Lenenergo releases its financial statements for 6M2015 prepared in accordance with IFRS
In the opinion of the Company's auditor, LLC RSM RUS, the enclosed interim condensed consolidated financial statements as at 30 June 2015 fully comply with the requirements of IAS 34.
RUB mln, unless otherwise stated | ||||||||
Indicator | 6 M 2015 | 6M2014 | For reference : 31.12.2014 | Change , % | ||||
for 6 M 2015 | 6 M2 015/ 6M2014 | |||||||
Operational indicators | ||||||||
Productive electricity supply, mln kWh | 14,461 | 14,516 | 28 , 680 | - | -0.38% | |||
Electricity losses , % | 12 . 2 0 | 10 . 51 | 11 . 06 | - | 1 . 69 p.p. | |||
Connectedcapacity , MW | 150 | 130 | 694 | - | 15 . 39% | |||
Financial indicators | ||||||||
Assets | 131,560 | 132,256 | 135,169 | -2.67% | - | |||
Equity | 40,121 | 49,715 | 43,437 | -7.63% | - | |||
Liabilities, including: | 91 , 440 | 82,541 | 91,732 | -0.32% | - | |||
- non-current liabilities | 41,901 | 44,888 | 53,461 | -21.62% | - | |||
- current liabilities | 49,538 | 37,653 | 38,271 | 29.44% | - | |||
Revenue , including : | 17,316 | 18,185 | 41,601 | - | -4.78% | |||
- from electricity transmission | 14,665 | 15 , 504 | 30 , 263 | - | -5.41% | |||
- from grid connections | 1 , 423 | 1,652 | 8,581 | - | -13.86% | |||
- other | 1,228 | 1,030 | 2,757 | - | 19.22% | |||
Operating expenses | 18,834 | 16 , 538 | 35,516 | - | 13.88% | |||
Operating profit | 1,518 | 1,648 | 6,085 | - | -7.89% | |||
EBITDA | 1,457 | 4,015 | 13,429 * | - | -63 . 71 | |||
EBITDA margin , % | 8.4% | 22.1% | 32.28% | - | ||||
Net profit / loss | -3,296 | 330 | - 1,839 * | - | - | |||
Net profit margin , % | - | 1.81% | - | - | ||||
Net debt | 41 , 811 | 25,6 47 | 44 , 163 | -5.33% | - | |||
Net debt /EBITDA | 3.85 | 2.4 | 3 . 29 | - | - | |||
* EBITDA and net profit for 2014 are indicated with adjustments on the loss on impairment of property, plant and equipment recognized in the structure of operating expenses.
EBITDA is calculated as profit before tax + depreciation of property, plant and equipment and amortization of intangible assets + finance expenses - finance income
Net debt is calculated as long-term and short-term borrowings minus cash and cash equivalents and short-term investments as at the end of the period.
In the calculation of Net debt/EBITDA, the value of Net debt is used as at the end of the reporting period, the value of EBITDA - for the last 12 months.
Revenue
Revenue from electricity transmission net of normal (expected) technological losses for 6M2016 amounted to RUB 17,316 mln, minus 5% compared with the same period of 2014 (RUB 18,185 mln). The Company received most of the revenue from its consumers: PJSC Petersburg Sales Company and LLC RSK-Energo.
The decrease in revenue is largely due to the growth of technological losses by 33% for 6M2015 compared with the same period of 2014, which was primarily the result of changes in the method for determining the volume of electricity supplied to the Lenenergo grid. Introduction from 01.07.2014 of the AIMS (Automated Information and Measuring System) allowed determining the actual level of supply to the network, which led to a sharp increase in the supply of electric power to Lenenergo networks.
Revenue from technological connection for the six months ending 30 June 2105 decreased by 14% compared with the same period of 2014 and totaled RUB 1,423 mln. The drop in revenue from technological connection accompanied by increased connected capacity by 20 MW (plus 15%) compared with the 6 months of 2014 is due to the implementation in 2015 of obligations under the contracts concluded at lower tariff rates.
Other income were up 19% from the previous year's level and reached RUB 1,228 mln.
Costs
Operating expenses of the Group in the reporting periodwere RUB 18,834 mln, up 14% from the previous year's level.
