23.03.2017
printable version
RSS

RusHydro announces full year 2016 IFRS results

March 23, 2017. Moscow, Russia. RusHydro Group (hereinafter referred to as the “Group”, ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces its audited consolidated financial statements for the year ended December 31, 2016, prepared in accordance with International Financial Reporting Standards (IFRS).


Key highlights for FY2016:


  • Strong 2016 financial performance due to 15.7% production increase and substantial optimization of operating expenses;
  • Increase in revenue in 4Q – 3.6%, in 2016 – 8.2%;
  • EBITDA in 4Q – RUB 29,896 mn (+15.8%), 2016 EBITDA – RUB 100,341 mn (+36.7%);
  • Operating expenses in 2016 increased significantly below inflation – by 0.2%, in 4Q 2016 – 0.3% decrease due to implementation of cost-cutting program;
  • Net profit for 2016 – RUB 39,751 mn (+46.4%); net profit adjusted for non-cash items – RUB 66,114 mn (+39.6%);
  • Weighted-average EPS in 2016 – RUB 0.1095 (+26.6%).


Nikolay Shulginov, Chairman of the Management Board – General Director of PJSC RusHydro, commented:


“In 2016, RusHydro Group demonstrated excellent results that reflected not only record high output from our hydropower plants – almost 16% higher than 2015, but also consistent management’s efforts aimed at optimization of manageable costs and divestment of non-core assets.


In 2016, we have completed construction of Blagoveshenskaya CHP, comissioned unique Zelenchuksaya hybrid hydropower plant in Karachayevo-Cherkessia and Zaragizhskaya small hydropower plant in Kabardino-Balkaria. At the same time we optimized our capex plan for the 2016-2019 by RUB 60 bn without compromising safety and reliability, and adopted 5-year operating efficiency plan.


During the year, we have tremendous work to prepare capital raising aimed at refinancing of RAO ES East holding debt portfolio and, in March 2017 the transaction has been successfully finalized. Soon our operating companies in the Far East will reduce their debt by RUB 55 bn, enabling them to carry out in full rehabilitation and modernization works to maintain high reliability of energy supply.


It is important to note that in 2016 RusHydro paid record high dividends in its history of almost RUB 0.04 per share for a total of RUB 15 bn – a 2.5x increase against 2015. 2016 financial results ensure the capability to execute Russian government’s decision on dividend payment”.

2016/2015 highlights (in RUB mn)



2016

2015

chg

4Q’16

4Q’15

chg

Revenue, including

391,322

361,826

8.2%

112,464

108,555

3.6%

     Revenue

374,072

347,512

7.6%

105,428

102,429

2.9%

     Government grants

17,250

14,314

20.5%

7,036

6,126

14.9%

Operating expenses

315,705

315,103

0.2%

88,751

89,034

-0.3%

EBITDA1

100,341

73,383

36.7%

29,896

25,806

15.8%

Net profit

39,751

27,159

46.4%

-

-

-

Net profit adj.2

66,114

47,368

39.6%

22,900

19,154

19.6%

Operating results


  • In 2016, the Group posted record operating results, boosted by increased water inflows to major reservoirs, new capacity commissioning as well as substitution of condensing electricity power generation from thermal power plants with hydro in the Far East of Russia in the 2nd half of 2016;
  • Total electricity generation by power plants of RusHydro Group in 4Q 2016 amounted to 30,682 GWh (+0.1%), in 2016 – 124,799 GWh (+9.2%);
  • In 4Q 2016, total production by HPPs/PSPPs amounted to 22,132 GWh (+2.8%), in 2016 – 94,976 GWh (+15.7%);
  • Total inflows to reservoirs in the Far East of Russia was 30-60% higher than long-run average, to reservoirs of Volga-Kama cascade, Siberia and HPPs of the South of Russia – close to long-run average;
  • Electricity generation by the plants of RAO ES East subgroup in 4Q 2016 – 9,231 GWh (-5.1%), in 2016 – 31,672 GWh (-6.8%);
  • The electricity generation by the Boguchanskaya hydropower plant in 4Q 2016 amounted to 3,452 GWh (+19.8%); in 2016 – 13,970 GWh (+6.8%)3;
  • Electricity output by RusHydro Group’s retail companies in 4Q 2016 amounted to 8,754 GWh (-1%), in 2016 – 33,905 GWh (-2.3%);
  • In 2016, heat output by thermal plants of RAO ES East subgroup increased by 4% to 31,494 ths. GCal as compared to the same period of 2015.


