IR Releases

24.08.2015

Lenenergo releases its financial statements for 6M2015 prepared in accordance with IFRS

In the opinion of the Company’s auditor, LLC RSM RUS, the enclosed interim condensed consolidated financial statements as at 30 June 2015 fully comply with the requirements of IAS 34. 

 

RUB mln, unless otherwise stated

 

Indicator

6M2015

6M2014

For reference:

31.12.2014

Change, %

 

for 6M2015

6M2015/

6M2014

Operational indicators

 

 

Productive electricity supply, mln kWh

14,461

14,516

28,680

-

-0.38%

 

Electricity losses, %

12.20

10.51

11.06

-

1.69 p.p.

 

Connected capacity, MW

150

130

694

-

15.39%

Financial indicators

 

 

Assets

131,560

132,256

135,169

-2.67%

-

 

Equity 

40,121

49,715

43,437

-7.63%

-

 

Liabilities, including:

91,440

82,541

91,732

-0.32%

-

 

- non-current liabilities

41,901

44,888

53,461

-21.62%

-

 

- current liabilities

49,538

37,653

38,271

29.44%

-

 

Revenue, including:

17,316

18,185

41,601

-

-4.78%

 

- from electricity transmission

14,665

15,504

30,263

-

-5.41%

 

- from grid connections

1,423

1,652

8,581

-

-13.86%

 

- other

1,228

1,030

2,757

-

19.22%

 

Operating expenses

18,834

16,538

35,516

-

13.88%

 

Operating profit

1,518

1,648

6,085

-

-7.89%

 

EBITDA

1,457

          4,015  

13,429*

-

-63.71

 

EBITDA margin, % 

8.4%

22.1%

32.28%

-

 

Net profit/loss

-3,296

330

- 1,839*

-

-

 

Net profit margin, % 

-

1.81%

-

-

 

Net debt

41,811

25,647

44,163

-5.33%

-

 

Net debt/EBITDA

3.85

2.4 

3.29

-

-

* EBITDA and net profit for 2014 are indicated with adjustments on the loss on impairment of property, plant and equipment recognized in the structure of operating expenses.

EBITDA is calculated as profit before tax + depreciation of property, plant and equipment and amortization of intangible assets + finance expenses – finance income  

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

In the calculation of Net debt/EBITDA, the value of Net debt is used as at the end of the reporting period, the value of EBITDA - for the last 12 months.

Revenue

Revenue from electricity transmission net of normal (expected) technological losses for 6M2016 amounted to RUB 17,316 mln, minus 5% compared with the same period of 2014 (RUB 18,185 mln). The Company received most of the revenue from its consumers: PJSC Petersburg Sales Company and LLC RSK-Energo.

The decrease in revenue is largely due to the growth of technological losses by 33% for 6M2015 compared with the same period of 2014, which was primarily the result of changes in the method for determining the volume of electricity supplied to the Lenenergo grid. Introduction from 01.07.2014 of the AIMS (Automated Information and Measuring System) allowed determining the actual level of supply to the network, which led to a sharp increase in the supply of electric power to Lenenergo networks.

Revenue from technological connection for the six months ending 30 June 2105 decreased by 14% compared with the same period of 2014 and totaled RUB 1,423 mln. The drop in revenue from technological connection accompanied by increased connected capacity by 20 MW (plus 15%) compared with the 6 months of 2014 is due to the implementation in 2015 of obligations under the contracts concluded at lower tariff rates.

Other income were up 19% from the previous year’s level and reached RUB 1,228 mln.

Costs

Operating expenses of the Group in the reporting period were RUB 18,834 mln, up 14% from the previous year’s level. 

RUB mln

6M2015

6M2014

Change, %

Transmission fee

7,421

7,523

-1.36%

Depreciation of property, plant and equipment

2,889

2,303

25.45%

Payroll and payroll taxes

2,491

2,568

-3.00%

Provision for litigations and claims

1,870

1,409

32.72%

Provision/(reversal of provision) for impairment and write-off of receivables

1,736

161

978.26%

Taxes other than income tax

522

447

16.78%

Repairs and maintenance

357

532

-32.89%

Rent

268

260

3.08%

Raw materials and supplies

158

139

13.67%

Electric metering services

144

-

-

Telecommunication and information services

128

179

-28.49%

Utilities

109

69

57.97%

Impairment of intangible assets

85

65

30.77%

Internal security

82

90

-8.89%

Agency services

81

45

80.00%

Social expenses

74

89

-16.85%

Consulting, legal and audit services

60

82

-26.83%

Provision/(reversal of provision) for impairment  of inventories

1

46

-97.83%

Other operating expenses

356

532

-33.08%

Total operating expenses

18,834

16,538

13.88%

Comments on the dynamics of key cost items:

  • Depreciation of property, plant and equipment

The growth of depreciation expenses by 25% was caused by the increased book value of property, plant and equipment due to commissioning of fixed assets as a result of implementation of the investment program.

  • Provision/(reversal of provision) for impairment and write-off of receivables

A significant increase in the provision for impairment of receivables in 1H 2015 compared with the same period of 2014 was due to the deteriorating financial position of some large consumers.

