 43.9 -
Adjusted net profit 74.0 77.9 (5.0)
Net cash flows from operating activities 151.0 153.0 (1.3)


In 2013, the Company increased revenue by 16.5% y-o-y up to RUB 759.8 bn (FY 2012: RUB 652.2bn). The growth was related to the increase in revenue from electricity sales as some subsidiaries of the Company started to perform the guaranteed supplier function in 12 regions of the Russian Federation.

Revenue from electricity transmission grew by 5.5% as a result of tariff increases effective 1 July 2012 and 1 July 2013.

The share of technological connection in the Company’s revenue shrank by 18.7% mainly due to the provision of technological connection services to consumers at reduced tariffs and the implementation of a roadmap for improving the infrastructure accessibility approved by the government of the Russian Federation.

Operating expenses (excl. impairment of property, plant and equipment, accounts receivable and advances paid) amounted to RUB 655.2 bn, representing an increase by 19.1% y-o-y (FY 2012: RUB 550.3 bn). The growth of operating expenses was mainly related to the increase in amortisation as a result of new capacity commissioning, cost of purchased electricity for resale and personnel expenses due to the personnel growth related to the guaranteed supplier functions, as well as to the commissioning of new facilities as part of the investment programme.

Adjusted EBITDA grew by 10% y-o-y to RUB 233 bn (FY 2012: RUB 211.4 bn). The increase is largely related to the decrease in manageable operating expenses due to the implementation of a programme aimed at increasing operating efficiency and slower growth of expenses for electricity purchase for compensation of losses compared to the growth of revenue. EBITDA including losses from impairment of property, plant and equipment and allowance for accounts receivable and advances paid decreased to RUB (58.6) bn compared to RUB 168.8 bn in 2012.

The Company’s net loss amounted to RUB 159.4 bn (net profit for FY 2012: RUB 43.9bn). The decline was mainly due to the recognition of property, plant and equipment impairment as a result of the decrease in long-term tariff estimates compared to the previous estimates. Adjusted net profit decreased by 5% y-o-y to RUB 74.0 bn (FY2012: RUB 77.9 bn) due to the high amortisation growth related to the commissioning of fixed assets as part of the investment programme.

In 2013, total debt amounted to RUB 884.3 bn, an increase of 14.8% (FY 2012: RUB 770.1 bn), while net debt totaled RUB 488.1 bn (FY 2012: RUB 382.0 bn).

Total assets of the Company declined by 2.3% y-o-y and amounted to RUB 1,946 bn (FY 2012: RUB 1,993bn) mainly due to the recognition of fixed assets impairment.

As of 31 December 2013, the Company’s cash balances rose by 3.5% and stood at RUB 61.9 bn (FY 2012: RUB 59.8 bn).


Outlook:

In 2013, electricity consumption contracted by 0.58% y-o-y and amounted to 1,009,816 bn kWh, which was primarily due to the slower economic growth.

The outlook for electricity consumption in 2014 has been designed in accordance with the scenarios of the socio-economic development of Russia. It is based on the factual electricity consumption in recent years and the analysis of the existing orders and signed agreements for technological connection services. In 2014, electricity consumption in Russia is expected to amount to 1, 016,664 bn kWh which represents a 0.68% increase y-o-y.

The Government of the Russian Federation has approved the strategy for electricity grid development (decree № 511-r dated 3 April 2013), which is aimed at decreasing operating expenses in the industry by 15% by 2017 compared to 2012, adjusted for inflation, per unit of electric equipment services and maintenance. According to the approved strategy, investment expenses are expected to decline by 30% by 2017 compared to 2012, while electricity losses are expected to be scaled back by 11% compared to 2012.

Russian Grids’ priority for 2014 is to further improve its operating efficiency as it aims to outpace the decrease in operating expenses set by the strategy for electricity grid development and achieve a target of 16.9% by 2017, compared to 2012 and adjusted for inflation, per unit of electric equipment services and maintenance. Russian Grids expects to meet the targets for the decrease in investment expenses and electricity losses set by the strategy.

* * *

A conference call for investors and analysts will be held today at 2:00PM London / 5:00PM Moscow / 9:00AM New York.

The conference call will be hosted by Oksana Shatokhina, Deputy Director General for Economic Affairs of the Company.

The conference call will be held in Russian, with simultaneous translation into English on a separate line.