Events in January-December 2016


  • In January, PJSC RAO ES East agreed with the regional labor union organizations of the Far East to keep the payroll in all companies of the subgroup in 2016 at the level of 2015;
  • In January, PJSC RusHydro and Voith Hydro approved preliminary terms of cost optimization of Saratovskaya HPP modernization project providing for a decrease of modernization contract of more than RUB 7 bn.
  • As a result of the voluntary tender offer and a squeeze-out procedure, PJSC RusHydro increased its ownership consolidated 99.98% of PJSC RAO ES East as of December 31, 2016.
  • In June, the Board of Directors approved RusHydro Group development strategy through 2020 with outlook to 2025.
  • In July, PJSC RusHydro paid out 2015 dividends worth RUB 15 bn (or 0.038863 per share).
  • In July, a special supply subsidiary established in order to streamline procurement and supply function in the Group began its operations.
  • In November, the Group completed the transaction to sell dams of Bratskaya, Ust’-Ilimskaya and Irkutskaya HPPs to EuroSibEnergo Group. These dams are part of technological complex of EuroSibEnergo’s cascade of hydropower plants located on the Angara River. The transaction amount is RUB 10,950 mn (incl. VAT).
  • In December, Zaragizhskaya small HPP (30.6 MW) and Zelenchukskaya hybrid hydropower-pumped storage plant (160 MW in pumping mode and 140 MW in power generation mode) have been commissioned.
  • In December, the Group completed the transaction to sell 100% shares of LLC ESC Bashkortostan (electricity sales company, guaranteeing supplier of electricity in the Republic of Bashkortostan) to Inter RAO Group.


Revenue


Revenue breakdown 2016/2015 (in RUB mn)


2016

2015

chg

4Q’16

4Q’15

chg

Electricity sales

272,582

254,518

7.1%

74,382

74,171

0.3%

Heat and hot water sales

38,849

35,381

9.8%

11,672

11,158

4.6%

Capacity sales

37,068

33,038

12.2%

11,380

10,057

13.2%

Other sales

25,573

24,575

4.1%

7,994

7 ,043

13.5%

Revenue from operations

374,072

347,512

7.6%

105,428

102,429

2.9%

Government grants

17,250

14,314

20.5%

7,036

6,126

14.9%

Total revenue

391,322

361,826

8.2%

112,464

108,555

3.6%

In 2016, total revenue of the Group increased by 8.2% to RUB 391,322 mn compared to 2015. The change is associated with the following key factors:

  • significant increase in output of hydropower plants of PJSC RusHydro on the back of strong inflows to a number of large reservoirs;
  • increase in day-ahead market prices in the first price zone;
  • indexation of regulated electricity capacity tariffs for RusHydro hydropower plants;
  • increase in capacity prices of the competitive capacity auctions (KOM) for the hydropower plants of the second price zone following full liberalization of capacity market for hydro in Siberia with increase of capacity sold at KOM price from 80% to 100% since May 1, 2016;
  • increase in revenue from electricity sales of RAO ES East subgroup segment following both increase in output and growth of tariffs;
  • increase in government grants by 20.5% to RUB 17,250 mn due to compensation of expenses in the amount of RUB 2,079 mn incurred by JSC DGK for purchase of natural gas from Sakhalin-1 consortium;
  • increase in revenue from electricity sales of ESC RusHydro subgroup segment following an increase in electricity output, planned tariff growth, as well as increase in electricity consumption and new consumers acquisition;
  • increase in revenue from heat sales, primarily due to increase in average heat tariffs.


