28.10.2016
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RusHydro announces 9M 2016 RAS results

October 28, 2016. Moscow, Russia. PJSC RusHydro (MOEX, LSE: HYDR; OTCQX: RSHYY) announces its non-consolidated financial results under Russian accounting standards (RAS) for the nine months of 2016[1].


Key highlights:

  • Strong financial results reflected a significant increase in electricity generation by hydropower plants, management’s efforts to optimize operating expenses, stable pricing environment in the wholesale electricity market;
  • 3Q 2016 revenue – RUB 29,554 mn (+10%), 9M 2016 revenue – RUB 86,765 mn (+11%);
  • 9M 2016 operating expenses – RUB 39,568 mn (-13%);
  • 3Q 2016 EBITDA – RUB 19,784 mn (+46%), 9M 2016 EBITDA – RUB 58,495 mn (+36%);
  • EBITDA margin in 3Q 2016 – 67% (+16 p.p.), in 9M 2016 – 67% (+12 p.p.);
  • Reported net profit for 9M 2015 – RUB 42,806 mn (+55%), adjusted net profit – RUB 39,710 mn (+58%).

Key financials for 9M 2015/2016 under RAS (in RUB mn)



9M’16

9M’15

chg

3Q’16

3Q’15

chg

Revenue

86,765

78,023

11%

29,554

26,811

10%

Operating expenses

(39,568)

(45,558)

-13%

(13,558)

(16,831)

-19%

Operating profit

47,197

32,465

45%

15,996

9,980

60%

EBITDA[2]

58,495

43,044

36%

19,784

13,586

46%

Net profit

42,806

27,558

55%

14,380

7,382

95%

Net profit (adj.)[3]

39,710

25,173

58%

13,266

5,747

131%

Revenue

In the 9 months of 2016, revenue increased by 11% to RUB 86,765 mn as compared to RUB 78,023 mn for the same period of 2015.


The underlying factors behind the change in revenue were:

  • significant increase in production and electricity output as a result of: a) higher than long-run average and 2015 water inflow to reservoirs of the Volga-Kama cascade in the nine months of 2016; b) increased electricity generation by hydropower plants of the South of Russia against the backdrop of water levels close to long-run average and launch of 100 MW Gotsatlinskaya HPP in 2015; c) favorable hydrological conditions in Siberia, as well as modernization of automatic reliability system of the unified energy system of Siberia in 2015;
  • indexation of electricity and capacity tariffs;
  • increase in capacity sales following 100% liberalization of hydro capacity market in the second price zone from May 1, 2016[4] and launch of 100 MW Gotsatlinskaya HPP in 2015 under capacity supply agreement;
  • increase in the average prices on the “day ahead” market in the nine months of 2016 as compared to the same period of 2015 as a result of growth of electricity consumption accelerated in the 3rd quarter of 2016 due to warmer air temperatures as compared to 2015.

Revenue breakdown (RUB mn)



9M’16

9M’15

chg

3Q’16

3Q’15

chg

Electricity sales

59,651

53,693

11%

20,718

19,146

8%

Capacity sales

26,432

23,406

13%

8,649

7,375

17%

Other sales

682

924

-26%

187

290

-36%

TOTAL

86,765

78,023

11%

29,554

26,811

10%

Operating expenses


Operating expenses in January-September 2016 decreased by 13% to RUB 39,568 mn as compared to the same period of 2015.


Operating expenses breakdown (in RUB mn)



9M’16

9M’15

chg

3Q’16

3Q’15

chg

Depreciation

11,298

10,579

7%

3,788

3,606

5%

Purchased electricity and capacity

5,221

9,950

-48%

1,792

3,535

-49%

Labor expenses, taxes and contributions

5,096

5,947

-14%

1,538

2,437

-37%

Property tax

5,049

4,964

2%

1,688

1,670

1%

Repairs & maintenance

2,275

2,244

1%

975

1,033

-6%

Other third-party services

2,197

2,136

3%

906

891

2%

Services of System Operator, ATS, CFS

2,112

2,133

-1%

707

746

-5%

Security expenses

1,307

1,282

2%

428

416

3%

Insurance expenses

1,200

1,080

11%

457

493

-7%

Rent

1,071

892

20%

357

305

17%

Water tax

974

687

42%

360

228

58%

Lease expenses

155

220

-30%

51

68

-25%

Other

1,613

3,444

-54%

511

1,403

-64%

TOTAL

39,568

45,558

-13%

13,558

16,831

-19%

Major factors of change in operating expenses were (among the highest constituent expenses):

  • increase in depreciation and property tax as a result of commissioning of new fixed assets as well as reconstruction and modernization of operating assets;
  • ongoing headcount optimization, as well continuing overhaul of employees’ and top management’ incentive systems;
  • decrease in purchased electricity and capacity as a result of: a) decrease in purchased electricity for sale under free bilateral agreements due to lower sales under these contracts[5]; b) decrease in price for purchased electricity;
  • reduction of other expenses, including corporate and traveling expenses, utilities and other costs, by 54% as a result of implementation of measures aimed at restraining non-operating costs.


