JSC ROSSETI
FINANCIAL RESULTS FOR FIRST HALF OF 2014
29 August 2014, Moscow, Russia – JSC ROSSETI (LSE: RSTI) (“ROSSETI” or the “Company”), the largest
electricity transmission and distribution grid company in Russia, today announces its interim condensed
consolidated IFRS results for the six months ended 30 June 2014.
Key financial indicators:
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Revenue: RUB 379.5 bn (1H2013: RUB 349.4 bn)
EBITDA: RUB 113.7 bn (1H2013: RUB 67.0 bn)
Adjusted EBITDA1: RUB 121.9 bn (1H2013: RUB 115.0 bn)
Adjusted EBITDA margin: 32.1% (1H2013: 32.9%)
Net profit / (loss): RUB 31.5 bn (1H2013: RUB (2.1) bn)
Adjusted net profit 2: RUB 38.1 bn (1H2013: RUB 36.3 bn)
Net cash flows generated by operating activities: RUB 63.8 bn (1H2013: RUB 67.6 bn)
Key corporate highlights:
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Admission to trading of global depositary receipts of the Company on the Moscow Stock Exchange.
Transfer of the guaranteed electricity supplier functions to certain subsidiaries of ROSSETI.
Confirmation of the Ba1 credit rating and change of outlook from “developing” to “stable” by
Moody's.
Assignment of a long-term credit rating BBB- by Standard & Poor’s.
Development of the consolidated investment programme for 2015-2019.
Change of the English version of the Company’s name for ‘’JSC ROSSETI’’.
Commenting on the 1H 2014 financial results, Andrey Demin, First Deputy Director General for Economic
Affairs and Finance of ROSSETI, said:
“We are pleased with the results of the first half of 2014. ROSSETI demonstrated a significant increase in
EBITDA and net profit as a result of the improving operating efficiency and revenue growth, including
revenue from electricity transmission services, which was higher than the growth of operating expenses.
We see a positive effect of the consistent implementation of our strategy aimed at increasing operating
efficiency, gradual reduction of costs and optimisation of our investment programme. In the second half of
the year, we will make every effort to further increase profitability and improve cost management, while
fulfilling all our obligations under the approved investment programme”.
1
Adjusted EBITDA is calculated as EBITDA excluding losses from impairment of available-for-sale
investments, promissory notes and accounts receivable;
2
Adjusted net profit is calculated as net profit for the period excluding losses from impairment of
available-for-sale investments, promissory notes, accounts receivable and deferred income tax expense
related to them.
1
FINANCIAL SUMMARY
Indicators
Revenue
Operating expenses
incl. amortisation
Operating profit
EBITDA
Adjusted EBITDA
Net profit/(loss)
Adjusted net profit
Net cash flows from operating activities
Net debt
1H2014
billions, RUB
379.5
(331.7)
(61.1)
50.6
113.7
121.9
31.5
38.1
63.8
467.9
1H2013
billions, RUB
349.4
(318.7)
(56.8)
32.6
67.0
115.0
(2.1)
36.3
67.6
367.1
Change
%
8.6
4.1
7.6
55.2
69.7
6.0
5.0
(5.6)
(27.5)
In 1H 2014, the Company’s revenue increased by 8.6% y-o-y to RUB 379.5 bn (1H 2013: RUB 349.4 bn),
driven by higher revenue from electricity transmission services as a result of the growth of the electricity
transmission tariff from 1 July 2013.
Operating expenses totaled RUB 331.7 bn, representing an increase of 4.1% y-o-y (1H 2013: RUB 318.7 bn).
The growth of operating expenses was mainly related to the increase in the cost of electricity transmission
services provided by territorial grid organizations due to the increase in their tariffs. Other major factors
include the increase in personnel expenses related to the indexation of salaries in accordance with the
Industry Agreement dated 1 July 2013, as well as to the increase in headcount due to the commissioning of
new facilities as part of the investment programme); the increase in provisions accrued for estimated
liabilities, mainly due to legal cases related to contracts for electricity transmission services provided by
territorial grid organizations; and the increase in accumulated amortisation due to the launch of new
property, plant and equipment as part of the investment programme. Additionally, the reporting period
saw an increase in the cost of electricity purchased for sale by certain subsidiaries acting as guaranteed
suppliers, which was also due to the growth of electricity tariffs.
The increase in both EBITDA and net profit were driven by the revenue growth which was faster than the
growth of operating expenses, as well as by the decrease in financial expenses related to the reduction of
losses from impairment of investments (particularly the recognition of impairment losses from the decline
in the market value of equity investments in OJSC “INTER RAO UES” as of 30 June 2013).
In 1H 2014, adjusted EBITDA grew by 6.0% y-o-y to RUB 121.9 bn (1H 2013: RUB 115.0 bn), supported by
the increased operating efficiency and higher profit before tax, which was primarily driven by the increase
in revenue from electricity transmission services.
