05.03.2015
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RusHydro announces FY2014 RAS results

JSC RusHydro (MOEX, LSE: HYDR; OTCQX: RSHYY) announces its non-consolidated financial results under Russian accounting standards (RAS) for full year ended December 31, 2014.


Key highlights:

  • 4Q 2014 revenue – RUB 26.5 bn (-4%), for 2014 revenue – RUB 108.5 bn (-0.3%);
  • 2014 operating expenses – RUB 65.5 bn (+11%);
  • 4Q 2014 EBITDA – RUB 11.4 bn (-17%), FY2014 EBITDA – RUB 56 bn (-9%);
  • EBITDA margin in 4Q 2014 – 43% (-6 p.p.), for 2014 – 52% (-5 p.p.);
  • Reported net profit for 2014 – RUB 30.7 bn (-13%), adjusted net profit – RUB 32.9 bn (-20%).

Key financials for the 4Q and FY 2013/2014 under RAS (in RUB mn)


2014

2013

chg

4Q’14

4Q’13

chg

Revenue

108,478

108,794

0%

26,535

27,785

-4%

Operating expenses

65,464

58,873

11%

18,484

17,075

8%

Operating profit

43,014

49,921

-14%

8,051

10,710

-25%

EBITDA[1]

56,052

61,774

-9%

11,431

13,718

-17%

Net profit

30,729

35,321

-13%

-

-

-

Net profit (adj.)[2]

32,876

40,870

-20%

3,184

8,546

-63%

Revenue


In 2014, revenue remained flat year-on-year and amounted to RUB 108,478 mn. The underlying factors behind the change in revenue were:

  • Decrease in production by hydropower plants as well as in electricity output as a result of: a) low water level during flood period in the Far East of Russia from July to September 2014 with increased water reserves in reservoirs as of the beginning of the year; b) lower than long-run average water inflow to reservoirs of the Volga-Kama cascade; c) lower than normal water levels of Siberian rivers in 3Q 2014; d) water conditions on the rivers of the South of Russia and North Caucasus were close or lower than the long-run average;
  • increase in electricity prices on the “day-ahead” market in the 2nd pricing zone due to decrease in electricity generation by hydropower plants;
  • increase in capacity prices of the competitive capacity auctions (KOM) for the hydropower plants of the first price zone due to indexation for consumer price index;
  • increase in capacity sales prices following liberalization of hydro capacity market in the second price zone from May 1, 2014[3];
  • indexation of regulated electricity and capacity tariffs .

Revenue breakdown (RUB mn)


2014

2013

chg

4Q’14

4Q’13

chg

Electricity sales

76,532

78,975

-3%

17,458

19,847

-12%

Capacity sales

30,678

29,251

5%

8,749

7,797

12%

Other sales

1,268

568

123%

328

141

133%

TOTAL

108,478

108,794

0%

26,535

27,785

-4%

Operating expenses


Operating expenses in 2014 increased by 11% to RUB 65,464 mn as compared to 2013.


Operating expenses breakdown (in RUB mn)


2014

2013

chg

4Q’14

4Q’13

chg

Purchased electricity and capacity

17,975

16,696

8%

4,688

4,841

-3%

Depreciation

13,038

11,853

10%

3,380

3,008

12%

Labor expenses

7,969

6,112

30%

2,625

2,220

18%

Property tax

5,970

5,922

1%

1,479

1,775

-17%

Repairs & maintenance

3,615

3,308

9%

1,352

1,220

11%

Services of System Operator, ATS, CFS

2,770

2,672

4%

689

693

-1%

Other third-party services

2,624

1,863

41%

1,073

624

72%

Security expenses

1,660

1,434

16%

422

366

15%

Other taxes and fees

1,505

1,254

20%

395

359

10%

Insurance expenses

1,185

1,328

-11%

326

495

-34%

Rent expenses

1,094

1,038

5%

275

277

-1%

Water tax

836

967

-14%

170

231

-26%

Leasing expenses

706

1,097

-36%

109

263

-59%

Other

4,517

3,328

37%

1,501

703

114%

TOTAL

65,464

58,873

11%

18,484

17,075

8%

Major factors of change in operating expenses were:

