IR Releases

Lenenergo releases its FY2012 IFRS financial statements

In the opinion of the Company’s auditor, Ernst & Young, the consolidated financial statements present fairly, in all materials respects, the financial position of the Group as at 31 December 2012, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Indicator	Unit	31.12.2011	31.12.2012	Δ % 31.12.2012/ 31.12.2011
Assets	RUB thousand	96 951 021	99 392 607	2,52%
Total equity	RUB thousand	42 535 138	43 541 677	2,37%
Liabilities, including:	RUB thousand	54 415 883	55 850 930	2,64%
- non-current liabilities	RUB thousand	29 381 124	25 283 559	-13,95%
- current liabilities	RUB thousand	25 034 759	30 567 371	22,09%
Revenues, including:	RUB thousand	32 256 795	33 134 547	2,72%
- from electricity transmission	RUB thousand	22 895 281	23 520 737	2,73%
- from grid connections	RUB thousand	8 629 336	7 579 648	-12,16%
- other	RUB thousand	732 178	2 034 162	177,82%
Operating expenses	RUB thousand	(31 503 143)	(30 659 230)	-2,68%
Operating profit / loss	RUB thousand	753 652	2 475 317	228,44%
Net profit / loss	RUB thousand	(943 276)	232 867	-
Earnings / loss per ordinary share	RUB	(0,93)	0,12	-
For reference:
EBITDA	RUB thousand	5 742 546	6 778 716	18,04%
NET DEBT/EBITDA	-	3,60	3,58	-
Profitability indicators
EBITDA margin, %	%	17,6%	20,46%	2,86 p.p.
Net profit margin, %	%	-2,9%	0,7%	2,2 p.p.
Liquidity indicators
Urgent liquidity	-	0,32	0,18	-
Current liquidity	-	0,48	0,37	-

Revenues

Revenues from electricity transmission in 2012except regulatory process losses in the amount of RUB 5,031 mln (in 2011 – RUB 5,532 mln) constituted RUB 23,521 mln, that is 3% higher than in 2011.The main volume of revenues was received from customers - JSC PSK and LLC Energy-Holding: RUB 18,997,352 thousand (2011: 19,358,904 thousand) and 3,455,843 (2011: 4,411,197 thousand), respectively, accounting for 78 % (2011: 84%) of the total revenues from the transportation of electricity before the deduction of process losses.

Revenues from technological connection in 2012 decreased by RUB 1,050 mln (12%) as compared to 2011 and totaled RUB 7,580 mln, which is caused by the decrease in the average tariff for grid connection in 2012 at the overall increase in the volume (capacity) of connections.

Other revenues in 2012 amounted to RUB 2,034 mln, up by 178% to the level of the previous year. The growth is the result of a program to identify non-contractual electricity consumption, under which illegal consumers were identified and billed, resulting in increased revenues. Since this source of revenues was not previously met in the Group's business activities, the amount is defined as "other revenues".

Prime cost

Operating expenses of the Group during the reporting period amounted to RUB 30,659 mln, which is 3% lower than the indicator of the last year.

Items of operating expenses	2011	2012	Δ % 31.12.2012/ 31.12.2011
Transmission fee	13,402812	13,380,789	-0,2%
Depreciation	4,812,663	4,216,055	-12,4%
Payroll and payroll taxes	4,111,829	4,160,787	1,2%
Impairment of property, plant and equipment	4,255,798	3,600,893	-15,4%
Repairs and maintenance	1,040,880	1,308,874	25,7%
Rent	471,637	466 933	-1,0%
Agency services	7,082	448,623	6234,7%
Telecommunication and information services	347,876	348,134	0,1%
Raw materials and supplies	261,252	307,124	17,6%
Provision for impairment and write-off of receivables	505,329	213,796	-57,7%
Taxes other than on income	178,544	212,485	19,0%
Social expenses	200,605	195,672	-2,5%
Consulting, legal and audit services	142,401	192,750	35,4%
Other operating expenses	1 764 435	1 606 315	21,3%
Total	31,503,143	30,659,230	-2,7%

Comments on the dynamics of the key operating expenses items:

Decrease in operating expenses for depreciation by 12.4% in 2012 was caused by the depreciation of property, plant and equipment and leased equipment due to the revaluation as at 31.12.2011.

Repairs and maintenance increased in 2012 by 25.7%, which was the result of implementation of an intensive repair program, designed to maintain equipment and electrical networks in good condition.

