Inter RAO Group posted interim consolidated IFRS financial statements for the first nine months of 2017.
|Indicator, RUB bn||9 months 2017||9 months 2016||% Change|
|Adjusted operating expenses3||615.7||588.6||4.6%|
|Adjusted operating income3||43.1||38.6||11.7%|
|Adjusted net income3||42.6||33.0||29.4%|
|Loans and borrowings1||26.6||17.8||49.5%|
* — Financial indicators are provided according to financial statements in billion rubles rounded to one decimal place. Percentages are calculated based on IFRS statements data expressed in million rubles.
1 Including the share of debt in joint ventures.
2 Including deposits maturing in 3 to 12 months.
3 Operating expenses do not include release of impairment of property, plant and equipment amounting to 4.4 billion rubles in the nine months of 2016 and charge of impairment of property, plant and equipment amounting to 2.4 billion rubles in the nine months of 2017. The adjusted operating and net income does not include the impact of accrual/reversal of impairment of property, plant and equipment, and income from sale of assets classified as held-for-sale in the nine months of 2016, amounting to 31.9 billion rubles. The adjusted net income also takes into account the impact of recognition of deferred tax on charge/release of impairment of property, plant and equipment.
4 EBITDA for the nine months of 2017 does not include disposed assets in Armenia and Georgia and the figure of Ekibastuzskaya TPP-2 as it has been reclassified as held-for-sale.
The changes in the Group's financial performance were significantly influenced by the following key factors and events:
- Commissioning of 1,428 MW of new and upgraded power generation capacity under Capacity Delivery Agreements (CDA);
- Increase in average heat sales prices for end consumers across Russian assets of the Group;
- Optimization of capacity utilization in the Electric Power Generation Segment, including retirement of inefficient power generation equipment of combined installed capacity of 1,271 MW;
- Increase in average end consumer sales prices in the Supply Segment of the Group;
- Strengthening of the ruble against the U.S. dollar and euro;
- Completed sale of a stake in Electric Networks of Armenia and Razdan Energy Company (Razdan TPP) in December 2016; consequently, these companies did not deliver financial performance in 2017.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Group revenue increased by 5.1% (31.7 billion rubles) to 653.7 billion rubles
The increase in revenue in the Supply Segment by 45.2 billion rubles (11.2%) to 448.3 billion rubles is related both to higher average sales prices of guaranteeing suppliers for end consumers, and the acquisition of new customers by independent retailers.
The increase in revenue in the Electric Power Generation Segment by 2.0 billion rubles (2.3%) to 87.8 billion rubles is primarily related to the commissioning of Unit 12 of Verkhnetagilskaya TPP with the installed capacity of 447 MW and Unit 4 of that of Permskaya TPP with the installed capacity of 861 MW as part of Capacity Delivery Agreements. Added value has been achieved on the back of a build-up in in installed capacity as a result of relabeling equipment at some of plants.
Revenue in the Thermal Power Generation Segment which includes TGK-11 Group5 and Bashkir Generation Company Group, increased by 1.4 billion rubles (2.9%) to 49.0 billion rubles. Revenue increased mainly due to higher average heat prices in Bashkortostan, the Omsk Region and the Tomsk Region, compared to the previous reporting period. This was partially offset by a reduction in power generation by power plants in the segment given a decline in margin.
The Trading Segment saw revenue decrease by 16.6 billion rubles (28.4%) to 41.9 billion rubles in the nine months of 2017 versus 58.5 billion rubles in the same period of 2016. The revenue decreased due the strengthening of the ruble against the main currencies of export contracts (U.S. dollar and euro), as well as to a reduction in supply to Belarus, Georgia, China, Estonia and Russia in accordance with market conditions.
A decrease in the revenue in the Foreign Assets Segment by 3.7 billion rubles (15.5%) to 20.3 billion rubles is primarily related to the impact of the strengthening of the ruble against the U.S. dollar and the Georgian lari, which caused a decline in the ruble-denominated revenue of foreign companies; besides, the main factors contributing to the decline included a shutdown of one of the three power units at Trakya Elektrik plant in Turkey for repairs in May and June 2017, and disposal of Mtkvari Energy of the Group in June 2016.
