IR Releases

20.03.2015

Lenenergo OJSC published 2014 financial statements prepared in accordance with the Russian Accounting Standards

Lenenergo OJSC published 2014 financial statements prepared in accordance with the Russian Accounting Standards.  

Indicator

UoM

2013

2014

Change
 2014/2013%

For reference only
2014 BP
updated
(as of 31.12.14)

Operating performance indicators

Net supply of electric power

mln kWh *

29,613

28,680

-3.2%

28,827

Electric power losses

%

10.11

11.06

0.95 p.p.

10.61

Connected capacity, including:  

MW

771

694

-10.0%

759

 - generation facilities

MW

400

150

-62.5%

150

 - other

MW

371

529

42.4%

609

- connection according to temporary power supply diagram

MW

0

15

0.0%

0

Revenue and financial result

Sales revenue, including:

RUB mln

39,902

44,722

12.1%

45,120

 - from electric power transmission services

RUB mln

33,207

36,261

9.2%

36,740

 - from technological connection services

RUB mln

6,515

8,249

26.6%

8,183

 - from other industrial activity

RUB mln

180

212

17.6%

198

Prime cost

RUB mln

36,429

39,257

7.8%

40,450

Gross profit (loss)

RUB mln

3,473

5,466

57.4%

4,670

Profit (loss) before taxation

RUB mln

1,444

-8,793

-708.9%

1,448

Net profit (loss)

RUB mln

425

-7,968

-1,975.4%

152

EBITDA *

RUB mln

11,279

10,207

-9.5%

12,375

EBITDA margin

%

28.3%

22.8%

-5.4 p.p.

27.4%

Credit portfolio and debt position

Loans and credits **

RUB mln

33,376

49,769

49.1%

45,346

Average rate on credits obtained

%

8.14%

9.51%

1.37 p.p.

9.26

Net debt

RUB mln

23,722

45,546

92.0%

41,741

Net debt /
EBITDA for 4 quarters

х

2.1

4.5

-

3.4

Investment program

Capital expenditure

RUB mln

18,729

23,411

25.0%

25,864

* EBITDA = Net Profit + Tax on Profit + Amortization + Interest Payable + Interest Receivable + Creation of Reserve for Impairment of Debt Financial Investment.

** Amount of indebtedness under credits and loans (Company’s debt) inclusive of interest is reflected (amount of lines 1410 and 1510 of the balance sheet).

Note: The table contains actual values of indicators for 2013 and 2014, as well as forecast indicators for 2014 in accordance with the updated Business Plan approved by the Board of Directors on December 26th, 2014 (Minutes No. 17 of December 31st, 2014). 

Formation of revenues and financial result

            Sales revenue of the Company was RUB 44,722 million at year-end 2014, the growth was RUB 4,820 million or 12.1% compared to the same period of 2013.

Increase in revenues is attributable to all types of activity, i.e. electric power transmission services, technological connection services, as well as other industrial activity.    

The highest growth, in absolute terms, occurred in electric power transmission services and amounted to RUB 3,054 million (9.2%), which was mainly caused by the increase in the average tariff by 12,7% due to the increase in approved boiler tariffs for electric power transmission services in 2014 versus to boiler tariffs in 2013.

The growth of revenue from the technological connection services at year-end 2014, versus 2013 fact, was RUB 1,734 million (26.6%). Positive dynamics in revenue was put when planning to perform accrued obligations towards applicants, as well as was caused by the existence of contracts with big applicants in 2014 revenue structure.   

Decrease in volume of connected capacity by 77 MW (inclusive of the connection according to temporary power supply diagram), versus 2013 fact, was due to the decreased capacity with respect to electric power generation facilities. The volume of connected capacity with respect to other groups of applicants grew by 157 MW due to the execution of accrued obligations towards applicants.

Growth of revenue from other industrial activity by RUB 32 million or 17.6% at year-end 2014 versus 2013 was mainly caused by the recognition of income from the services related to the maintenance, operational servicing and repair of Kubanenergo OJSC facilities rendered in the period of preparing for, and holding XXII Olympic Winter Games and XI Paralympic Winter Games 2014.

            Prime cost of rendered services (adjusted for amortization) was RUB 39,257 million at year-end 2014, incremental costs were RUB 2,827 million (7.8%) versus 2013. The most significant gain was in:

-        production, maintenance and delivery works and services (7.1% or RUB 1,126 million) due to the growth  of electric power transmission services in networks of cooperating network organizations which resulted from a significant excess of approved 2014 tariff and balance decisions over indicators of 2013 tariff and balance decisions;

-        size of depreciation charges (8.6% or RUB 711 million) due to the increased book value of fixed assets in connection with commissioning of fixed assets as a result of implementation of the investment program;

-        purchased power to compensate losses (7.6% or RUB 414 million) owing to an increase in volume of losses  by 73 million kWh (2.1%) and increase in unregulated tariff for purchase of losses by 5.4% as a result of growth of the actual ATC (Average Total Cost) price. 

Gross profit of Lenenergo OJSC was RUB 5,466 million at year-end 2014 that is above the indicator for the similar period of the previous year by RUB 1,993 million (57.4%) as a result of higher-than-anticipated growth of revenue in comparison with the cost escalation.   

