RusHydro announces 9M 2018 IFRS results
December 11, 2018. Moscow, Russia. RusHydro Group (hereinafter referred to as the “Group”, ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces its condensed consolidated interim unaudited financial information prepared in accordance with International Financial Reporting Standards (IFRS) for the 3rd quarter and 9 months of 2018.
Key highlights for 3Q and 9M of 2018:
3Q and 9M 2018/2017 highlights (in RUB mn)
Total electricity generation by RusHydro Group’s power plants reached 32,246 GWh (+3.9%) in the third quarter of 2018, in 9M – 99,618 (+5.3%) vs electricity consumption increase of only 1.6% in Russia for the same period. In 3Q of 2018 total electricity generation by RusHydro Group’s hydropower and pumped storage plants increased by 4.3% to 25,961 GWh, by the Group’s thermal power plants – by 2.4% to 6,197 GWh, while electricity generation by renewables decreased by 8.4% to 87 GWh as compared to the same period of 2017. In nine months of 2018 total electricity generation by RusHydro Group’s hydropower and pumped storage plants increased by 5.1% to 76,582 GWh, by the Group’s thermal power plants – by 6.2% to 22,722 GWh, while electricity generation by renewables decreased by 3.5% to 314 GWh as compared to the same period of 2017. Total electricity generation by Boguchanskaya hydropower plant[iiii] in 3Q 2018 amounted to 4,122 GWh (+10.9%), in 9M – 10,286 (-1.7%).
The underlying factors of the production change in January-September 2018 were:
During the nine months of 2018, heat output by thermal plants and boilers of RusHydro Group in the Far East increased by 4.6% to 19,574 thousand GCal as compared to the corresponding period of 2017. The increase came on the back of lower temperatures in all the regions of the Far East in the first quarter of the year with an exception of Chukotka Autonomous Okrug. Slight decrease in heat output in the third quarter is a result of higher air temperatures.
In the third quarter of 2018, total electricity output by energy retail companies of ESC RusHydro subgroup – JSC ESC RusHydro, PJSC Krasnoyarskenergosbyt, JSC Chuvashskaya Electricity Sales Company and PJSC Ryazanenergosbyt, amounted to 4,191 GWh, a 4.4% decrease as compared to the same period of 2017, for the nine months of 2018 – 14,706 GWh, a decrease of 1.5% as compared to the corresponding period last year.
Increase in electricity output by PJSC Krasnoyarsenergosbyt and JSC Chuvashskaya Electricity Sales Company for the nine months of the year is driven by extension of heating season in the Krasnoyarskiy Krai until May 31, 2018 and climate conditions in Chuvashia. Decrease in output by PJSC Ryazanenergosbyt came on the back of cancellation of service with glass production factory in Ryazan. Negative performance of JSC ESC RusHydro was a result of cancelation of service agreement with OJSC Kaustik (JSC Bashkir Soda Company Group).
Key events of the first half of 2018
Revenue breakdown in 3Q and 9M 2018/2017 (in RUB mn)
For the nine months of 2018, total revenue of the Group increased by 7.2% to RUB 288,087 mn as compared to RUB 268,742 in the corresponding period of 2017. The change is associated with the following key factors:
Following adoption of IFRS 15 standard from January 1, 2018, the Group recognizes revenue from compensation of transmission losses and expenses on power distribution under contracts with grid companies on a net basis (in 9M 2018 – RUB 5,368 mn including RAO ES East subgroup of RUB 2,036 mn and ESC RusHydro subgroup of RUB 3,332 mn).
Operating expenses in 3Q and 9M 2018/2017 (in RUB mn)
Total operating expenses for the nine months of 2018 compared to the same period last year increased by 5.3% to RUB 227,777 mn as revenue increased by 7.2%, due to the following factors:
For the nine months of 2018, EBITDA increased by 13.1% to RUB 81,016 mn compared to the same period of 2017.
The Group’s net profit increased by 39.7% to RUB 43,033 mn. Adjusted net profit in the reporting period amounted to RUB 48,405 – an increase of 18.5% as compared to the same period last year.
The difference between the reported and adjusted profit is attributed mainly to the following non-cash effects (before income tax) and recognition of change in fair value of the derivative financial instrument:
Key indicators of financial position
As of September 30, 2018, the Group's assets increased by RUB 35,730 mn or 3.5% to RUB 1,063,981 mn against the comparable figure as at December 31, 2017. Change in assets is primarily attributable to:
As at the end of the reporting period, the Group's liabilities increased by RUB 8,114 mn or 2.4% to RUB 340,801 mn as compared to December 31, 2017. The structure of liabilities has changed accordingly: long-term liabilities increased by RUB 64,988 mn following increase of non-current debt and short-term liabilities decreased by RUB 56,874 mn mainly due to decrease of current debt and current portion of non-current debt.
Structure of the liabilities of the Group underwent the following changes:
The fair value of the non-deliverable forward contract, recognized under the terms of transaction with PJSC VTB Bank, increased from RUB 20,716 mn (as of December 31, 2017) to RUB 22,064 mn (as of September 30, 2018). The main reason of the change in fair value of the forward contract is the local dynamics in the change of market price of RusHydro’s shares for the nine months of 2018.
Events after the reporting date
The full financial statements are available on the Company’s website at: http://www.eng.rushydro.ru/investors/reports
[i] Operating profit is calculated as the difference between revenue, other operating profit and operating expenses.
[ii] EBITDA is calculated as operating profit/loss excluding depreciation of property, plant and equipment, amortization of intangible assets, income arising from the change in fair value of financial assets measured through profit or loss, impairment of property, plant and equipment, impairment of accounts receivable, profit / loss on disposal of property and subsidiaries and other non-cash items of operating income and expenses.
[iii] Net profit is adjusted for the effects of recognition of financial income/expense arising from the change in fair value of non-deliverable forward contract, impairment of fixed assets, impairment of accounts receivable, profit / loss on disposal of property, plant and equipment, as well as other operating income arising from the change in fair value of financial assets measured through profit or loss.
[iiii] The Boguchanskaya hydropower plant is part of the Boguchanskiy Energy and Metals Complex (BEMO), a joint venture (JV) between 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 jointly controlled entities”. Operations of the HPP have been put into the press-release for general reference.
[iiiii] In July 2017, the Resolution of the Russian Government No. 895 “On reaching basic rates (tariffs) for electric power (capacity) in the territories of the Far East Federal region (the “Far East”)” became effective, under which rates for consumers in the territories of the Far East should be reduced starting from 1 January 2017 to the basic level of RUB 4.00 / kWh, from 1 January 2018 to RUB 4.30 / kWh. According to the Resolution of the Russian Government No. 1614-r of 28 July 2017, PJSC RusHydro was appointed as the recipient of a premium to the price for capacity provided by the Company in the price zones of the wholesale market under CCS agreements. The premium to the price for capacity is set in order to achieve the basic level of rates (tariffs) for electricity (capacity) planned for the next regulation period in the Far East constituent regions. Within the amounts defined by Resolution No. 1615-r of the Russian Government dated 28 July 2017, the Company translates the collected amounts of margin in the form of free-of-charge targeted contributions to the budgets of the respective regions. The Group companies being guaranteeing suppliers will receive compensation for the shortage of income related to the reduction of rates, through subsidies from the Far East constituent regions.
[iiiiii] Here and hereinafter the operating expenses do not include impairment loss.
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 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.