IR Releases

31.07.2015

Lenenergo released its financial statements for 6M2015 prepared in accordance with RAS

Indicator

Unit

6M2014

6M2015

Change

 6M2015/

6M2014,
%

 

Operating Results

Productive electricity supply

mln kWh

14,516

14,461

-0.4%

 

Electricity losses

%

10.51

12.20

1.69 p.p.

 

Connected capacity

MW

130

150

15.1%

 

Revenue and Financial Result

Sales revenue, including:

RUB mln

20,105

19,957

-0.7%

 

- from electricity transmission services

RUB mln

18,436

18,575

0.8%

 

- from technological connection services

RUB mln

1,560

1,301

-16.6%

 

- from other industrial activity

RUB mln

110

81

-26.3%

 

Cost

RUB mln

19,303

20,127

4.3%

 

Gross profit (loss)

RUB mln

803

-170

-121.2%

 

Profit (loss) before taxes

RUB mln

-2,494

-5,671

-

 

Net profit (loss)

RUB mln

-2,504

-5,090

-

 

EBITDA *

RUB mln

3,222

1,345

-58.2%

 

EBITDA margin

%

16.0%

6.7%

-9.3 p.p.

 

Credit Portfolio and Debt Position

Loans and credits **

RUB mln

42,701

48,345

13.2%

 

Average credit offered rate

%

8.22%

10.22%

2.00 p.p.

 

Net Debt

RUB mln

25,998

42,680

64.2%

 

Net Debt/EBITDA* for 4 quarters

х

2.4

4.4

-

 

Investment Program

Capex

RUB mln

6,719

2,855

-58%

 

* The indicator is calculated as EBITDA = Net profit + income tax + Depreciation + Interest expense + Provision for impairment of debt financial
investments.

** The amount of outstanding borrowings (debt of the Company) including interest (sum of lines 1410 and 1510 of the balance sheet) is reflected.

Formation of Revenue and Financial Result

Sales revenue for 6 months 2015 amounted to RUB 19,957 mln, the revenue decrease was RUB 148 mln, or 1%, compared to the same period of 2014.

The drop of revenue was influenced by decreased revenue from technological connection and other industrial activity.

The decrease in revenue from technological connection services by RUB 259 mln, or 17%, at a simultaneous growth in the volume of connected capacity by 20 MW, or 15% compared to 6M2014 was due to the implementation in 2015 of obligations under contracts concluded at lower rates.

The decrease in revenue from other industrial activity compared to 6M2014 amounted to RUB 29 mln, or 26%, and was due to the inclusion in 2014 of income from facilities maintenance of Kubanenergo, rendered in the period of preparation and holding of the XXII Olympic Winter Games and XI Paralympic Winter Games.

Thus, there was an increase in revenue from electricity transmission services by RUB 139 mln, or 1% due to the increase in the average tariff for electricity transmission by 1%.

Electricity losses for 6 months 2015 increased by 1.69 percentage points over the fact of 6M2014 and amounted to 12.20%. The growth of losses was due to the transition from June 2014 on AIMS CEM in the cross section of Lenenergo - FGC UES to determine the amount of electricity supply to the network of Lenenergo (the calculation method agreed upon by the parties was previously applied). Thus, since the level of electricity consumption by the consumers of St. Petersburg and the Leningrad Region has not changed significantly, the increase in electricity supply in the network has resulted in the growth of factual losses in the electric networks of Lenenergo.

Cost of services (including depreciation) for 6 months 2015 amounted to RUB 20,127 mln, the growth compared to 6M2014 was RUB 825 mln, or 4%.  The cost increase was primarily influenced by the growth of costs for purchased power to compensate for losses not regulated by the Company and the increase of depreciation of fixed assets. Thus, decreased operating expenses for a number of articles were associated with the implementation of the Company’s plan of measures on increase of efficiency and improvement of the Company’s economic and financial position regarding costs optimization.