5 GTK-11 Group is represented by heat producers such as JSC TGK-11 (Omsk) and JSC Tomsk Generation, and heat distribution network operators such as JSC Tomsk RTS and JSC OmskRTS.
Operating expenses increased by 33.9 billion rubles (5.8%) to 618.0 billion rubles compared to the previous reporting period. At the same time, expenses adjusted for the impact of charge/release of impairment of property, plant and equipment amounted to 615.7 billion rubles (4.6%) which is comparable to changes in the revenue.
An increase in electricity transmission costs of 15.3 billion rubles (8.9%) to 183.8 billion rubles is related to the performance of the Group's supply assets and the increase in electricity consumption and electricity transmission fees.
An increase in the cost of purchased electricity and capacity of 10.6 billion rubles (4.5%) to 246.4 billion rubles compared to the previous reporting period is primarily related to the growth of market prices for purchased capacity compared to the previous reporting period, as well as to the increase in sales in the supply segment partially offset by a decrease in trading activity.
Fuel costs declined by a narrow margin compared to the previous reporting period to 89.6 billion rubles. A diversity of change factors have been at play: the falling output at Trakya Elektrik plant due to repair work, the disposal of Mtkvari Energy of the Group in June 2016, and the strengthening of the ruble against the U.S. dollar and euro led to slashing costs, while the ramped-up output in the Electric Power Generation Segment and gas price adjustment as ordered by the Federal Anti-monopoly Service – to surging costs.
Charge/Release of impairment of property, plant and equipment The impairment of property, plant and equipment of TGK-11 amounting to 2.4 billion rubles was recognized, while in the previous reporting period was recognized partial release of previously recognized impairment of property, plant and equipment of Verkhnetagilskaya TPP totaling 4.4 billion rubles.
EBITDA totaled 67.4 billion rubles, having decreased by 3.3%. However EBITDA adjusted for the impact of disposal of the Group's assets in Armenia and Georgia and reclassification of an asset in Kazakhstan is starting to develop a positive trend showing a growth of +0.6%.
In the Supply Segment, EBITDA increased by 3.7 billion rubles (35.6%) to 14.0 billion rubles. This is primarily related mainly to the fact that the revenue from electricity sales grew stronger than the cost of purchased electricity and its transmission, which is due to the nature of tariff regulation.
In the Electric Power Generation Segment, EBITDA grew by 0.7 billion rubles to 39.4 billion rubles. The growth is attributed to a diversity of factors at play. A significant positive effect was achieved as a result of the commissioning of Unit No. 12 of the Unit 12 at Verkhnetagilskaya TPP with the installed capacity of 447 MW and Permskaya TPP with the installed capacity of 861 MW under CDAs. In addition, contributing factors included the growth of installed capacity due to the relabeling of equipment at several plants and scheduled decommissioning of inefficient capacity. The scheduled repair work at Yuzhnouralskaya TPP and Ivanovo CCGT resulted both in increased expenses and reduced electric power output.
In the Thermal Power Generation Segment, EBITDA fell by 0.4 billion rubles (4.1%) to 8.9 billion rubles. The positive effect from growing thermal power tariffs was offset by substantial expenses on current repair work on heat supply networks in Bashkiria and reduced thermal power output at the plants of Bashkir Generation Company Group. However TGK-11 Group improved the EBITDA performance both due to both growing power supply and thermal power tariffs and a revised capacity sales structure by generation units.
In the Trading Segment EBITDA fell by 2.4 billion rubles to 5.1 billion rubles on the back of the strengthening ruble and reduced supplies to China, Belarus, Georgia and Estonia.