The Company’s adjusted net profit amounted to RUB 38.1 bn, a 5.0% increase y-o-y (1H 2013: RUB 36.3
bn). This is attributed to revenue growth, including revenue from electricity transmission services, which
was higher than the growth of operating expenses.
Total assets grew by 2.2% YTD to RUB 1,988 bn (YE2013: RUB 1,946 bn) as a result of the increase in
property, plant and equipment following the launch of new facilities as part of the investment programme,
the increase in reserves due to the transition of certain subsidiaries to their own accounts for repair works,
2
and the increase in cash on settlement accounts (on 30 June 2014, cash and cash equivalents grew by 45%
YTD to RUB 89.7 bn from RUB 61.9 bn as of 31 December 2013).
In 1H 2014, net debt amounted to RUB 467.9 bn (1H 2013: RUB 367.1 bn). The increase was due to the
growth of the loan portfolio as the Company attracted loan facilities to finance its investment programme.
Outlook
On 3 April 2014, the Government of the Russian Federation approved the Strategy for electricity grid
development (decree № 511-r dated 3 April 2013), which is aimed at decreasing operating expenses in the
industry by 15% by 2017 compared to 2012, adjusted for inflation, per unit of electric equipment services
and maintenance. Additionally, according to the approved strategy, investment expenses are expected to
decline by 30% by 2017 compared to 2012, while electricity losses are expected to be scaled back by 11%
compared to 2012.
Further improvement in operating efficiency remains ROSSETI’ priority for 2014 as the Company aims to
outpace the decrease in operating expenses set by the strategy for electricity grid development and achieve
a target of 16.9% in 2017, compared to 2012 and adjusted for inflation, per unit of electric equipment
services and maintenance. ROSSETI expects to meet the targets for the decrease in investment expenses
and electricity losses set by the strategy.
Additionally, according to the Government directive, in 2014 the Company will decrease
administrative and management expenses by at least 15% y-o-y on both the Company and
subsidiary level.
* * *
The Company will hold a conference call for investors and analysts at 1:00 PM Moscow/ 10:00 PM London
/ 5:00 AM EDT on 29 August 2014.
Participant dial-in:
Russian version
UK dial-in:
Russia dial-in:
USA dial-in:
Confirmation code:
+44 (0) 20 3427 1916
+7 (495) 213 0977
+1 (212) 444 0896
8812399
English version
UK dial-in:
Russia dial-in:
USA dial-in:
Confirmation code:
+44 (0) 20 7784 1036
+7 (495) 705 9450
+1 (646) 254 3367
9535015
Participants are advised to dial in 5-10 minutes prior to the start time.
The call will be recorded and there will be a replay facility available until 11 September 2014 as follows:
3
UK dial-in:
Russia dial-in:
USA dial-in:
Replay passcode:
+44 (0) 20 3427 0598
+7 (495) 705 9453
+1 (347) 366 9565
Russian version: 8812399
English version: 9535015
For enquiries:
JSC ROSSETI
Maria Stepanova, Head of IR +7(495) 995 5333 (ext. 3961)
Yulia Martynova, IR +7 (495) 995 5333 (ext. 3834)
FTI Consulting
Maria Shiryaevskaya +7 (495) 795 0623
Olga Lundquist +7(495) 795 0623
About the Company
JSC ROSSETI is the largest electricity transmission and distribution grid company in Russia. It is also one of
the largest electricity transmission and distribution grid companies in the world by length of electricity
lines and installed transformer capacity. JSC ROSSETI holds interests in and manages 15 distribution grid
companies and Federal Grid Company in Russia. The Company together with its subsidiaries owns and
operates 2.25 million kilometers of electricity transmission and distribution lines with a total installed
transformer capacity of 743 GVA. The Company operates in 74 regions of Russia covering an area of 13.6m
sq. km.
Forward-looking statements
Some of the information in this press release may contain projections or other forward-looking statements
regarding future events or the future financial performance of JSC ROSSETI. 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. 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 industry, as well as many other risks specifically
related to JSC ROSSETI and its operations.