Gross profit of Lenenergo for 6M2015 totaled (RUB 170 mln) that is below the indicator of the similar period of previous year by RUB 973 mln. For 6M2015, the Company received gross profit of RUB 803 mln.

Net loss for 6 months 2015 amounted to RUB 5,090 mln, and the financial result was below the indicator of the same period of 2014 by RUB 2,586 mln (for 6M2014, the Company received net loss of RUB 2,504 mln). The main influence on the increase in net loss was rendered by the drop of gross profit and the growth of the negative balance of other income and expenses relative to the same period of 2014 through the establishment of valuation allowances on doubtful debts.

EBITDA Formation

EBITDA characterizing cash flow generated by the Company before taxes and interest payments for 6M2015 totaled RUB 1,345 mln and dropped by RUB 1,877 mln, or 58%.

The decrease in EBITDA was also influenced by the drop in gross profit (w/o depreciation) and establishment of valuation allowances on doubtful debts.

The share of EBITDA in revenue (EBITDA margin) dropped by 9.3 percentage points compared to 6M2014 and amounted to 6.7% (as a result of lower EBITDA values at insignificant changes in revenue).

Credit Portfolio and Debt Position

The growth of debt on loans and credits as of 30.06.2015 compared to the same period of last year was RUB 5,644 mln, or 13%. Loans and credits were raised to finance of the Company’s Capex program.

The weighted average rate on raised borrowings as at 30.06.2015 amounted 10.22% and exceeds the value of the indicator for the similar period of the previous year by 2 percentage points due to the deterioration of the situation on the capital market and raising interest rates on existing and concluded loan agreements.

The increase in Net Debt for 6 months 2015 to the level of the same period of 2014 exceeds the growth of debt on borrowings due to the reduced value of the most liquid assets at the end of the period (the sum of short-term investments and cash).

The ratio of Net Debt/EBITDA for 4 quarters increased by 2 points compared to the same period of 2014 due to the growth in net debt and decline in the value of EBITDA for 4 quarters.

Investment Activity

Capex in 1H 2015 amounted to RUB 2,855 mln, which is 58% below the indicator of 1H 2014 (RUB 3,864 mln).


Capex program implementation

6M2014

6M2015

Change

 6M2015/

6M2014,

%

Capex, RUB mln (w/o VAT)

6,719

2,855

-58%

Commissioning of fixed assets, RUB mln

4,660

1,790

-62%

Financing, RUB mln (VAT included)

9,882

4,877

-51%

Capacity input, MVA

245

116

-53%

Capacity input, km

735

183

-75%

The decline in Capex program implementation in 1H 2015 compared to the same period in 2014 was due to decreased volumes works on the objects of the investment program, including on distribution networks 0.4-10 kV for technological connection of subscribers, in connection with the absence of possibilities to raise credit funds in the planned scope to finance the Capex program and implementation of the program only to the extent of available funding sources.

Forward-Looking Statements Regarding Expected Results in 2015:

Due to the deteriorating financial performance of Lenenergo by the end of 2014, the Group has prepared the Plan of actions to increase efficiency and improve the economic and financial position of Lenenergo, which includes the following activities undertaken by the Company in 2015 and subsequent periods: 

·  revision of tariff balance decisions in the territory of the Group’s presence in 2015;

·  optimization of operating (controllable) expenses of the Company;

·  optimization of investment costs and revision (adjustment) of the Company’s investment program for 2015;

·  approval of the Company’s long-term investment program and optimization of investment costs for the period until 2020;

·  settlement of disputes between the Company and third-party grid organizations, operating on the territory of St. Petersburg and the Leningrad Region;

·  consolidation of network organizations functioning on the territory of St. Petersburg and the Leningrad Region on the basis of Lenenergo;

·  repayment of debt;

·  etc.

For reference:
PJSC LENENERGO is the largest distribution grid company (the operator of 0.4-110 kV networks) on the territory of St. Petersburg and the Leningrad Region.
Financial statements of Lenenergo and information for shareholders and investors are available on the Company’s website at http://www.lenenergo.ru/shareholders/open_info/