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: https://www.eng.rushydro.ru/investors/reports/
The presentation of the results is available
at:
https://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.
|