Federal Grid Company of Unified Energy System

Transcription

1 Federal Grid Company of Unified Energy System 1H2010 RAS Results Andrey Kazachenkov, CFO August 10 th, 2010

2 Federal Grid Company: Overview Federal Grid Company a natural monopoly in electric power transmission, owns and operates the Unified National Electric Grid (UNEG) (220 kv and higher) Over 121 thousand km of transmission lines and 797 substations, spanning 73 Russian regions From January 1 st, 2010, the Company transferred to a new tariff regulation system based on RAB methodology Regions covered by the Company Shareholder structure Russian Federation: 79.11% Free float: 20.89% Number of staff: 21,770 Market capitalization (as of ) RUR bln Ticker symbol (MICEX): FEES Key indicators 1H 2010 Revenues, RUR mln 55,925 Operating expenses,* RUR mln 37,836 Operating profit, RUR mln 20,499 EBITDA, RUR mln 35,336 Net profit, RUR mln 13,131 Electricity output from the UNEG, bln kwh 239 Electricity losses, bln kwh 11 Page 1 * Including management expenses

3 Significant Changes in the Company's Financials 1) As of January 1 st, 2010 Federal Grid Company has operated under the tariff regulation system that uses the method of return on invested capital (RAB-regulation) 2) Technical service and repair functions were transferred from Glavsetservis UNEG to Federal Grid Company and the transition to fulfilling work using its own resources was completed 3) With the aim of adjusting the book value of PP&E to the level of the evaluated value of initial invested capital used by Federal Tariff Service (FTS) for setting RAB tariffs, a PP&E revaluation was carried out as of , which led to an increase in PP&E depreciation costs 4) A transition was conducted to the capitalization of costs connected with investing activity Page 2

4 Key results for 1H 2010 Financial indicators (excluding VAT), RUR mln 1H H 2010 change, % Revenues from operating activities, including: 41,209 55, Revenues from transmission services, including: 39,798 55, compensation for electricity losses 6,659 7, Revenues from technological connections (4.3 times) Other incomes* 38,767 51, EBITDA 24,812 35, Net profit (loss) 8,682 13, Federal Grid Company revenues for 1H 2010 increased 35.7% y-o-y, due to the transition to a new tariff regulation system using the method of return on invested capital, as of January 1 st, The increase in other incomes in 1H 2010 is due mainly to the reversal of allowance for doubtful accounts of LLC Index of energy - FGC UES and other counterparties. The main factor driving EBITDA growth was the increase in profit before taxes and the increase in amortization due to the commissioning of new capacity, as a result of implementing the Company s investment program. Page 3 *Including interest income

5 Financial Results Performance Indicator, RUR mln 1H H 2010 change, % Comments Revenues 41,209 55, Operating expenses 31,665 37, Net profit 8,682 13, Transition to a new tariff regulation system using the method of return on invested capital, as of January 1 st, 2010 Due to the commissioning of new capacity, exchange rates and amortization growth Due to increases in the tariff component for financing sources for the investment program Net Debt (38,752) (47,597) 22.8 Due to redeeming the bond issue in 1H 2010 EBITDA 24,812 35, Increase in profit before tax and amortization due to the commissioning of new capacity Page 4

6 Other Income Structure Indicator, RUR mln 1H H 2010 Gain on the disposal of property and proprietary interests 32,838 37,263 Income on the reversal of reserves 1,473 9,883 Interest income on financial investments and bank accounts 3,748 2,914 Miscellaneous other income 708 1,310 Total other incomes 38,767 51,370 The increase in other incomes during 1H 2010 by RUR 12,603 mln y-o-y is primarily due to the disposal of promissory notes of JSC VTB Bank and the reversal of allowance for doubtful accounts of LLC Index of energy - FGC UES and other counterparties. Page 5

7 Operating Expense Structure (operating activities) Indicator, RUR mln 1H H 2010 change, % Material expenses, including: 12,942 Raw and other materials 88 Purchased energy, fuel and water supply 6,933 including: compensation for electricity losses 6,853 Workwear 58 Operating work and services 5,863 including: repair services 5,013 10, ,209 7, ,426 1, (58.6) (63.9) Amortization 11,952 16, Employee benefit expenses 2,992 6, Taxes and fees on operating expenses 633 1, General business expenses and services 1,215 1, Expenses on maintaining property 1,611 1, including: rent insurance Other operating expenses Total operating expenses* 31,665 37, * including administrative expenses Page 6

