IR Releases

06.05.2014

Lenenergo released financial statements for Q1 2014 in accordance with RAS

MICEX-RTS: LSNG/LSNGP

Credit rating:
Moodys Ba2 (Outlook: Stable)
Confirmed: February 2014

Press release

Lenenergo released financial statements for Q1 2014 in accordance with RAS. In comparison with the similar period of last year revenue growth was 30%, EBITDA increased by 40% 

Indicator

Unit

3M 2013

3M 2014

Change

 3M 2014/

3M 2013,

%

For reference

BP 2014

(as of 31.12.14)*

Operational indicators

Productive electricity supply

Mln kWh

7,697

7,799

1.3%

29,211

Electricity losses

%

13.94

12.36

-1.58 p.p.

10.18

Connected capacity

MW

30

58

93.3%

609

Revenue and financial result

Sales revenue, including:

RUB mln

8,136

10,591

30.2%

48,184

 - from electricity transmission services

RUB mln

7,798

10,008

28.3%

39,834

 - from technological connection services

RUB mln

303

527

73.9%

8,183

 - from other industrial activity

RUB mln

34

56

64.7%

168

Costs

RUB mln

8,690

10,337

19.0%

41,370

Gross profit (loss)

RUB mln

-554

254

145.8%

6,814

Profit (loss) before taxes

RUB mln

-705

-154

78.1%

4,454

Net profit (loss)

RUB mln

-739

-324

56.1%

2,763

EBITDA *

RUB mln

1,757

2,461

40.1%

16,862

EBITDA margin

%

21.6%

23.2%

1.6 p.p.

35.0%

Credit portfolio and debt position

Loans and credits **

RUB mln

28,814

37,089

28.7%

45,600

Average credit offered rate

%

8.38%

8.13%

-0.25 p.p.

-

Net debt

RUB mln

24,329

26,014

6.9%

43,904

Net Debt/
EBITDA for the last 4 quarters

х

2.4

2.2

-

2.6

Investment program

Investment program

(deployment)

RUB mln

1,037

1,421

37%

25,864

* Calculated in accordance with the methodology used in the formation of the business plan for 2013: EBITDA = Net Income + Income Taxes + Depreciation + Interest expense - Interest receivable.

** Amount of outstanding borrowings (debt of the Company) including interest (sum of lines 1410 and 1510 of the balance sheet)

Note: the actual values of indicators for 3M 2013 and 2014, and expected indicators for 2014 are given in the table according to the adjusted Business plan approved by the Board of Directors, Minutes # 30 of 16.04.2014

Formation of revenue and financial result

                Sales revenue by results of the Q1 2014 was RUB 10,591, relatively 2013 the gain of revenue made RUB 2,455 mln or 30.2%.

The increase in revenue was noted on all types of activity - in electric power distribution services, technological connections services, and other industrial activity.

The highest growth in absolute expression was noted on electric power distribution and made RUB 2,209 mln (28.3%) that is mainly caused by increase in the average tariff for transmission services by 26.2% due to increase in the approved joint operation tariffs for services in electric power transmission of 2014 in comparison with joint operation tariffs of 2013.

Revenue growth from rendering services in technological connections in comparison with Q1 2013 was RUB 224 mln (73.9%) due to completion of planned obligations towards some applicants before term.

Revenue growth from other industrial activity increased by RUB 22 mln or 64.7% compared to the fact of Q1 2013 is connected with including in the revenue for 2014 of services on technical, operative and corrective maintenance of Kubanenergo facilities.

Cost of the rendered services (taking into account depreciation) following the results of Q1 2014 was RUB 10,337 mln, and relatively 2013 the gain of expenses made RUB 1,647 mln (19.0%). The most significant gain was noted:

                • on services in electric power distribution by networks of adjacent DGCs (79.4% or RUB 1,174 mln) due to the attempt to change a joint operation tariff scheme of electric power distribution and calculations for the rendered services to consumers of JSC RKS-energo in the area of coverage of the adjacent distribution grid organization JSC LOESK in Q1 2013. In this regard these expenses were not included in the financial report of JSC Lenenergo (following the results of 2013 there was no change of the joint operation tariff of electric power distribution);

                • in the size of depreciation charges (7.5% or RUB 153 mln) due to increase in the book value of fixed assets in connection with input of fixed assets owing to implementation of the investment program;

                • on compensation fund taking into account insurance premiums (16.8% or RUB 168 mln) due to indexation of official salaries caused by execution of the obligation of the employer under the Industry tariff agreement, increase in official salaries by key professions;

                • on property tax (49.6% or RUB 62 mln) in connection with increase in the rate of property tax on power network equipment subject to taxation (pursuant to item 3 of Article 380 of the Tax Code of the Russian Federation the tax rate in 2014 on this group of assessed property was 0.7%, in 2013 – 0.4%. ) ;

Gross profit of JSC Lenenergo following the results of Q1 2014 totaled RUB 254 mln that is higher than the indicator of the similar period of previous year by RUB 808 mln. For 3 months 2013 the Company received a gross loss of RUB 554 mln.

