IR Releases

Lenenergo released its financial statements for the year 2016 prepared in accordance with IFRS

The revenue of Lenenergo for 2016 grew by 51% and totaled RUB 59,023 mln. EBITDA doubled to RUB 23,916 mln. Net profit for the reporting period was RUB 7,703 mln (2015: RUB 144 mln).

RUB mln, unless otherwise stated
Indicator	2016	2015	Change
Financial results
Sales revenue, including:	59,023	39,027	51.2%
- from electricity transmission services	46,400	33,182	39.8%
- from technological connection services	8,814	3,250	171.2%
- from other activity	3,809	2,595	46.8%
Operating expenses	48,613	33,102	46.9%
Operating profit	10,409	5,925	75.7%
Net profit	7,703	144	-
Net profit margin, %	13.05%	0.37%	12.68,p.p.
EBITDA	23,916	11,943	100.3%
EBITDA margin, %	40.52%	30.60%	9.92,p.p.
Investments
Capex	20,760	10,727	93.5%
	31.12.2016	31.12.2015	Change
Indicators of the financial position statement
Assets	235,173	239,841	-1.9%
Equity	148,341	140,450	5.6%
Return on equity (ROE), %	5.19%	0.103%	5.087,p.p.
Liabilities	86,832	99,391	-12.6%
Credit portfolio and debt position
Loans and credits	34,528	40,975	-15.7%
Net debt	24,091	10,918	120.7%
Net debt/EBITDA	1.01	0.91	-

Note:
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 - cash and cash equivalents - short-term investments.

Revenue and financial result

The Group’s indicators for 2016 were essentially influenced by the subsidiaries JSC SPb ES and JSC PES, which were included in the 2015 statements as from the date of their acquisition, that is 23.12.2015 (8 days).

Group’s revenue

Sales revenue for 2016 was RUB 59,023 mln, +51.2% against the indicator for 2015 (RUB 39,027 mln).

The growth of revenue from electricity transmission services for 2016 against the year 2015 is explained by bringing the tariff and balance decisions into compliance with the current laws and partial compensation for the short-received incomes in the previous years of the regulation period.

The growth of revenue from the technological connection services for 2016 against 2015 is explained by the performance of the obligations to the applicants, which have been accumulated before 01.01.2015.

The growth of revenue from other activity is caused by the growth of the revenue in respect of identified uncontracted electricity consumption by 52%, as well as by the growth of the revenue on compensation contracts by 89%.

Group’s operating expenses

Operating expenses of the Group for the reporting period were RUB 48,613 mln, +46.9% against the similar indicator for 2015. 

	2016	2015	Change
Total operating expenses	48,613	33,102	46.9%
Electricity transportation expenses	16,109	17,414	-7.5%
Property, plant and equipment depreciation	11,830	5,858	102.0%
Payroll and payroll taxes	6,707	5,156	30.1%
Provision for receivables impairment and write-off	2,366	1,407	68.1%
Intangible assets depreciation	1,676	161	943.8%
Taxes, except profit tax	1,342	1,048	28.1%
Repairs and maintenance	1,331	1,314	1.3%
Lease payment	771	670	15.2%
Impairment / (reversal of impairment) of intangible assets	623	(37)	-
Raw materials and supplies	514	339	51.4%
Provisions for court proceedings and claims	543	1,951	-72.1%
Public utility services	439	241	82.1%
Services of commercial electricity metering	343	325	5.4%
Social sphere expenses	229	187	22.6%
Expenses  for private security service	228	169	35.3%
Telecommunication and information services	223	282	-21.0%
Consulting, legal and audit services	166	121	37.0%
Agency services	108	176	-38.7%
Provision for impairment of inventories	69	1	6,437.5%
Impairment / (reversal of impairment) of property, plant and equipment	-	(5,602)	-
Other operating expenses	2,996	1,921	55.9%

Comments concerning the dynamics of the most essential cost items:

Depreciation of property, plant and equipment

Growth of costs for the depreciation of property, plant and equipment by 102.0% was due to the increase in their book value as a result of the revaluation surplus at 31.12.2015.

Depreciation of intangible assets

Growth of costs for the depreciation of intangible assets by 943.8% was due to the depreciation of the intangible assets “Income-bearing contracts”, which were recognized in the consolidated statements regarding such companies as JSC SPb ES and JSC PES at the time of their acquisition. 

Impairment / (reversal of impairment) of intangible assets

Growth of the cost item is explained by the goodwill impairment in respect of the companies JSC SPb ES and JSC PES.

Group’s operating profit

Operating profit of the Group for 2016 was RUB 10,409 mln, +75.7% against 2015.