To participate in the conference call, please use the following access details:

Participant dial-in:
UK dial-in: +44 (0) 20 3427 1900
Russia dial-in: +7 495 705 9450
USA dial-in: +1 646 254 3366
Confirmation code: Russian version: 9319165
English version: 5325396

Participants are advised to dial in 5-10 minutes prior to the start time.

The call will be recorded and there will be a replay facility available for 7 days until 1 May 2014 as follows:
UK dial-in: +44 (0) 20 3427 0598
Russia dial-in: +7 495 705 9453
Russia free phone: 810 800 2870 1012
USA dial-in: +1 347 366 9565
Replay passcode: Russian version: 9319165
English version: 5325396

The press release, presentation and IFRS report will be available on the Company's website: http://www.rosseti.ru/eng/.

* * *

For further information:
JSC Russian Grids
Maria Stepanova, Head of IR +7(495) 995 5333 (ext. 3961)
Yulia Martynova, IR +7 (495) 995 5333 (ext. 3834)

FTI Consulting
Larisa Millings +44 (0)20 3727 1364
Maria Shiryaevskaya +7 (495) 795 0623
Olga Lundquist +7(495) 795 0623

JSC Russian Grids is the largest electricity transmission and distribution grid company in Russia. It is also one of the largest electricity transmission and distribution grid companies in the world by length of electricity lines and installed transformer capacity. JSC Russian Grids holds interests in and manages 15 distribution grid companies and Federal Grid Company in Russia. The Company together with its subsidiaries owns and operates 2.25 million kilometers of electricity transmission and distribution lines with a total installed transformer capacity of 743 GVA. The Company operates in 74 regions of Russia covering the area of 13.6m sq. km.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of JSC Russian Grids. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might” the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industry, as well as many other risks specifically related to JSC Russian Grids and its operations.

Group of companies “Russian Grids”
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2013
(in millions of Russian roubles, unless otherwise stated)

 
Year ended
31 December 2013
Year ended
31 December 2012
(restated)
Revenue and government subsidies 759,779 652,183
Operating expenses (914,495) (564,470)
Other income, net 5,895 3,364
Results from operating activities (148,821) 91,077
Finance income 9,049 9,885
Finance costs (50,618) (41,425)
Net finance costs (41,569) (31,540)
Share of (loss)/profit of equity accounted investees (net of income tax) (11) 71
(Loss)/profit before income tax (190,401) 59,608
Income tax benefit /(expense) 31,012 (15,753)
(Loss)/profit for the year (159,389) 43,855
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 (123) (106)
Net change in fair value of available-for-sale financial assets transferred to profit or loss - (17)
Foreign currency translation differences 26 (50)
Related income tax 25 28
Total items that are or may be reclassified subsequently to profit or loss (72) (145)
Items that will never be reclassified  to profit or loss:  
 
Remeasurements of the defined benefit liability (3,879) (4,595)
Related income tax 752 761
Total items that will not be reclassified  to profit or loss (3,127) (3,834)
Other comprehensive loss for the year net of income tax (3,199) (3,979)
Total comprehensive (loss)/income for the year (162,588) 39,876
(Loss)/profit attributable to
Owners of the Company
(132,113) 25,375
Non-controlling interest (27,276) 18,480
Total comprehensive (losses)/income attributable to:  
 
Owners of the Company (134,332) 22,683
Non-controlling interest (28,256) 17,193
(Loss)/earnings per share  
 
Basic and diluted (loss)/earnings per ordinary share (in RUB) (0.82) 0.17



Group of companies “Russian Grids”
Consolidated Statement of Financial Position as at 31 December 2013
(in millions of Russian roubles, unless otherwise stated)

 
31 December 2013 31 December 2012
(restated)
31 December 2011
(restated)
ASSETS  
 
 
Non-current assets  
 
 
Property, plant and equipment 1,595,862 1,639,737 1,440,830
Intangible assets 16,557 13,929 11,340
Investments in equity accounted investees 1,202 1,188 1,891
Non-current accounts receivable 7,442 12,559 17,128
Other investments and financial assets 27,309 60,687 92,549
Deferred tax assets 9,012 4,102 2,599
Total non-current assets 1,657,384 1,732,202 1,566,337
 
 
 