·         Provision for litigations and claims

The increase in the provision was due to the assessment of recognition of potential risks of expenses on disagreements regarding determining the volume and cost of services in electric power transmission through networks of a number of third-party grid organizations. The main point of disagreements is the type of tariffs used in calculations and the absence of agreed essential conditions of the contracts for electric power transmission stipulated by the legislation of the Russian Federation. Lenenergo intends to defend its position in court. Final judicial practice in similar controversies for the date of the report has not been yet defined. The Company’s management decided to evaluate the possible risks and to form necessary provisions.

We expect that judicial decisions on claims will be made no later than the second half of 2015.

Financial result

The Group of Lenenergo made an operating profit of RUB 1,518 mln for 6M2015 (minus 8% to same period of 2014).

Net loss for the reporting period amounted to RUB 3,296 mln (for 6M2014 2013 the Group earned net profit in the amount of RUB 330 mln). The increase in net loss was influenced by higher operating expenses (largely due to the establishment of various reserves), as well as the growth of the negative balance of financial income and expenses compared with the same period of 2014, which was mainly the result of the increase in interest expense on loans (RUB 2,138 mln) and the recognition of impairment losses in financial investments (in the amount of RUB 226 mln).

EBITDA for 6M2015 totaled RUB 1,457 mln, which is 64% lower than the same indicator for 6M2014.

Debt position

Credit portfolio (short-term and long-term borrowings of the Company for the end of the reporting period) was RUB 48,342 mln, 3% lower than the same indicator for the end of 2014. Net debt as at 30.06.2015 was RUB 41,811 mln (minus 5% to the same indicator for the end of 2014). Net debt/EBITDA amounted to 3.85 for the end of the reporting period.

The weighted average credit rate amounted to 10.22% as at 30.06.2015.

Bonds

For the six months of 2015, the Group has fully executed its obligations on payment of coupon yield on the sixth coupon of the bonded loan of a series 04 for RUB 127 mln and on the 4th coupon of the bonded loan of a series BO-01 for RUB 123 mln. In April 2015, the Company has successfully passed the offer on the bonded loan of a series 04.

Forward-looking statement regarding expected results 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:

The structure of Lenenergo Group

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Dynamics of Key IFRS Indicators of Lenenergo:

2010

2011

2012

2013

2014

6M2015

 

 

 

 

 

 

Revenue

28 574

32,257

33,135

37,323

41,601

17,316

from electricity transmission

17,692

22,895

23,521

27,480

30,263

14,665

from technological connections

10,300

8,629

7,580

6,807

8,581

1,423

other

582

732

2,034

3,036

2,757

1,228

 

 

 

 

 

 

Operating expenses

21,441

31,503

30,653

31,008

35,516

18,834

 

 

 

 

 

 

Net profit*

4,750

2,461

238

3,281

-1,839

- 3,296

Net profit margin

16.6%

7.6%

0.7%

8.8%

-

-

 

 

 

 

 

 

EBITDA*

11,611

9,937

10,386

10,358

13,429

1,457

EBITDA margin

40.6%

30.8%

31.3%

27.8%

32.28%

8.4%

 

 

 

 

 

 

Net debt

15,038

20,469

22,011

23,300

44,163

41,811

Net debt/EBITDA

1.30

2.06

2.12

2.25

3.29

3.85

*EBITDA and Net profit for 2014, 2012 and 2011 are indicated with adjustments on loss on impairment of property, plant and equipment recognized in the structure of operating expenses.

EBITDA is calculated as profit before tax + depreciation of property, plant and equipment and amortization of intangible assets + finance costs – finance income  

Net debt is calculated as long-term and short-term borrowings minus cash and equivalents, and for 2011, 2012, 2013, 2014 and 1H 2015 – also net of short-term investments for the end of the period.

Dynamics of Key Indicators of the Consolidated Statement of Financial Position**:

2010

2011

2012

2013

2014

30.06.2015

 

 

 

 

 

Non-current assets

87,010

84,958

88,157

102,100

117,970

116,818

Current assets

6,372

11,993

11,236

18,744

17,199

14,742

Assets

93,382

96,951

99,393

120,845

135,169

131,560

Long-term borrowings

14,125

21,028

20,637

29,402

48,180

37,198

Non-current liabilities

21,924

29,412

25,338

34,700

53,461

41,901

Short-term borrowings

1,566

6,549

7,153

3,982

1,589

11,145

Current liabilities

21,497

25,035

30,567

36,679

38,271

49,538

Total liabilities

43,421

54,448

55,905

71,380

91,732

91,440

Total equity

49,961

42,504

43,487

49,465

43,437

40,121

Dynamics of Key Indicators of the Consolidated Income Statement **:

 

 

2010

2011

2012

2013

2014

6M2015

 

 

Revenue

28,574

32,257

33,135

37,323

41,601

17,316

 

 

Operating expenses

-21,441

-31,503

-30,653

-31,008

-35,516

18,834

 

 

Operating profit

7,133

754

2,482

6,316

6,085

- 1,518

 

 

Finance income

774

61

302

667

1,408

664

 

 

Finance expenses

-1,580

-1,660

-2,175

-2,682

-12,228

- 2,672

 

 

Profit before tax

6,257

-845

609

4,301

-4,734

-3,527

 

 

Income tax expense

-1,507

-99

-371

-1,020

519

231

 

 

Net profit for the year

4,750

-943

238

3,281

-4,216

-3,296

 

 

*  in accordance with the Consolidated Statement of Financial Position and Income Statement

Financial statements prepared in accordance with IFRS and other publications for investors are available on Lenenergo website in the Investor Relations section (www.lenenergo.ru)