Operating expenses4


Operating expenses in 2016/2015 (in RUB mn)



2016

2015

chg

4Q’16

4Q’15

chg

Employee benefit expenses

71,768

72,871

-1.5%

19,233

20,300

-5.3%

Purchased electricity and capacity

57,610

60,805

-5.3%

15,912

18,085

-12.0%

Fuel expenses

54,561

54,087

0.9%

16,793

16,276

3.2%

Electricity distribution expenses

46,722

42,663

9.5%

13,287

12,425

6.9%

Other third-party services

32,739

32,930

-0.6%

9,816

9,629

1.9%

Depreciation of PP&E and intangible assets

24,130

22,477

7.4%

5,896

5,494

7.3%

Taxes other than income tax

10,233

9,792

4.5%

2,728

2,486

9.7%

Other materials

9,115

9,202

-0.9%

2,714

3,236

-16.1%

Water usage expenses

3,202

2,844

12.6%

812

802

1.2%

Other expenses

5,625

7,432

-24.3%

1,560

301

418.3%

TOTAL

315,705

315,103

0.2%

88,751

89,034

-0.3%

Total operating expenses in 2016 compared to 2015 increased by 0.2% from RUB 315,103 mn to RUB 315,705 mn.


Major factors affecting operating expenses:


  • decrease in employee benefit expenses by 1.5 % as a result of continuing headcount optimization and overhaul of employee and management compensation plans;
  • decrease in expenses on purchased electricity and capacity due primarily to direct access of large customers serviced by LLC ESC Bashkortostan to wholesale electricity market, lower expenses of PJSC Yakutskenergo for electricity purchase in connection with acquisition of guaranteeing supplier status by JSC Viluyskaya HPP-3 (PJSC Alrosa), reduced purchase of electricity by PJSC RusHydro;
  • decrease in other expenses, due to lower loss on disposal of plant, property and equipment, travel expenses and social programs expenses;
  • decrease in third party services expenses primarily driven by reduction in subcontractors’ service, expenses related to consulting, legal and information services, as well as repair and maintenance works;
  • increase in electricity distribution expenses due to growth in distribution tariff and increased output of electricity to customers;
  • increase in depreciation and appreciation following commissioning of new plant, property and equipment in PJCS RusHydro, JSC Blagovesheskaya TPP and JSC Sulaksky Cascade.


Profit


In the reporting period, EBITDA increased by 36.7% to RUB 100,341 mn compared to RUB 73,383 mn in 2015.


In 2016, the Group’s net profit increased by 46.4% to RUB 39,751 mn compared to RUB 27,159 mn for the previous year. Adjusted net profit in the reporting period amounted to RUB 66,114 mn, a 39.6% increase as compared to the previous year. The difference between the reported and adjusted profit is attributed mainly to the following non-cash effects (before the income tax):

  • accrual of impairment of property, plant and equipment in the amount of RUB 26,525 mn including in relation to the following cash-generating units: PJSC RusHydro (Saratovskaya HPP, Votkinskaya HPP, Kabardino-Balkarian branch), JSC Blagoveschenskaya TPP, PJSC Kamchatenergo, PJSC Yakutenergo, JSC Sakhaenergo, PJSC Magadanenergo, PJSC Sakhalinenergo;
  • accrual of impairment of accounts receivable in the amount of RUB 7,133 mn including RUB 3,968 accrued for RAO ES East Subgroup, RUB 1,911 mn for ESC RusHydro subgroup, RUB 1,014 mn for PJSC RusHydro;
  • recognition of income from the sale of dams of Bratskaya, Ust’-Ilimskaya and Irkutskaya HPPs in the amount of RUB 7,202 mn included in included in other operating income;
  • accrual of impairment of financial assets in the amount of RUB 4,464 mn in relations to cash and deposits, placed in Peresvet Bank, currently undergoing preparation for financial recovery procedure.
  • recognition of income from the sale of LLC ESC Bashkortostan in the amount of RUB 3,048 mn in other operating income;
  • accrual of impairment of loans issued to ZAO Verkhne-Narynskye HPPs in the amount of RUB 2,378 mn according with denunciation of agreements between the Russian Federation and Kyrgyzstan Republic on construction of upper Naryn Cascade hydropower plants.