 
Current assets  
 
 
Inventories 23,920 20,855 19,227
Other investments and financial assets 53,306 56,056 27,799
Current tax assets 5,568 5,300 6,426
Trade and other receivables 143,944 118,274 102,868
Cash and cash equivalents 61,917 59,815 74,480
Total current assets 288,655 260,300 230,800
Total assets 1,946,039 1,992,502 1,797,137



Group of companies “Russian Grids”
Consolidated Statement of Financial Position as at 31 December 2013
(in millions of Russian roubles, unless otherwise stated)

 
31 December 2013 31 December 2012
(restated)
31 December 2011
(restated)
EQUITY AND LIABILITIES  
 
 
Equity  
 
 
Share capital 163,154 49,947 45,039
Share premium 212,978 16,244 6,036
Treasury shares (2,819) (2,819) (2,819)
Reserve for issue of shares - 19,751 9,382
Other reserves (6,265) (4,046) (1,354)
Retained earnings 398,711 807,577 777,104
Total equity attributable to equity holders of the Company 765,759 886,654 833,388
Non-controlling  interest 295,932 335,765 325,731
Total equity 1,061,691 1,222,419 1,159,119
 
 
 
 
Non-current liabilities  
 
 
Loans and borrowings 492,229 381,868, 296,759
Trade and other payables 14,487 15,061 30,063
Employee benefits 28,971 24,278 19,995
Deferred tax liabilities 38,715 72,818 67,339
Total non-current liabilities 574,402 494,025 414,156
 
 
 
 
Current liabilities  
 
 
Loans and borrowings 57,808 59,906 30,955
Trade and other payables 241,266 200,042 185,686
Provisions 10,397 14,566 6,419
Current tax liabilities 475 1,544 802
Total current liabilities 309,946 276,058 223,862
Total liabilities 884,348 770,083 638,018
Total equity and liabilities 1,946,039 1,992,502 1,797,137

Group of companies «Russian Grids»



Group of companies “Russian Grids”
Consolidated Statement of Cash Flows for the year ended 31 December 2013
(in millions of Russian roubles, unless otherwise stated)

 
Year ended
31 December 2013
Year ended
31 December 2012
(restated)
OPERATING ACTIVITIES  
 
  (Loss)/profit for the year (159,389) 43,855
Adjustments for:  
 
Depreciation and amortization 115,942 97,795
Impairment of property, plant and equipment 239,446 4,706
Finance costs 50,618 41,425
Finance income (9,049) (9,885)
Loss on disposal of  property, plant and equipment 3,245 1,332
Share of loss//(profit) of equity accounted investees (net of income tax) 11 (71)
Gain from disposal of subsidiaries - (56)
Other non-cash transactions 171 4,040
Income tax (benefit)/expense (31,012) 15,753
Operating profit before working capital changes and reserves 209,983 198,894
Change in trade and other receivables (20,255) (16,395)
Change in financial assets related to employee benefit fund 5 (310)
Change in inventories (3,041) (1,637)
Change in trade and other payables 15,823 5,817
Change in employee benefit liabilities (869) (1,676)
Change in provisions (4,169) 8,147
Cash flows from operations before income taxes and interest paid 197,477 192,840
Income taxes paid (9,050) (9,929)
Interest paid (37,448) (29,937)
Net cash flows from operating activities 150,979 152,974
 
 
 
INVESTING ACTIVITIES  
 
Acquisition of property, plant and equipment and intangible assets (268,452) (285,894)
Proceeds from sale of  property, plant and equipment 1,507 2,115
Acquisition of investments and placement of bank deposits (97,447) (91,261)
Proceeds from disposal of investments and withdrawal of bank deposits 101,904 68,249
Disposal of subsidiaries, net of cash disposed of - 144
Disposal of investment in equity accounted investee - 800
Dividends received 47 33
Interest received 7,290 5,634
Net cash flows used in investing activities (255,151) (300,180)
FINANCING ACTIVITIES  
 
Proceeds from loans and borrowings 293,076 172,796
Repayment of loans and borrowings (185,484) (55,080)
Proceeds from shares issued 4,295 25,485
Purchase of non-controlling interest in subsidiaries (764) (5,898)
Dividends paid (3,469) (1,506)
Repayment of finance lease liabilities (1,381) (3,256)
Net cash flows from financing activities 106,273 132,541
Net increase/(decrease) in cash and cash equivalents 2,102 (14,665)
Cash and cash equivalents at beginning of year 59,815 74,480
Cash and cash equivalents at end of year (Note 18) 61,917 59,815



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