Profit


Operating profit for the period increased by 45% or RUB 14,732 mn to RUB 47,197 mn.


EBITDA increased by 36% as compared to the same period of 2015 and amounted to RUB 58,495 mn.


RusHydro's net profit for the reporting period increased by 55% to RUB 42,806 mn. Net profit adjusted for non-cash items increased by 58% to RUB 39,710 mn as compared to RUB 25,173 mn in the same period of the previous year.


The difference between the reported and adjusted net profit is attributed mainly to the following non-cash effects:

  • gain from mark-to-market revaluation of listed equity stakes in the amount of RUB 4,259 mn;
  • gain from reserves on impairment of investments in the amount of RUB 711 mn;
  • expenses (net) on provision for accounts receivable in the amount of RUB 2,005 mn;
  • gain from reserves for impairment of assets in the amount of RUB 3 mn;
  • gain from other reserves in the amount of RUB 128 mn.

RusHydro's financial position as of September 30, 2016


The Company's total assets increased by RUB 26,012 mn as of September 30, 2016, or 3% against the similar figure as of December 31, 2015, reaching RUB 918,643 mn.


As of September 30, 2016, total liabilities decreased by 1% or RUB 2,137 mn as compared to the similar figure as of December 31, 2015, and amounted to RUB 148,314 mn.


The Company's debt portfolio dropped by 1% as compared to the beginning of the year, from RUB 124,010 mn to RUB 122,295 mn; long-term loans make up 93% of total debt portfolio.


The Company's equity for the nine months of 2016 increased by 4% to RUB 770,265 mn against RUB 742,469 mn as of the beginning of the reporting year.


The full financial statements are available on the Company’s website at: http://www.rushydro.ru/investors/reports


The Company plans to publish its consolidated results for the nine months of 2016 under International financial reporting standards (IFRS) on December 15, 2016.


[1] PJSC RusHydro, the parent company of RusHydro Group, includes 19 branches registered in the Russian Federation, including: branch Bureyskaya GES, branch Volzhskaya GES, branch Votkinskaya GES, Dagestan branch, branch Zhigulevskaya GES, branch Zagorskaya GAES, branch Zeiskaya GES, Kabardino-Balkarsky branch, branch Kamskaya GES, Karachaevo-Cherkessky branch, branch Cascade of Verkhne-Volzhsky GES, branch Cascade of Kuban GES, branch Corporate Energy University, branch Nizhegorodskaya GES, branch Novosibirskaya GES, branch Saratovskaya GES, branch Sayano-Shushenskaya GES named after P.S. Neporozhny, Severo-Osetinsky branch, branch Cheboksarskaya GES.

[2] EBITDA calculated as gross profit before depreciation.

[3] Net profit adjusted for the mark-to-market revaluation of listed equity stakes, reserves for financial investment impairment, assets and potentially uncollectible accounts receivable, contingencies This indicator is not reported in the official financial statements under RAS and has been calculated and put into the press release for reference.

[4] According to the decree of the government of the Russian Federation No. 379 of April 30, 2016, the whole amount of capacity from hydropower plants of the 2nd pricing zone is sold at unregulated prices as of May 1, 2016. Thus, the whole amount of capacity from hydropower plants of the 2nd pricing zone, excluding capacity sold under regulated agreements, will be supplied at the price of competitive capacity auction (KOM). Early liberalization was initiated providing that growth of electricity and capacity costs set by the Russian government for consumers from the Republic of Buryatia from May to December 2016 will not exceed 7.5%. In case such growth rate is surpassed, the portion of capacity sold under KOM tariffs should get back to 80%.

[5] In accordance with capacity market regulations, in order to fulfill obligations under bilateral agreement as well as payment liabilities for load losses and security constraints according to the contract volumes, a supplier under bilateral agreement is obliged to buy electricity in the amount equal to registered amount to be supplied under the agreement. The supplier should sign an agreement with Trading System Administrator for electricity purchase, which is called “electricity purchase agreement signed in order to fulfill obligations under bilateral agreement”.

The information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of RusHydro. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially from these statements. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to RusHydro and its operations.
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