  • increase electricity consumption by the Zagorskaya PSPP due to launch of the plant after scheduled outage in 2013 to dismantle the temporary earthfill link in the lower reservoir of the Zagorskaya PSPP No. 2;
  • increase in volumes of electricity purchased for resale together with growth in purchase prices;
  • increase in depreciation and property tax as a result of commissioning of new assets;
  • increase in labor expenses and related other taxes in terms of fees from the payroll budget and health insurance due to: a) indexation of salaries of employees of the Company’s branches in accordance with collective agreement and sectorial tariff agreement; b) increase in operating staff headcount of the Company’s branches as a result of incorporation of HPP; c) increase in operating staff headcount due to creation of groups responsible for power market support in the Company’s branches; as well as due to transfer of operational dispatch management functions in relation to power system protection from SO UES; d) 10% increase in the base for insurance fees calculation; e) one-off bonus payment to the Company’s employees for execution of a three-year program aimed to enhance operational excellence and returns on investments;
  • one-off increase in transport expenses due to establishment of JSC RusHydro Transport company in order to improve transportation management system and reduce transport costs in the mid-term;
  • increase in security expenses as a result of incorporation of three small HPPs.

Profit


The higher growth rate in operating expenses versus revenue growth in 2014 as compared to the previous year resulted in 14% decline in operating profit as compared to the same period of the previous year.


EBITDA decreased by 9% as compared to the same period of 2013 and amounted to RUB 56,052 mn.


RusHydro's net profit for the reporting period decreased by 13% to RUB 30,729 mn. Net profit adjusted for non-cash items decreased by 20% to RUB 32,876 mn as compared to RUB 40,870 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:

  • mark-to-market revaluation of listed equity stakes in the amount of RUB 574 mn, of which shares of Inter RAO account for RUB 582 mn;
  • accrued reserves in the amount of RUB 1,676 mn.

RusHydro's financial position as of December 31, 2014


The Company's total assets increased by RUB 39,374 mn as of December 31, 2014, or 5% against the similar figure as of December 31, 2013, reaching RUB 855,580 mn.


The growth in assets mainly in terms of long-term financial investments is related to acquisition of shares of RusHydro’s subsidiaries: JSC Zagorskaya PSPP-2 in the amount of RUB 46,144 mn, JSC Zaramagskie HPPs in the amount of RUB 15,312 mn, JSC Ust’-Srednekanskaya HPP in the amount of RUB 8,389 mn, as well as shares of JSC Blagoveschenskaya TPP in the amount of RUB 6,301 mn and JSC Yakutskaya TPP No. 2 in the amount of RUB 5,637 mn and CJSC TPP in Sovetskaya Gavan’ in the amount of RUB 4,374 mn.


As of December 31, 2014, total liabilities stood at RUB 137,050 mn as compared to RUB 191,786 mn as of December 31, 2013. The decrease was attributed primarily to reduction of liabilities to acquirers of the Company’s shares of additional issue after registration of the amendments to the Company’s share capital in the beginning of 2014. The Company's debt portfolio rose by 11% from the beginning of the year to RUB 114,177 mn; long-term loans make up 81% of total debt portfolio.


The Company's equity for January-December 2014 increased by 15% to RUB 718,460 mn against RUB 624,343 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 FY 2014 under International financial reporting standards (IFRS) on March 25, 2015.



[1] EBITDA calculated as gross profit before depreciation.

[2] 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.

[3] According to the decree of the government of the Russian Federation No. 374 of April 28, 2014, “On amendments to the Regulations of wholesale electricity and capacity market in terms of special aspects of participation of gencos, owners of hydropower plants located in the 2nd pricing zone, in the wholesale market” from May 1, 2014 till December 31, 2015, 35% of capacity of the hydropower plants located in the 2nd pricing zone is sold at the regulated tariffs based on the results of the competitive capacity auctions (KOM). Actual decrease in capacity sale price of KOM is related to decrease in capacity tariff of the Sayano-Shushenskaya HPP in the 2nd half of 2013 from RUB 86,825.85 per MW to RUB 35,955.02 per MW. 

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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