In 2012, a significant increase in agency services was related to the payment for consulting services to identify non-contractual electricity consumption.

In 2012, the Group recognized impairment of property, plant and equipment in the amount of RUB 3,601 mln, which is 15.4% less than in 2011 (RUB 4,256 mln). This is due to the fact that since July 2012 tariff rules for electricity transmission in the RAB-regulation has been changed (in particular, the rate of return on invested capital decreased from 11% to 1%). However, in 2011, the loss on impairment of property, plant and equipment was greater than in the current year – RUB 4,256 mln, which was mainly due to the introduction in 2011 of restrictions on the growth of tariffs for electricity transmission in the Russian legislation.

Financial result

Following the results of 2012, the Group of companies Lenenergo earned operating profit of RUB 2,475 mln (+228% to 2011), net profit for the reporting period amounted to RUB 233 mln (in 2011, the Group received net loss).

An overall increase in revenues and decrease in operating expense contributed to the formation of net profit of the Group in 2012. Net profit for 2012 was significantly affected by the growth of financial expenses compared with 2011, which in turn is due to an increase in interest expenses associated with building-up of the loan portfolio, and total depreciation of Lenenergo’s stake in JSC SZEUK.

EBITDA for 2012 amounted to RUB 6,779 mln, which is 18% higher than in 2011.

Revaluation of property, plant and equipment

Revaluation of property, plant and equipment at fair value as of December 31, 2012:

	Production premises	Power lines	Equipment, power equipment substations	Other	Assets under construction	Total
Initial cost	(2 072 226)	(16 011 771)	(3 372 415)	73 495	1 271 719	(20 111 198)
Accumulated depreciation	1 430 606	9 783 862	2 705 487	6 890	-	13 926 845
					Total:	(6 184 353)
					Recognized as a loss in F2	(3 600 893)
					Recognized in equity as revaluation reserve decrease	(2 583 460)

For reference:

The structure of the Group of companies Lenenergo

Dynamics of the key IFRS indicators of Lenenergo for the 5 recent years:

2008	2009	2010	2011	2012
Revenues, including:	17 914	22 800	28 574	32 257	33 135
- from electricity transmission	11 690	15 416	17 692	22 895	23 521
- from grid connections	5 671	6 638	10 300	8 629	7 580
- other	553	746	582	732	2 034
Operating expenses	14 608	18 489	21 441	31 503	30 659
Net profit	1 838	2 587	4 750	-943	233
Net profit margin	10,26%	11,35%	16,63%	-2,92%	0,70%
EBITDA	3 908	8 185	11 611	5 681	6 779
EBITDA margin	21,8%	35,9%	40,6%	17,6%	20,46%
Net debt	10 884	13 736	15 038	20 469	24 277
Net debt/EBITDA	2,78	1,68	1,30	3,60	3,58

Dynamics of the key indicators of the consolidated statement of financial position for the 5 recent years:

Indicator	2008	2009	2010	2011	2012
Long-term assets	73 023	78 962	87 010	84 958	88 157
Cash and cash equivalents	2 499	2 949	653	7 109	3 514
Short-term assets	10 331	9 363	6 372	11 993	11 236
Assets	83 355	88 325	93 382	96 951	99 393
Long-term borrowings	12 946	10 074	14 125	21 028	20 637
Non-current liabilities	24 496	16 926	21 924	29 381	25 284
Short-term borrowings	436	6 611	1 566	6 356	7 153
Current liabilities	15 618	25 565	21 497	25 035	30 567
Liabilities	40 114	42 492	43 421	54 416	55 851
Equity	43 241	45 834	49 961	42 535	43 542

Dynamics of the key indicators of the consolidated income statement for the 5 recent years:

Indicator	2008	2009	2010	2011	2012
Revenues	17 914	22 800	28 574	32 257	33 135
Operating expenses	-14 608	-18 489	-21 441	-31 503	-30 659
Operating profit	3 306	4 311	7 133	754	2 475
Finance income	2 292	78	774	61	302
Finance expenses	-1 372	-2 084	-1 580	-1 660	-2 175
Other non-operating income (expenses)	-1 178	-173	-70	-	-
Profit before tax	3 048	2 132	6 257	-845	602
Income tax expense	-1 210	455	-1 507	-99	-370
Net profit / loss	1 838	2 587	4 750	-943	233

Financial statements for 2012, prepared in accordance with IFRS, as well as publications for investors are available on the website of Lenenergo in the section "Investor relations" (www.lenenergo.ru)