June 7, 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 1st quarter of 2018.
Key highlights for the first quarter of 2018:
Financial results reflected strong
operational results driven by increased water inflows to major
reservoirs of the Volga-Kama cascade and electricity production
growth of RAO ES East subgroup’s facilities following increase in
power demand;
Total revenue – RUB 110,097 mn (+6.5%
y-o-y);
EBITDA– RUB 32,022 mn (+5.9% y-o-y);
Operating expenses increased by 7.5% y-o-y
mainly as a result of fuel cost increase;
Net profit – RUB 22,951 mn (+22.0% y-o-y);
adjusted net profit – RUB 20,893 mn (+2.5% y-o-y).
1Q 2018/2017 highlights (in RUB mn)
|
1Q/18
|
1Q/17
|
chg.
|
Revenue, including
|
110,097
|
103,359
|
6.5%
|
Revenue
|
99,699
|
98,779
|
0.9%
|
Government grants
|
10,398
|
4,580
|
127.0%
|
Operating expenses
|
84,795
|
78,869
|
7.5%
|
Operating profit[1]
|
25,302
|
24,490
|
3.3%
|
EBITDA[2]
|
32,022
|
30,234
|
5.9%
|
Net profit
|
22,951
|
18,806
|
22.0%
|
Net profit (adj.)[3]
|
20,893
|
20,390
|
2.5%
|
Operating results
In the first quarter of 2018, electricity
generation by RusHydro Group has reached 31,835 GWh (+9.3%). Group’s
total power production including Boguchanskaya hydropower plant[4]
reached 34,637 GWh (+7.2%). Total electricity generation by
hydropower and pumped storage plants of RusHydro Group in 1Q 2018
amounted to 22,140 GWh (+8.2%), total output by thermal and
geothermal power plants – 9,695 GWh (+5.3%).
Main factors affecting operating results in the
first quarter of 2018 were:
total water inflow to reservoirs of the
hydropower plants of the Volga-Kama cascade was significantly higher
than long-run average (by 1.2-2.5x);
increase in water inflow to the reservoirs of
the hydropower plants in the south of Russia, Siberia and the Far
East by 10-25% as compared to the long-run average;
growth of electricity generation by thermal
power plants in the Far East following moderation of water supply in
reservoir of Zeyskaya hydropower plant aided by increase in
consumption in the region;
increase in electricity sales to China and
UES of Siberia by 25.2% (to 629.7 GWh) as compared to the same
period last year.
In the first quarter of 2018, heat output by
thermal plants of RusHydro Group in the Far East increased by 7.7% to
13,038 thousand GCal as compared to the same period of 2017 due to
lower air temperatures in most regions of the Far East.
In the first quarter of 2018, total electricity
output by RusHydro Group’s electricity retail companies, operating
in Chuvashia, Ryazan and Krasnoyarsk regions (ESC RusHydro subgroup),
amounted to 6,025 GWh, an increase of 1.3% as compared to the same
period of 2017.
Key events of the first quarter of 2018
On February 7, 2018, RusHydro Group’s
financial debt decreased by RUB 26 bn following exclusion of
guarantee obligation between PJSC RusHydro and State Corporation
Vnesheconombank on PJSC Boguchanskaya HPP loan given out by the bank
in 2010. The lending bank supported the termination following
completion of construction and ramp-up of the hydropower plant, and
taking into consideration PJSC Boguchanskaya HPP’s stable
financial and operational results and its ability to service the
loan independently. As a result, the Group’s total debt load
decreased significantly;
On February 15, 2018, PJSC RusHydro has
successfully placed loan participation notes (LPNs) issued by
RusHydro Capital Markets DAC. RusHydro will use the proceeds from
the RUB 20 bn Eurobond issue to refinance its current loan portfolio
and for general corporate purposes. The LPNs will mature in 2021 and
bear an interest rate of 7.4% per annum. The following ratings have
been assigned to the issue: S&P: “BB+” / Moody's: ‘Ba1’
/ Fitch: ’BB+’ / ACRA ‘AAA(RU)’;
On February 27, 2018, Standard & Poor's
Global Ratings Services raised long-term corporate credit ratings on
PJSC RusHydro to ‘BBB-’ with ‘Stable’ outlook. Short-term
corporate credit was raised to ‘À-3’ respectively.
Revenue
Revenue breakdown in 1Q 2018/2017 (in
RUB mn)
|
1Q/18
|
1Q/17
|
chg.
|
Electricity sales
|
66,034
|
66,599
|
-0.8%
|
Heat and hot water sales
|
16,670
|
15,668
|
6.4%
|
Capacity sales
|
10,799
|
10,588
|
2.0%
|
Other sales
|
6,196
|
5,924
|
4.6%
|
Revenue from operations, total
|
99,699
|
98,779
|
0,9%
|
Government grants[5]
|
10,398
|
4,580
|
127.0%
|
Total revenue
|
110,097
|
103,359
|
6.5%
|
In the first quarter of 2018, total revenue of the
Group increased by 6.5% to RUB 110,097 mn as compared to RUB 103,359
in the first quarter of 2017. The change is associated with the
following key factors:
increase in revenue from electricity
(including government grants5) of RAO ES East subgroup by
RUB 4,286 mn on the back of tariff and sales volume growth;
increase in revenue from electricity sales of
PJSC RusHydro by RUB 2,169 mn due to production growth by
hydroelectric plants following increased water inflows to
reservoirs, primarily of the Volga-Kama cascade;
decrease in revenue of ESC RusHydro subgroup
by RUB 493 mn as a result of lower sales and cancellation of
electricity supply agreements with customers;
increase in other sales revenue is mainly
driven by increase in electricity distribution services in RAO ES
East subgroup’s companies such as JSC DRSK, PJSC Yakutskenergo and
PJSC Magadanenergo.