4
Group of companies “Russian Grids”
Consolidated Interim Condensed Statement of Profit and Loss and Other Comprehensive Income
for the six months ended 30 June 2014 (Unaudited)
(in millions of Russian roubles, unless otherwise stated)
Six months
ended
30 June 2014
Unaudited
Six months
ended
30 June 2013
Unaudited
379,526
(331,698)
2,814
50,642
349,371
(318,671)
1,913
32,613
Finance income
Finance costs
Net finance costs
5,194
(13,990)
(8,796)
5,285
(35,511)
(30,226)
Share of profit of equity accounted investees (net of income tax)
Profit before income tax
Income tax expense
1
41,847
(10,307)
12
2,399
(4,486)
Profit/(loss) for the period
31,540
(2,087)
Revenue
Operating expenses
Other income, net
Results from operating activities
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Net change in fair value of available-for-sale financial assets
Foreign currency translation reserve
Income tax on items that may be reclassified subsequently to profit
or loss
Total items that may be reclassified subsequently to profit or loss
Items that will not be reclassified to profit or loss:
Remeasurements of the defined benefit liability
Income tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Other comprehensive income for the period, net of income tax
18
(76)
(109)
81
(4)
(62)
20
(8)
1,112
(136)
976
914
1,032
(131)
901
893
Total comprehensive income/(loss) for the period
32,454
(1,194)
Profit/(loss) attributable to:
Owners of the Company
Non-controlling interest
22,724
8,816
(1,840)
(247)
Total comprehensive income/(loss) attributable to:
Owners of the Company
Non-controlling interest
23,327
9,127
(947)
(247)
0.14
(0.01)
Profit/(loss) per share
Basic and diluted profit/(loss) per ordinary share (in RUB)
5
Group of companies “Russian Grids”
Consolidated Interim Condensed Statement of Financial Position as at 30 June 2014 (Unaudited)
(in millions of Russian roubles, unless otherwise stated)
30 June 2014
Unaudited
31 December 2013
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in equity accounted investees
Non-current accounts receivable
Other investments and financial assets
Deferred tax assets
Total non-current assets
1,625,968
15,853
1,209
9,822
25,931
4,666
1,683,449
1,595,862
16,557
1,202
7,442
27,309
9,012
1,657,384
Current assets
Inventories
Other investments and financial assets
Current tax assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
27,521
41,600
6,391
139,253
89,742
304,507
1,987,956
23,920
53,306
5,568
143,944
61,917
288,655
1,946,039
6
Group of companies “Russian Grids”
Consolidated Interim Condensed Statement of Financial Position as at 30 June 2014 (Unaudited)
(in millions of Russian roubles, unless otherwise stated)
30 June 2014
Unaudited
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Treasury shares
Other reserves
Retained earnings
Total equity attributable to equity holders of the
Company
Non-controlling interest
Total equity
Non-current liabilities
Loans and borrowings
Trade and other payables
Employee benefits
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Provisions
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
31 December 2013
163,154
212,978
(2,819)
(5,662)
421,435
163,154
212,978
(2,819)
(6,265)
398,711
789,086
303,021
1,092,107
765,759
295,932
1,061,691
498,253
18,393
27,700
39,045
583,391
492,229
14,487
28,971
38,715
574,402
59,370
240,651
12,407
30
312,458
895,849
1,987,956
57,808
241,266
10,397
475
309,946
884,348
1,946,039
7
Group of companies “Russian Grids”
Consolidated Interim Condensed Statement of Cash Flows for the six months ended 30 June 2014 (Unaudited)
(in millions of Russian roubles, unless otherwise stated)
Six months ended
30 June 2014
Unaudited
OPERATING ACTIVITIES
Profit/(loss) for the period
Adjustments for:
Depreciation, amortization and impairment
Finance costs
Finance income
Profit/(loss) on disposal of property, plant and equipment
Share of profit of equity accounted investees
(net of income tax)
Loss on disposal of subsidiaries
Other non-cash transactions
Income tax expense
Operating profit before working capital changes and reserves
Change in trade and other receivables
Change in financial assets related to employee benefit fund
Change in inventories
Change in trade and other payables
Change in employee benefit liabilities
Change in provisions
Cash flows from operations before income taxes and interest
paid
Income taxes paid
Interest paid
Net cash flows from operating activities
31,540
(2,087)
61,139
13,990
(5,194)
(113)
56,752
35,511
(5,285)
1,128
(1)
(28)
10,307
111,640
1,793
332
(3,612)
(17,979)
(1,264)
2,010
(12)
12
154
4,486
90,659
10,509
71
(5,210)
(553)
(256)
(3,793)
92,920
(7,039)
(22,123)
63,758
91,427
(6,256)
(17,576)
67,595
Six months ended
30 June 2014
Unaudited
INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangible
assets
Proceeds from sale of property, plant and equipment
Acquisition of investments and placement of bank deposits
Proceeds from sale of investments and withdrawal of bank
deposits
Interest received
Net cash flows used in investing activities
FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayment of loans and borrowings
Purchase of non-controlling interest in subsidiaries
Proceeds from shares issued
Dividends paid
Payment of finance lease liabilities
Net cash flows from financing activities
Six months ended
30 June 2013
Unaudited
Six months ended
30 June 2013
Unaudited
(63,090)
1,627
(19,393)
(86,003)
2,115
(32,874)
33,079
4,651
(43,126)
62,586
3,349
(50,827)
50,671
(43,038)
(9)
(431)
7,193
86,076
(69,997)
(764)
500
(1,000)
14,815
8
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
27,825
61,917
89,742
31,583
59,815
91,398
9