Group’s net profit

Following 2016, the Group received net profit equal to RUB 7,703 mln (2015: RUB 144 mln). The positive dynamics of the year 2016 financial result, besides the growth of revenue on regulated types of activities and reduction in expenses for electricity transportation by 7.5%, was mainly influenced by the increase in the balance of other incomes and expenses due to the reduction in interest rates on credits and the increase in interest receivable.

EBITDA

EBITDA for 2016 was RUB 23,916 mln, +100.3% against the similar indicator for 2015 (RUB 11,943 mln).

Calculation of EBITDA, RUB mln

EBITDA	23,916
Pre-tax profit	8,691
Property, plant and equipment, and intangible assets depreciation	13,506
Financial incomes	(2,821)
Financial expenses	4,540

EBITDA margin for 2016 grew by 9.92 percentage points to 40.52%. The material positive dynamics of the indicator is explained by higher rates of the Group’s income growth against expenses.

Credit portfolio and debt position

Credit portfolio (short-term and long-term credits and loans of the company as at the end of the reporting period) was RUB 34,528 mln, -15.7% against the similar indicator as at the end of 2015. The debt reduction was due to the repayment of debt on bonded loans for the amount of RUB 6,000 mln (including, series BO-01 (RUB 3,000 mln) was repaid within the timeframe, series 04 (RUB 3,000 mln) was repaid early, on the date of the 8^th coupon payment) using the funds received from the sale of the federal loan bonds out of the money paid to the charter capital of PJSC Lenenergo in order to pay the ordinary shares of the additional issue.

Net debt following 2016 was RUB 24,091 mln, +120.7% y-o-y (end of 2015). The main reason for the increase in the net debt is a material reduction in the item “cash and cash equivalents” as a result of the expenditure of the cash received from the sale of the federal loan bonds out of the money paid to the charter capital of PJSC Lenenergo in order to pay the ordinary shares of the additional issue.

Net debt/EBITDA as at the end of the reporting period grew as a result of a more considerable growth of the net debt against the growth of EBITDA and equaled 1.01 against 0.91 as at the end of 2015. 

Investments

Capex amount in 2016 was RUB 20,760 mln, +93.5% against the similar indicator of 2015 (RUB 10,727 mln). The expenditure growth is explained by the implementation in 2016 of the actions to perform the accumulated obligations of technological connection of consumers in Saint Petersburg and the Leningrad Region, financed through the funds received from the sale of the federal loan bonds.

Dynamics of key indicators of Lenenergo, RUB mln:

	2012	2013	2014	2015	2016
Revenue	33,135	37,323	41,601	39,027	59,023
from electricity transmission	23,521	27,480	30,263	33,182	46,400
from technological connection	7,580	6,807	8,581	3,250	8,814
Other	2,034	3,036	2,758	2,595	3,809
Operating expenses	30,653	31,008	35,516	33,102	48,613
Net profit	238	3,281	-4,216	143	7,703
Net profit margin	0.70%	8.80%	-	0.37%	13.05%
EBITDA	10,386	10,358	11,053	11,943	23,916
EBITDA margin	31.30%	27.80%	32.28%	30.60%	40.52%
Net debt	22,011	23,300	44,163	10,918	24,091
Net debt/EBITDA	2.12	2.25	4.00	0.91	1.01

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 - cash and cash equivalents - short-term investments as at the end of the reporting period.

Dynamics of key indicators of the Consolidated Financial Position Statement, RUB mln:

	2012	2013	2014	2015	2016
Long-term assets	88,157	102,100	117,970	197,892	213,927
Short-term assets	11,236	18,744	17,199	41,949	21,245
Assets	99,393	120,845	135,169	239,841	235,173
Long-term debt	20,637	29,402	48,180	27,618	23,450
Long-term liabilities	25,338	34,700	53,461	46,835	43,289
Short-term debt	7,153	3,982	1,589	13,357	11,078
Short-term liabilities	30,567	36,679	38,271	52,556	43,543
Liabilities	55,905	71,380	91,732	99,391	86,832
Capital	43,487	49,465	43,437	140,450	148,341

Dynamics of key indicators of the Consolidated Income Statement, RUB mln:

	2012	2013	2014	2015	2015
Revenue	33,135	37,323	41,601	39,027	59,023
Operating expenses	-30,653	-31,008	-35,516	-33,102	-48,613
Operating profit	2,482	6,316	6,085	5,925	10,409
Finance income	302	667	1,409	1,184	2,821
Finance expenses	-2,175	-2,682	-12,228	-5,225	-4,540
Profit before tax	609	4,301	-4,734	1,884	8,691
Profit tax expense	-371	-1,020	519	-1,740	-988
Net profit	238	3,281	-4,216	144	7,703