RUB mln | |||
6M 2015 | 6M 2014 | Change , % | |
Transmission fee | 7 , 421 | 7,523 | -1.36% |
Depreciation of property, plant and equipment | 2 , 889 | 2,303 | 25.45% |
Payroll and payroll taxes | 2 , 491 | 2,568 | -3.00% |
Provision for litigations and claims | 1,870 | 1,409 | 32 . 72% |
Provision/(reversal of provision) for impairment and write-off of receivables | 1,736 | 161 | 978 . 26% |
Taxes other than income tax | 522 | 447 | 16.78% |
Repairs and maintenance | 357 | 532 | -32.89% |
Rent | 268 | 260 | 3.08% |
Raw materials and supplies | 158 | 139 | 13 . 67% |
Electric metering services | 144 | - | - |
Telecommunication and information services | 128 | 179 | -28.49% |
Utilities | 109 | 69 | 57.97% |
Impairment of intangible assets | 85 | 65 | 30.77% |
Internal security | 82 | 90 | -8.89% |
Agency services | 81 | 45 | 80.00% |
Social expenses | 74 | 89 | -16.85% |
Consulting, legal and audit services | 60 | 82 | -26.83% |
Provision/(reversal of provision) for impairment of inventories | 1 | 46 | -97 . 83% |
Other operating expenses | 356 | 532 | -33.08% |
Total operating expenses | 18,834 | 16,538 | 13.88% |
Comments on the dynamics of key cost items:
- Depreciation of property, plant and equipment
The growth of depreciation expenses by 25% was caused by the increased book value of property, plant and equipment due to commissioning of fixed assets as a result of implementation of the investment program.
- Provision/(reversal of provision) for impairment and write-off of receivables
A significant increase in the provision for impairment of receivables in 1H 2015 compared with the same period of 2014 was due to the deteriorating financial position of some large consumers.
· Provision for litigations and claims
The increase in the provision was due to the assessment of recognition of potential risks of expenses on disagreements regarding determining the volume and cost of services in electric power transmission through networks of a number of third-party grid organizations. The main point of disagreements is the type of tariffs used in calculations and the absence of agreed essential conditions of the contracts for electric power transmission stipulated by the legislation of the Russian Federation. Lenenergo intends to defend its position in court. Final judicial practice in similar controversies for the date of the report has not been yet defined. The Company's management decided to evaluate the possible risks and to form necessary provisions.
We expect that judicial decisions on claims will be made no later than the second half of 2015.
Financial result
The Group of Lenenergo made an operating profit of RUB 1,518 mlnfor 6M2015 (minus 8% to same period of 2014).
Net loss for the reporting period amounted to RUB 3,296 mln (for 6M2014 2013 the Group earned net profit in the amount of RUB 330 mln). The increase in net loss was influenced by higher operating expenses (largely due to the establishment of various reserves), as well as the growth of the negative balance of financial income and expenses compared with the same period of 2014, which was mainly the result of the increase in interest expense on loans (RUB 2,138 mln) and the recognition of impairment losses in financial investments (in the amount of RUB 226 mln).
EBITDA for 6M2015 totaled RUB1,457 mln , which is 64% lower than the same indicator for 6M2014.
Debt position
Credit portfolio (short-term and long-term borrowings of the Company for the end of the reporting period) was RUB48,342 mln, 3% lower than the same indicator for the end of 2014. Net debt as at 30.06.2015 was RUB41,811 mln (minus 5% to the same indicator for the end of 2014 ) . Net debt/EBITDA amounted to 3.85 for the end of the reporting period.
The weighted average credit rate amounted to 10.22% as at 30.06.2015.
Bonds
For the six months of 2015, the Group has fully executed its obligations on payment of coupon yield on the sixth coupon of the bonded loan of a series 04 for RUB 127 mln and on the 4th coupon of the bonded loan of a series BO-01 for RUB 123 mln.In April 2015, the Company has successfully passed the offer on the bonded loan of a series 04.
Forward-looking statement regarding expected results 2015:
Due to the deteriorating financial performance of Lenenergo by the end of 2014, the Group has prepared the Plan of actions to increase efficiency and improve the economic and financial position of Lenenergo, which includes the following activities undertaken by the Company in 2015 and subsequent periods:
· revision of tariff balance decisions in the territory of the Group's presence in 2015;
· optimization of operating (controllable) expenses of the Company;
· optimization of investment costs and revision (adjustment) of the Company's investment program for 2015;
· approval of the Company's long-term investment program and optimization of investment costs for the period until 2020;
· settlement of disputes between the Company and third-party grid organizations, operating on the territory of St. Petersburg and the Leningrad Region;
· consolidation of network organizations functioning on the territory of St. Petersburg and the Leningrad Region on the basis of Lenenergo;
· repayment of debt ;
· etc .
The management believes that the implementation of the above measures will help to maintain the Group's liquidity at the appropriate level and timely comply with its financial liabilities.