            Net loss of the Company was RUB 7,968 million at year-end 2014 versus 2013, the financial result deteriorated by RUB 8,393 million (for 2013 the Company received net profit in the amount of RUB 425 million). Net loss growth was influenced by the following factors:

-        creation of a reserve for  impairment of financial investment in 4Q 2014 in the amount of RUB 8,607million based on the results of conversion of short-term financial investments into long-term due to resolution of Bank Tavrichesky OJSC by the decision of the Bank of Russia;

-        creation of reserves for liabilities with respect to discrepancies not resolved under a pre-action protocol. Significant increase in reserves versus 2013 was due to recognition of possible risks of occurrence of expenses with respect to disputes in terms of determination of volume and prices of electric power transmission services in networks of cooperating network organizations. The main point of dispute is the type of tariff applied in calculations and lack of agreed essential terms of power transmission contracts provided for by the applicable laws of the Russian Federation. Lenenergo OJSC intends to stand ground in a judicial procedure. Final judicial practice with respect to such disputes was not determined as of the date of the report. Company’s management team decided to assess possible risks and create necessary reserves.

Formation of EBITDA

The EBITDA indicator which characterizes the cash flow generated by the Company before taxation and interest was RUB 10,207 million at year-end 2014 and decreased by RUB 1,072 million (-9.5%) in comparison with the similar period of 2013.

The EBITDA indicator was influenced mostly by the change in balance on other income and expenses as a consequence of creating a reserve for estimated liabilities. The balance of other income and expenses, exclusively of interest payable and receivable, as well as creation of a reserve for impairment of debt financial investment, decreased by RUB 3,776 million in comparison to the similar period of 2013 and amounted to RUB -4,231 million (for 2013, the balance of other income and expenses was RUB -455 million).

Increase in the amount of interest payable was due to the fact that interest was charged on the larger amount of principal debt during the reporting period, as well as that credit rates increased.

Increase in the amount of interest receivable was due to the fact that the Company had free cash throughout the year and placed them in short-term financial investments.

EBITDA’s share in the revenue (EBITDA margin indicator) decreased by 5.4 percentage points versus 2013 and amounted to 22.8% (as a result of decrease in EBITDA value along with simultaneous growth of revenue). 

Credit portfolio and debt position

            Increase in indebtedness under loans and credits, in comparison to the previous reporting year, amounted to RUB 16,393 million (49.1%), as of December 31, 2014, and was caused by obtaining loans and credits to implement the investment program formed in accordance with the instruction of the RF Ministry of Energy (Minutes No. 09-1183pr as of December 03, 2013). The investment program of Lenenergo OJSC was approved by Order No. 562 of the RF Ministry of Energy as of August 29, 2014.

                Deviation of the actual amount of indebtedness under obtained loans and credits from the planned value by 9.8% (or RUB 4,423 million) at year-end 2014 comes from the necessity of drawing down credit facilities under current loan agreements to minimize the cost of borrowed capital raised by the Company due to deterioration of situation in the financial market and essential interest rate growth at the end of 2014.

                Amid worsening situation in the capital market in 2014 and the growth of rates under concluded contracts, the average weighted rate on borrowed reserves was 9.51% as of December 31, 2014 which is 1.37 percentage points higher than the indicator value for the previous year.

Net debt increase for 2014 exceeds the growth of indebtedness under loans and credits due to the decrease of the amount of most realizable assets as of the end of the period (amount of short-term financial investments and funds).

The Net debt/EBITDA ratio increased by 2.4 percentage points, in comparison to 2013, and amounted to 4.5 owing to the growth of net debt amount along with simultaneous decrease in the EBITDA indicator due to creation of assessed reserves with respect to disputes with cooperating network organizations.

Investment activity

CAPEX for 2014 was RUB 23,411 million that is 25% higher than the similar indicator for 2013 (RUB 18,729 million).

Investment program execution

2013

2014

Change
2014/
2013 %

Capital expenditure (assimilation), RUB mln, excl. VAT

18,729

23,411

25%

Commissioning of fixed assets RUB mln

18,653

24,314

30%

Financing, RUB mln, incl. VAT

19,345

25,178

30%

Commissioning of capacity, MVA

907

1,450

60%

Commissioning of capacity, km

1,846

2,490

35%

Forward-looking statement regarding expected results of 2015:

Due to the deterioration of Company’s financial indicators at year-end 2014, Lenenergo OJSC management team prepared, and laid before Lenenergo OJSC Board of Directors for approval, the List of High-Priority Measures to Ensure Lenenergo OJSC Financial Stability for 2015-2019 which provides for the adjustment of Lenenergo OJSC Business Plan and Investment Program and aimed at fulfillment of obligations towards Company’s creditors and contracting parties. The said list was made with due account for the implementation of the complex of measures to eliminate negative factors which influenced the financial and economic status of the Company and provides for the following principal directions:

-  Investment Program sequestering;

-  reduction of operating costs;

-  optimization of Company’s credit policy.

 The List of High-Priority Measures to Ensure Lenenergo OJSC Financial Stability for 2015-2019 was reviewed and approved by Lenenergo OJSC Board of Directors on March 03, 2015.