EBITDA decreased mainly in the Foreign Assets Segment. The figure in the segment amounted to 4.2 billion rubles, which is 4.8 billion rubles less than in the previous reporting period. The decrease was related to the disposal of Electric Networks of Armenia, Razdan Energy Company (Razdan TPP) and Mtkvari Energy of the Group (last year, the impact of these assets on EBITDA totaled 2.1 billion rubles) and classification of a 50% stake in the Ekibastuzskaya TPP-2 joint venture as assets classified as held-for-sale ( in the previous reporting period, the impact on EBITDA was 0.6 billion rubles), as well as the strengthening of the ruble against the U.S. dollar and lari, which resulted in impaired financial performance of foreign assets expressed in rubles. In addition, the indicator declined due to the decrease in the output of Trakya Elektrik related to repair work performed in the second quarter of 2017.
The share of profits in associates and joint ventures declined by 50% to 2.1 billion rubles
The reduction in the share of profits in associates and joint ventures is primarily related to the fact that there was no profit from participation in joint ventures of Electric Networks of Armenia and Razdan Energy Company (Razdan TPP) due to the sale of a 50% stake in these companies in December 2016, as well as classification of the 50% stake in the Ekibastuzskaya TPP-2 joint venture as assets classified as held-for-sale starting from December 1, 2016.
Net income for the nine months of 2017 amounted to 40.8 billion rubles, having decreased by 27.6 billion rubles. Adjusted net income amounted to 42.6 billion rubles, having increased by 29.4%.
The better result of the previous reporting period of 2016 includes income from the sale of the Group's stake in PJSC Irkutskenergo amounting to 31.9 billion rubles and recognized partial release of impairment of property, plant and equipment of Verkhnetagilskaya TPP.
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Total assets increased by 30.4 billion rubles (5.3%), amounting to 602.7 billion rubles.
Total assets of the Group increased mainly due to accumulation of funds generated by the Group in the reporting period on settlement accounts and deposits, and due to the acquisition of rights to claim on CDAs for CCGT-420 of Unit 12 of Verkhnetagilskaya TPP.
Equity increased by 27.1 billion rubles (6.5%) amounting to 446.3 billion rubles.
The increase in equity due to the recognition of net income for the reporting period was partially offset by an impact of distribution of dividends for 2016 totaling 13.1 billion rubles.
Total liabilities amounted to 155.7 billion rubles, having increased by 3.3 billion rubles (2.2%).
The increase in total liabilities is mostly attributable to the fact that companies of the Supply Segment raised short-term loans in order to repay debt on the wholesale market for payment for electricity transmission services. At the same time, there was a considerable reduction in advance payments received due to the high base seasonal effect
Debt burden including the Group's share of the debt of joint ventures increased by 49.5% to 26.6 billion rubles
Total loans and borrowings of the Group's subsidiaries, not including the share of the debt of joint ventures, increased by 8.8 billion rubles (49.9%) to 26.3 billion rubles as a result of loans secured for operation activity, primarily in the Supply Segment.
The ratio of long-term debt to short-term debt as of September 30, 2017 (not including the share of loans and borrowings of joint ventures) amounted to 14.7% versus 85.3% (on December 31, 2016, it was 50.4% versus 49.6%).
The amount of external loans and borrowings of joint ventures in the structure of consolidated debt amounted to 0.1 billion rubles and is represented by the debt of CSJC Kambaratinskaya HPP-1.
The Group's net debt including deposits with the maturity terms of 3 to 12 months as of September 30, 2017 was equivalent to minus 104.5 billion rubles versus minus 78.2 billion rubles as of the beginning of 2017.
What with the Group's growing debt burden, this performance is predicated on the funds available from operating activities of the Group's subsidiaries, the scheduled retirement of accounts receivable as part of the transaction to sell equity stake in PJSC Irkutskenergo and the funds available from debt settlement under loan agreements by Nizhnevartovskaya TPP and CJSC “Electric Networks of Armenia.
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Inter RAO Group is a diversified energy holding serving various segments of Russian and international electric power industry. The Group is the leading exporter and importer of electricity in Russia actively increasing electricity generation and sales, and developing new lines of business.
The corporate strategy of Inter RAO is focused on making Inter RAO a global energy enterprise, a key player in the global energy market, and Russia's leading electric utility by energy efficiency. Inter RAO Group owns and operates approximately 32.7 GW of installed power generation capacity.