For reference:
The structure of Lenenergo Group
100% 100% 98.13% 96.65%
100 %
of C С« Kurortenergo »
Dynamics of Key IFRS Indicators of Lenenergo:
2010 | 2011 | 2012 | 2013 | 2014 | 6 M 2015 | |
Revenue | 28 574 | 32,257 | 33 , 135 | 37,323 | 41 , 601 | 17,316 |
from electricity transmission | 17,692 | 22,895 | 23,521 | 27 , 480 | 30,263 | 14,665 |
from technological connections | 10 , 300 | 8,629 | 7,580 | 6,807 | 8,581 | 1,423 |
other | 582 | 732 | 2,034 | 3,036 | 2 , 757 | 1 , 228 |
Operating expenses | 21,441 | 31 , 503 | 30 , 653 | 31,008 | 35,516 | 18,834 |
Net profit * | 4,750 | 2 , 461 | 238 | 3,281 | -1 , 839 | - 3,296 |
Net profit margin | 16.6% | 7.6% | 0 .7 % | 8.8% | - | - |
EBITDA * | 11,611 | 9,937 | 10,386 | 10,358 | 13,429 | 1 , 457 |
EBITDA margin | 40.6% | 30.8% | 31.3% | 27.8% | 32.28% | 8.4% |
Net debt | 15 , 038 | 20,469 | 22,011 | 23,300 | 44,163 | 41,811 |
Net debt/ EBITDA | 1.30 | 2.06 | 2 .12 | 2.25 | 3.29 | 3.85 |
*EBITDA and Net profit for 2014, 2012 and 2011 are indicated with adjustments on loss on impairment of property, plant and equipment recognized in the structure of operating expenses.
EBITDA is calculated as profit before tax + depreciation of property, plant and equipment and amortization of intangible assets + finance costs - finance income
Net debt is calculated as long-term and short-term borrowings minus cash and equivalents, and for 2011, 2012, 2013, 2014 and 1H 2015 - also net of short-term investments for the end of the period.
Dynamics of Key Indicators of the Consolidated Statement of Financial Position ** :
2010 | 2011 | 2012 | 2013 | 2014 | 30.06.2015 | |
Non-current assets | 87,010 | 84,958 | 88,157 | 102,100 | 117 , 970 | 116,818 |
Current assets | 6,372 | 11,993 | 11,236 | 18,744 | 17,199 | 14,742 |
Assets | 93,382 | 96,951 | 99 , 393 | 120 , 845 | 135,169 | 131,560 |
Long-term borrowings | 14,125 | 21,028 | 20,637 | 29 , 402 | 48,180 | 37,198 |
Non-current liabilities | 21 , 924 | 29,412 | 25,338 | 34,700 | 53,461 | 41 , 901 |
Short-term borrowings | 1,566 | 6,549 | 7,153 | 3,982 | 1 , 589 | 11 , 145 |
Current liabilities | 21,497 | 25,035 | 30,567 | 36,679 | 38 , 271 | 49,538 |
Total liabilities | 43,421 | 54,448 | 55,905 | 71,380 | 91 , 732 | 91,440 |
Total equity | 49,961 | 42,504 | 43,487 | 49,465 | 43,437 | 40 , 121 |
Dynamics of Key Indicators of the Consolidated Income Statement ** :
2010 | 2011 | 2012 | 2013 | 2014 | 6M2015 | ||||
Revenue | 28,574 | 32 , 257 | 33,135 | 37 , 323 | 41 , 601 | 17 , 316 | |||
Operating expenses | -21 , 441 | -31 , 503 | -30 , 653 | -31 , 008 | -35 , 516 | 18 , 834 | |||
Operating profit | 7,133 | 754 | 2 , 482 | 6,316 | 6 , 085 | - 1,518 | |||
Finance income | 774 | 61 | 302 | 667 | 1 , 408 | 664 | |||
Finance expenses | -1 , 580 | -1,660 | -2 , 175 | -2 , 682 | -12 , 228 | - 2 , 672 | |||
Profit before tax | 6,257 | -845 | 609 | 4 , 301 | -4 , 734 | -3 , 527 | |||
Income tax expense | -1 , 507 | -99 | -371 | -1 , 020 | 519 | 231 | |||
Net profit for the year | 4 , 750 | -943 | 238 | 3 , 281 | -4,216 | -3,296 | |||
* in accordance with the Consolidated Statement of Financial Position and Income Statement
Financial statements prepared in accordance with IFRS and other publications for investors are available on Lenenergo website in the Investor Relations section (www.lenenergo.ru )
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