In addition, share of results of associates and joint ventures increased by RUB 6,254 mn and totaled RUB 6,682 mn. Increase in share in associates and joint ventures profit is due primarily to financial results of BoGES Group. In 2016, the Group recognized reversal of impairment of plant, property and equipment of PJSC Boguchanskaya HPP in the amount of RUB 25,390 mn. In the result, the share in the profit of BoGES group for 2016 has increased against prior year by RUB 7,862 mn and totaled RUB 8,546 mn.


Key indicators of financial position


As of December 31, 2016, the Group's assets increased by RUB 45,309 mn to RUB 983,446 mn against the comparable figure as at December 31, 2015. Change in assets is primarily attributable to:

  • increase in plant, property and equipment in connection with implementation of the investment program of the Group;
  • increase in cash equivalents with simultaneous decrease in short-term deposits;
  • increase in value of available-for-sale financial assets marked-to-market;
  • decrease in non-current assets explained by completion of transaction to sell dams of Bratskaya, Ust-Ilimskaya and Irkutskaya HPPs.

As at the end of the reporting period the Group's liabilities increased by RUB 8,296 mn from December 31, 2015, to RUB 332,514 mn. The change in the liabilities was mainly a result of placement of non-convertible interest-bearing bonds (series BO-PO4) in total amount of RUB 15,000 mn, as well as an increase in long-term debt of RAO ES East Subgroup. At the same time liabilities decreased due to redemption by PJSC RusHydro of bonds series 01 and 02 for nominal value of RUB 14,750 mn as well as decrease of accounts payable due to contractors and suppliers.


Subsequentevents


In January 2017, the Company resumed the results of execution of pre-emptive right by eligible shareholders to acquire Company’s shares of additional issue, registered by Bank of Russia on 7 December 2016. During the pre-emptive right period the Company placed 33,348,661 additional shares priced at RUB 1 per share, or 0.08% of the total volume of additional issue.


In March 2017, the Company and PJSC Bank VTB signed agreements related to a purchase of 55 bn ordinary shares of the Company (40 bn shares of the new issue and 15 bn shares of quasy-treasury stock) and conclusion of a 5-year non-deliverable forward contract in respect of these shares. The cash in the amount of RUB 55 bn received by the Company through the sale of shares is intended to repay the debts of RAO ES East subgroup. In accordance with the forward contract, the Company has no obligation to buy back its own shares; for the purposes of final settlement under the forward contact it is envisaged that PJSC Bank VTB sells the Company’s shares. Any difference between PJSC Bank VTB’s income from the sale of the above shares at the end of the forward contract and the forward price is due to be settled in cash between the Company and PJSC Bank VTB. The forward price is defined as the purchase cost of the shares increased by the total amount of interests charged less total dividends paid during the contract period.


At the moment of these consolidated financial statements approval, the estimate of the forward price and the related effect of the contract on the carrying amount of assets and liabilities, and financial result within the next financial year is not completed by the Group's management.


The consolidated financial statements of the Group are available at: http://www.eng.rushydro.ru/investors/reports/


The presentation of the results is available at: http://www.eng.rushydro.ru/investors/presentations/results_presentations/


Financial statements of PJSC RusHydro for the year ended December 31, 2016, under Russian accounting standards, are to be published on March 30, 2017.


1. EBITDA is calculated as operating profit/loss before depreciation of property, plant and equipment and intangible assets and non-cash expenses and income.

2. Adjusted for effects of impairment of fixed assets, accounts receivable, financial assets, issued loans, other non-current assets and goodwill of subsidiary.

3. The Boguchanskaya hydropower plant is part of the Boguchanskiy Energy and Metals Complex (BEMO), a 50/50 joint venture (JV) between PJSC RusHydro and UC RUSAL, and is not part of RusHydro Group. According to RusHydro’s shareholding in the JV (50%), the results of the plant are reported in the official financial statements in “Share of results of associates and joint ventures”. Operations of the HPP have been put into the press-release for general reference.

4. Here and hereinafter, the operating expenses do not include impairment losses.  

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.