IR Releases

25.08.2014

Lenenergo released IFRS financial statements for the 6 months 2014

Lenenergo released IFRS financial statements for the 6 months 2014. Revenues were up 32% YOY, EBITDA increased by 8% up to RUB 4,015 mln. Net profit totaled RUB 330 mln

The conclusion of the Company’s auditor Ernst & Young LLC based on the results of review states that the accompanying interim condensed consolidated financial statements for the period from 1 January 2014 to 30 June 2014 are prepared, in all material respects, in accordance with IAS 34.

 

RUB mln, unless otherwise stated

 

Indicator

6M 2014

6M 2013

For reference:

31.12.2013

Change, %

 

For 6M

2014

6M 2014/

6M 2013

Operational indicators

 

 

Productive electricity supply, mln kWh

14,516

14,119

29,613

-

2.8%

 

Electricity losses, %

10.51

10.97

10.11

-

-0.46 p.p.

 

Connected capacity, MW

130

94

371*

-

38.3%

Financial indicators

 

 

Assets

132,256

      105,992  

120,845

9.4%

-

 

Equity 

49,715

        43,760  

49,465

0.5%

-

 

Liabilities, including:

82,541

        62,232  

71,380

15.6%

-

 

- non-current liabilities

44,888

        27,027  

34,700

29.4%

-

 

- current liabilities

37,653

        35,205  

36,679

2.7%

-

 

Revenues, including:

18,185

        13,806  

37,323

-

31.7%

 

- from electricity transmission

15,504

        11,357  

27,480

-

36.5%

 

- from connection

1,652

          1,328  

6,807

-

24.3%

 

- other

1,030

          1,121  

3,036

-

-8.1%

 

Operating expenses

16,538

        12,080  

31,008

-

36.9%

 

Operating profit

1,648

          1,727  

6,316

-

-4.6%

 

EBITDA

               4,015  

3,707

10,358

-

8.3%

 

EBITDA margin, % 

22.1%

26.9%

27.75%

-

-4.8 p.p.

 

Net profit

330

              582  

3,281

-

-43.4%

 

Net profit margin, % 

1.81%

4.22%

8.79%

-

-2,4 p.p.

 

Net debt

25 674

23,604

23,300

10.2%

-

 

Net debt/EBITDA

2.

2.

2.2

-

-

* The actual amount of connected capacity is specified without taking into account the closing in 2013 of contracts for technological connection of generating facilities in the amount of 400 MW under low individual rates.

EBITDA is calculated as profit before tax plus depreciation of fixed assets and intangible assets plus financial expenses minus financial income.

Net debt is calculated as long-term and short-term credits and loans minus cash and cash equivalents and short-term investments as of the end of the period.

When calculating the ratio of Net debt/EBITDA the value of net debt for the end of the reporting period, and EBITDA for the last 12 months shall be used.

Revenues

Revenues from electricity transmission services for the 6 months ended 30 June 2014 net of normative (expected) losses of RUB 2,932 mln were RUB 15,504 mln, 37% higher than for the same period of 2013 (RUB 11,357 mln). The main revenues were received from customers – JSC Petersburg Sales Company and JSC RSK-Energo.

Revenues growth from electricity transmission was due to the increase of the average tariff by 26.2% caused by the increase of approved joint-operations tariffs for electricity transmission services in 2014 compared to joint-operations tariffs for 2013, and changes in the joint-operations scheme of payments for services on electricity transmission in the zone of LLC RKS-energo, and therefore revenues in this zone were not reflected in the accounting of JSC Lenenergo in the 1st half of 2013 (by the end of 2013, the change in the joint-operations scheme of electricity transmission has not occurred, and acceptance of revenues to the accounting in full occurred in Q4 2013).

Revenues from technological connection services for the 6 months ended 30 June 2014 increased by 24% compared with the same period of 2013 ad totaled RUB 1,652 mln. Positive dynamics of revenues was laid when planning to perform the accumulated obligations towards applicants.

Other revenues for 2013 were RUB 1,030 mln, 8% lower than the indicator of last year. The main part of revenues falls at identified non-contractual electricity consumption.

Cost

The Group’s operating expenses in the reporting period were RUB 16,538 mln, 37% higher than in the same period of last year.  