Operating
expenses[6]
Operating expenses in 1Q 2018/2017 (in
RUB mn)
|
1Q/18
|
1Q/17
|
chg.
|
Fuel expenses
|
21,239
|
17,900
|
18.7%
|
Employee benefit expenses
|
19,006
|
18,662
|
1,8%
|
Grid company services on electricity distribution
|
12,293
|
11,802
|
4,2%
|
Purchased electricity and capacity
|
11,401
|
11,622
|
-1,9%
|
Third parties services
|
7,593
|
7,209
|
5,3%
|
Depreciation
|
6,624
|
5,683
|
16,6%
|
Taxes other than on income
|
3,046
|
2,680
|
13,7%
|
Other materials
|
1,499
|
1,812
|
-17,3%
|
Water usage expenses
|
903
|
797
|
13,3%
|
Other expenses
|
1,191
|
702
|
69,7%
|
TOTAL
|
84,795
|
78,869
|
7,5%
|
Total operating expenses in the first quarter of
2018 compared to the same period last year increased by 7.5% to RUB
84,795 mn due to the following factors:
increase in fuel expenses mostly due to fuel
cost increase of JSC DGK as well as increase in electricity and heat
output of JSC DGK (+14.6% and +9%, respectively) as well as
commissioning of Blagoveshenskaya TPP and Yakutskaya GRES-2 as
compared with the same period last year;
increase in electricity distribution expenses
of grid companies due to planned tariffs increase and higher volumes
of electricity transmission following increase of useful output;
increase in depreciation expense due to
increase in value of property plant and equipment after
commissioning new facilities (including JSC Yakutskaya GRES-2 with
off-site construction in 2017 – 1Q 2018) as well as planned
renovation and modernization of the Group’s facilities.
Profit
In the first quarter of 2018, EBITDA increased by
5.9% to RUB 32,022 mn compared to the same period of 2017.
The Group’s net profit increased by 22.0% to RUB
22,951 mn. Adjusted net profit in the reporting period amounted to
RUB 20,893 – a 2.5% increase 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:
other operating income in the amount of RUB
2,341 mn as a result of change in fair value of financial assets
measured through profit and loss;
impairment of accounts receivable in the
amount of RUB 1,483 mn resulting from analysis of overdue
receivables and estimation of their collectability;
financial income in the amount of RUB 1,456
mn as a result of change in fair value of non-deliverable forward
contract as a result of increase of market price of RusHydro’s
shares in the reporting period;
impairment of property, plant & equipment
in the amount of RUB 480 million.
Key indicators of financial position
As of March 31, 2018, the Group's assets increased
by RUB 13,206 mn or 1.3% to RUB 1,041,457 mn against the comparable
figure as at December 31, 2017. Change in assets is primarily
attributable to:
increase in property, plant & equipment
(following execution of the Group’s investment program);
increase in accounts receivable.
As at the end of the reporting period, the Group's
liabilities decreased by RUB 10,441 mn or 3.1% to RUB 322,246 mn as
compared to December 31, 2017. The structure of liabilities has
changed accordingly: long-term liabilities increased by RUB 18,043 mn
and short-term liabilities decreased by RUB 28,484 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:
in February 2018, RusHydro has placed
eurobonds in the amount of RUB 20 bn issued by RusHydro Capital
Markets DAC with a maturity of 3 years and a coupon rate of 7.4%.
The proceeds of the issue were used to refinance the Group’s
current loan portfolio;
in March 2018, the Group has repaid loan from
PJSC Sberbank in the amount of RUB 10,613 mn.
The fair value of the non-deliverable forward
contract, recognized under the terms of transaction with PJSC VTB
Bank, decreased from RUB 20,716 mn (as of December 31, 2017) to RUB
18,854 mn (as of March 31, 2018).
The main reason of the change in fair value of the
forward contract is the favorable dynamics in the change of market
price of RusHydro’s shares in the first quarter of 2018. Therefore,
an increase in the market price of RusHydro’s shares in the
forthcoming reporting periods will reduce the fair value of the
forward contract further.
Events after the reporting date
On April 5, 2018, PJSC RusHydro announces the
signing of loan agreement with Far East Development Fund (FEDF) for
RUB 5 bn to finance construction of Sakhalin GRES-2 infrastructure
facilities. The term of the loan is eight years with an interest
rate of 5% per annum. Proceeds of the loan will cover close to half
of the infrastructure’s total project cost. The reduced interest
rate offered by the FEDF will help lower project’s financing costs
and optimize electricity tariffs;
On May 25, 2018, the Board of Directors held
a meeting to address issues related to the Annual General Meeting of
Shareholders (AGM), which will be held on June 27, 2018. The Board
recommended to the AGM to approve dividend in the amount of RUB
0.0263335 per share (50% of the Group’s net profit for 2017 under
IFRS).
[1]
Operating profit is calculated as the difference between revenue and
operating expenses.
[2]
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.
[3] 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.
[4] 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.
[5] 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.
[6] Here and hereinafter the
operating expenses do not include impairment loss.
|