Results of the Board of Directors on December 3, 2013
JSC RusHydro (ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces that the Company's Board of Directors held a meeting in absentia on December 3, 2013.
In accordance with the President’s decree on further development of RusHydro the Board of Directors approved a control model for construction of power facilities in the Far East of Russia. This model provides for signing a trust agreement between RusHydro and RAO ES of East, qualified as an interested-party transaction, and determined the price limit of the agreement in the amount of RUR 72,000 (incl. VAT), but no more than RUR 3,000 (incl. VAT) per quarter.
According to the agreement RusHydro will transfer the shares of CJSC Blagoveschenskaya TPP, CJSC Sakhalinskaya HPP No.2, CJSC TPP in Sovetskaya Gavan’, CJSC Yakutskaya HPP No.2 owned by the Company in trust to RAO ES of East. These shares are ex-dividend and cannot be alienated, pledged or reassigned.
Before issuance of the President’s decree the construction of these projects was included in the investment program of RAO ES of East (TPP in Sovetskaya Gavan’ from 2010, other plants from 2011). RAO ES of East was also responsible for development of project documentation.
At this stage:
Holding company RAO Energy System of East, part of RusHydro Group, is the largest supplier of electricity and heat power in the Far East of Russia. The company is responsible for operating and construction of power facilities in the region. Currently, JSC DGK (part of RAO ES of East holding) operates the Blagoveschenskaya TPP (the 1st stage). The installed capacity of the plant will be increased after construction of the second stage. The project is aimed to eliminate the deficit in thermal capacity and satisfy the increasing demand for heat power in Blagoveschensk city. DGK also operates the Mayskaya HPP in Sovetskaya Gavan’ (Khabarovsk region), that will be replaced by the Sovgavanskaya TPP. Yakutskenergo (subsidiary of RAO ES of East) operates the Yakutskaya HPP which will be deactivated after completion of construction of the Yakutskaya HPP No.2. The period of service of the Sakhalinskaya HPP has expired; the plant will be replaced by the Sakhalinskaya HPP No.2. New power facilities are aimed to add new generating capacity, meet the increasing demand for electric and thermal power, create an additional capacity margin and improve reliability of power supply.
Taking into account a considerable experience of RAO ES of East in terms of power facilities management in the Far East region it is reasonable to transfer shares of newly established companies owned by RusHydro in trust to RAO ES of East under RusHydro’s control for making decisions.
For further implementation of these projects the Board of Directors commissioned RusHydro’s representatives in the governing bodies of the Company’s subsidiaries and associates to vote for increase of share capital through additional share issues and subsequent acquisition of stakes of the following companies:
The shares will be placed through private subscription and can be paid in cash and cash claims. The price of share placement is to be determined by the Boards of Directors of companies listed above.
The Board of Directors also commissioned RusHydro’s representatives in the governing bodies of the Company’s subsidiaries and associates to approve the non-interest bearing loan agreements between RusHydro and a number of its subsidiaries, qualified as major transactions, with the following terms:
These agreements provide for working capital facilities to finance the first stage of construction of power projects in the Far East.
To execute the President’s decree on further development of RusHydro the Company signed the agreement on allocation of budget funds to finance the construction of power projects in the Far East, and the agreement on allocation of investments to ensure the efficiency and proper spending of funds on construction of the following projects:
In June 2013, RusHydro established four companies, wholly-owned by RusHydro, to exercise managerial and developer functions in order to ensure maximum transparency and control the construction process as well as proper use of budget funds.
The Board of Directors commissioned RusHydro’s representatives in the governing bodies of “VolgaHydro” LLC to approve the contractor agreement between “VolgaHydro” LLC, a joint venture established by RusHydro and Voith Hydro, and CJS Urban Engineering for development of project documentation for construction of the enterprise, qualified as major transaction, and determined the price limit of the agreement in the amount of RUR 20,212,310 (incl. VAT).
According to the agreement Urban Engineering will develop technical requirements for design, project documentation and fire safety statement as well as assist in approval of the project documentation, construction permission receipt and support the construction process.
These works are being implemented in terms of construction of enterprise aimed at manufacturing hydroturbine equipment located in Saratovskiy region. Urban Engineering was the winner of tender conducted by Voith Hydro due to its experience in construction of manufacturing enterprises and ability to carry out the design works within a short period of time and for the price stated in business plan.
The Board of Directors of RusHydro approved construction of “VolgaHydro” LLC, a joint venture aimed at manufacturing hydroturbine equipment, established together with Voith Hydro. On June 19, 2013, the Company’s Board of Directors approved participation of RusHydro in the joint venture located in Russia. RusHydro’s share in the share capital is 50% plus RUR 1, the share of Voith Hydro is 50% minus RUR 1.
The Board of Directors approved RusHydro’s agreements, qualified as interested-party transactions. In accordance of p. 188.8.131.52 of Regulations on disclosure of information the details of these transactions will be made available after their implementation in compliance with regulatory requirements of the Russian Federation.
The Board of Directors approved its working plan for the 1st half of 2014.
The Board of Directors took note of execution of p. 1 of the President’s decree of November 22, 2012 on further development of RusHydro in relation to retention of the Russian Federation share in the Company’s share capital not less than 60.5%. The Board of Directors commissioned Evgeny Dod, Chairman of the Management Board of RusHydro, to arrange the state registration of the report on results of additional issue of the Company’s shares by the Central Bank of Russia in accordance with the Federal law On securities market.
Placement of RusHydro’s shares of additional issue started on December 20, 2012 and ended on November 26, 2013. The number of issued shares totaled 68,617,944,796, including 66,006,190,950 shares placed in favor of the Russian Federation. As of now the Russian Federation owns 258,161,535,606 RusHydro’s shares, or 66.84% of the Company’s share capital. The report on results of additional issue of RusHydro’s shares will be registered in the end of December 2013 – beginning of January 2014. The relevant amendments to the Company’s Articles of Association on increase of RusHydro’s share capital will be made after registration of the report.
The Board of Directors approved the report on execution of the Company’s KPIs in the third quarter of 2013.
The Board Directors has amended Methodology of calculation of RusHydro’s KPIs and RusHydro’s annual KPIs in order to update it in compliance with the latest changes in legislation.
The Board Directors approved the list annual and quarterly KPIs of Rushydro for 2014.
Thus, the annual KPIs of Rushydro include:
The quarterly KPIs include:
The Board of Directors approved the report on interim results of 2013 business-plan execution for the 9 months of 2013 (including report on implementation of investment program, comprising report on implementation of generating facilities modernization program for 9 months of 2013).
Electricity generation by RusHydro’s power plants in the 3rd quarter and nine months of 2013 totaled 102.7% and 112.8% of the planned volumes respectively. The output amounted to 103.3% and 113.4% of the planned volumes respectively. The slight overshoot was a result of favorable hydrological conditions and regimes allowed by the Federal Water Resources Agency.
In the mine months of 2013 the installed capacity increased by 9 MW on the Saratovskaya HPP and 10.5 MW on the Zhigulevskaya HPP due to completion of technical upgrade and reconstruction works.
The financing of investment program in the nine months of 2013 amounted to RUR 45 bn (including VAT) or 99% of the plan for the period and 57% of the annual plan.
Financing of rehabilitation and modernization projects in the nine months of 2013 amounted to RUR 20.03 bn or 97% of the plan for the period and 70% of the annual plan of RUR 28.63 bn.
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.