Net loss following the results of Q1 2014 was RUB 324 mln, thus rather similar period of 2013 the financial result improved by RUB 415 mln (for 3 months 2013 net loss in the sum of RUB 739 mln was received).  Advancing growth rate of revenue as compared to prime cost growth (30.2% and 19.0%, respectively) had the main influence.

When forming the Business plan for 2014 initially a loss caused by peculiarities of activity on technological connection was included in the plan for Q1. The main part of contracts for technological connections of applicants to electric networks was closed in the end of the year therefore the most part of revenue from technological connections is planned for Q4.

EBITDA formation

                EBITDA characterizing generation of cash flow before taxes and interest payments of the Company by results of Q1 2014 was RUB 2,461 mln, and compared to the same period of last year increased by RUB 704 mln (40.1%).

RUB mln 

Indicators

Formula

3M 2013

3M 2014

Change

 Q1 2014/

Q1 2013

%

Revenue

1

8,136

10,591

30.2%

 

Cost excluding depreciation

2

6,627

8,127

22.6%

 

Gross profit + depreciation

3 = 1 - 2

1,509

2,464

63.3%

 

Balance of other income and expenses (w/o interest payable and receivable)

4

249

-2

-100.9%

 

EBITDA, including:

5 = 3 + 4 = 6 + 7 - 8 + 9 + 10

1,757

2,461

40.1%

 

Depreciation of FA and IA

6

2,063

2,210

7.1%

 

Interest payable

7

496

644

29.9%

 

Interest receivable

8

96

238

147.4%

 

Income tax

9

34

170

400.5%

 

Net profit

10 = 3 - 6 + 4 - 7 + 8 – 9

-739

-324

56.1%

 

The growth of EBITDA for 3M 2014 compared to the same period of 2013 occurred mainly due to decrease in the volume of net loss (RUB 415 mln), depreciation growth (RUB 147 mln, 7.1%) and profit tax (RUB 136 mln, by 5 times).

The balance of miscellaneous income and expenses net of interest payable and interest receivable decreased by RUB 251 mln and made a negative value – mainly due to decrease in income gained by a court decision (by RUB 147 mln, -98.1%), and growth of expenses on costs for executive production (by RUB 74 mln), payroll from profit (on RUB 23 mln, by 2.6 times) and other.

The increase in the sum of interest payable was generally connected with interest charging on a large sum of principal debt in the reporting period.

The growth of interest receivable was primarily caused by accumulation by the Company of free cash and it successful placement in short-term financial investments.

EBITDA share in revenue (EBITDA margin indicator) for 3M 2013 increased by 1.6 percentage points and made 23.2% (due to the outpacing growth rate of EBITDA relative revenue growth) that is positively characterized from an assessment position of the Company’s financial condition. 

Credit portfolio and debt position

Increase in the debt on loans and credits including interest (debt of the Company, the sum of lines 1410 and 1510 of the balance sheet) in comparison with the same period of the last reporting year totaled RUB 8,276 mln (28.7%). Loans and credits were attracted to finance of the Company’s investment program.

Due to the refinancing of credits with high interest rates, lack of increase in interest rates under signed credit agreements and conclusion of new contracts under interest rates below the average market rate the average credit offered rate as of March 31, 2014 was 8.13% that is lower than the value of the indicator for the similar period of last year by 0.25 p.p.

At the end of Q1 2014 the Company had the Securities Prospectus registered in June 2013 for four issues of exchange bonds totaling RUB 20 bn for 10 years, which are planned for placement in 2014.

The growth of Net debt for the last four quarters was lower than the growth of loans and credits due to the increase in the most liquid assets at the end of the period (sums of short-term financial investments and cash).

A greater increase of EBITDA for 4 quarters as of 31.03.2014 relative the increase in net debt resulted in improvement of the ratio of Net Debt/EBITDA (drop by 0.2).

Investment activity

CAPEX for Q1 2014 amounted to RUB 2,788 mln that is 55% higher than capital expenses for Q1 2013 (RUB 14,891 mln). 

Investment program execution

3M 2013

3M 2014

Change

Q1 2014/ Q1 2013

%

Deployment, RUB mln w/o VAT

1,801

2,788

55%

Commissioning of fixed assets, RUB mln

1,037

1,421

37%

Capacity input, MVA

3,836

5,550

45%

Capacity input, km

85

103

21%

 

238

233

-2%