RUB mln

6M 2014

6M 2013

Change, %

Transmission fee

7,523

5,340

41%

Payroll and payroll taxes

2,568

2,300

12%

Depreciation of property, plant and equipment

2,303

1,921

20%

Provision for litigations and claims

1,409

-41

-

Repairs and maintenance

532

476

12%

Taxes other than income tax

447

297

51%

Rent

260

232

12%

Telecommunication and information services

179

147

22%

Provision for impairment and write-off of receivables

161

83

94%

Raw materials and supplies

139

140

-1%

Internal security

90

70

29%

Social expenses

89

74

20%

Consulting, legal and audit services

82

63

29%

Utilities

69

63

10%

Amortisation of intangible assets

65

60

9%

Loss on impairment/(reversal of impairment) of intangible asset

46

17

167%

Agency services

45

218

-79%

Other operating expenses

532

620

-14%

Total

16,538

12,080

37%

Comments on basic expenses items:

  • Transmission fee
    Growth of expenses on electricity transmission by networks of third-party grid companies by 41% is associated with attempting to change the joint-operations scheme of payments for services on electricity transmission in the zone of third-party grid organization JSC LOESK in 2013, therefore these expenses were not reflected in the accounting of JSC Lenenergo in the 1st half of 2013 (by the end of 2013, the change in the joint-operations scheme of electricity transmission has not occurred, and acceptance of expenses on third-party grid organizations to the accounting in full occurred in Q4 2013);
  • Payroll and payroll taxes
    Growth of payroll by 12% is due to the indexation of salaries in connection with the performance of obligations of the employer under the Branch tariff agreement and measures to motivate the staff of key positions and professions;
  • Depreciation of property, plant and equipment
    Growth of expenses for depreciation of property, plant and equipment by 20% is driven by the increase in the book value of fixed assets in connection with the commissioning of fixed assets due to the implementation of the investment program;
  • Provision for litigations and claims
    Essential increase in provision for litigations and claims is caused by possible risks of recognition of expenses on large judicial proceedings due to disagreements regarding determination of volumes and cost of services in transmission of electricity of a number of third-party grid organizations. The most significant disagreements regarding payments exist with grid companies, such as JSC St. Petersburg Electrical networks, JSC Petrodvorets Electric Networks and other companies operating in the zone of JSC Lenenergo. The main point of contention is the type of tariff used in calculations and the lack of agreement on the essential terms of contracts for electricity transmission, stipulated by the current legislation of the Russian Federation. Lenenergo intends to defend legitimacy of its position in a judicial order. Final judicial practice on such disagreements at the date of report generation is not defined. The Company's management decided to evaluate the possible risks and to create the necessary reserves.

Financial result

By results of the 6 months 2014 Lenenergo Group of companies earned operating profit of RUB 1,648 mln (-4.6% to the same period of 2013). Net profit in the reporting period amounted to RUB 330 mln, which is 43% lower than the same indicator for the 6 months of 2013 (RUB 582 mln).

EBITDA for the 6 months 2014 was RUB 4,015 mln, which is 8% higher than the same indicator for the 6 months of 2013.

Debt position

Credit portfolio (the Company’s short-term credits and loans for the end of the reporting period) was RUB 42,705 mln, which is 28% higher than the same indicator for the end of 2013. Net debt as of 30.06.2014 was RUB 25,647 mln (+10.2% to the same indicator for the end of 2013). Net debt/EBITDA for the end of the reporting period did not exceed the recommended limits and totaled 2.4 times

Loan securities

For the 6 months ended 30 June 2014 the Group has fully fulfilled its obligations to pay coupon yield on the 2nd coupon of the 4th bond loan in the amount of RUB 127,140 thousand and on the 2nd coupon of the bond loan BO-01 in the amount of RUB 123,420 thousand. 

Credits

In the 1st half 2014 the Group received a number of tranches for the total amount of RUB 5,719 mln under the agreements signed with JSC Sberbank of Russia in 2013.

The Group received RUB 1,945 mln under the agreement about credit line opening signed with Sberbank in 2014, with an interest rate of 9.1% and a maturity up to April 2017.

In the 1st half 2014 the Group signed an agreement with Promsvyazbank under which it received RUB 1,650 mln with an interest rate of 9.41% and a maturity up to April 2017.

In the first half of 2014 the Group did not make repayments on existing loans.

Forward-looking statements regarding expected results of 2014:

At the time of preparation of the consolidated financial statements for 6 months 2014, the Company's management according to preliminary estimates formed an expectation on minor revenue decrease (less than 5%) and the adjusted financial result downward by the end of 2014.

Key factors in reducing the expected results are: reduction of electricity consumption and drop of revenues based on the results of consumer choice of the type of the applied tariff. The forecast reduction in energy consumption is based on the dynamics of decline in actual consumption in 1H 2014.

The forecast of revenues from services on technological connection of consumers to power grids remains unchanged.

The Company plans to offset the effect of revenues drop from electric power transmission services on its financial result by cost reduction and additional income from other activities.

Note: the Company provides its business planning in accordance with RAS. The forecast for 2014 has been published on the Company's website in the presentation “Key parameters of the adjusted Business plan for 2014 and forecast for 2015-2018” at http://upld.lenenergo.ru/iblock/a5d/ENG_Lenenergo_RAS_2014_Guidance.pdf