8 Significant Changes: Balance Sheet (1) Indicator, RUR mln Change, % Comments ASSETS Non-current assets, including: 523, , PP&E 237, ,627 (0.7) Construction-in-progress 216, ,653 12/5 Fulfillment of the investment program Long-term financial investments 66,970 79, Current assets, including: 222, ,247 (11.8) Inventories, including. 2,428 4, Novation of zero-coupon promissory notes of Energo-Finance into interest-bearing promissory notes Raw materials 2,262 3, Increase in raw material purchases for the fulfillment of repairs with its own resources Prepaid expenses Conclusion of property insurance agreement Accounts receivable (non-current), 20,493 6,572 (67.9) Novation of zero-coupon promissory notes of including: Energo-Finance into interest-bearing other debtors 20,307 6,384 (68.6) promissory notes Accounts receivable(current), including: 117, , customers and clients 8,949 13, Payment failure from customers, the reversal of allowance for doubtful accounts receivable Short-term financial investments 69,128 42,016 (39.2) Decrease in the balance of bank accounts and promissory notes redemption Page 7

9 Significant Changes: Balance Sheet (2) Indicator, RUR mln % of change Comments Equity and liabilities Equity, including 665, , Share capital 576, , Registration of additional share issue Additional paid-in capital 146, ,975 (0.1) Retained earnings of the reporting year Non-current liabilities, including: - 13,131 7,440 8, Increase of deferred tax liabilities Loans and credits 6,000 6, Current liabilities, including: 73,609 30,439 (58.6) Loans and credits 7, (93.8) Bond issue redemption Accounts payable, including 65,803 29,647 (54.9) Transfer of liabilities before the shareholders on the additional share issue (accounts payable to the shareholders) to the share capital Other creditors 46,862 8,458 (82.0) Page 8

10 Transition to RAB Regulation 5-year regulatory period 3-year regulatory period* Return on existing capital: 3.9% Return on existing capital: 5.2% Return on existing capital : 6.5% Return on newly invested capital: 11% The Russian Federal Tariff Service adopted RAB parameters Transition to tariff setting using RAB methodology The Russian Government adopted the transition to RABregulation Federal Tariff Service sets tariffs using RAB methodology Average tariff increase 2010 : 51% Full replacement value of invested capital as of RUR 1, bln Depreciated value of invested capital (irab) as of RUR bln Annual rate for decreases in controllable expenses: 2% Period of return 35 years Page 9 * approved by Federal Tariff Service

11 Credit Portfolio and Liquidity, as at Key parameters Ruble-denominated debt Leverage: 0.79% of total assets DEBT/EBITDA = 0.17 Credit portfolio Redemption date RUR mln Series 04 bonds ,000 Total: 6,000 RUR 50 bln total volume of registered bonds of Federal Grid Company consisting of 6 issues with a duration of 10 years (registration date ); RUR 45 bln total volume of undrawn credit lines RUR 12 bln the balance of bank accounts RUR 3 bln deposits Liquidity RUR 41.2 bln banks promissory notes with a duration of up to 1 year Credit ratings BBB/stable (international scale) ruaaа (national scale) BB BB B B+ B+ Baa2/stable (international scale) AAА.ru (national scale) Baa 2 + Baa 2 + Baa Page 10

12 100,0% 90,0% 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% Federal Grid Company is an Attractive Investment 0,0% FEES MSCI Russia Source: MICEX, MSCI Barra Company Country EV/EBITDA (2010) Developed countries EV/Sales (2010) EV /RAB ELIA Belgium Terna S.p.A. Italy REN Portugal Red Electrica Spain n/a National Grid UK ITC Holdings USA n/a Unique position in Russian power sector Leading Russian blue chip: Large company by market capitalization: RUR bln Free float not less than 15% International presence and plans for increasing the investor base: Depository receipts listing on the Frankfurt Stock Exchange in 4Q Q 2011 Federal Grid Company s shares are included in MSCI EM and MSCI Russia indices Income growth potential: New RAB regulation -> stable guaranteed return Tariff growth: %; %; % Return on newly invested capital: 11% Low leverage plans for further decrease in WACC Undervaluation of the Company: EV/RAB not more than 0.5 Developing countries Power Grid India n/a CTEEP Brazil n/a Transener SA Argentina n/a Transelectrica Romania Federal Grid Russia Federal Grid Russia Page 11

13 Contacts Federal Grid Company of Unified Energy System 5А Akademika Chelomeya Street, Moscow, Investor Relations Department Tel: Mobile: Alexander Duzhinov Nadezhda Sukhova Olga Ovchinnikova Tatiana Mayba Page 12

14 APPENDIX Page 13

15 1H 2010 Profit and Loss Statement (RAS) RUR thousand Code For the reporting period For the same period of the previous year Page 14 Revenues (net), including: ,925,353 41,208,893 transmission services ,395,566 39,798,164 other activities ,787 1,410,729 Operating expenses, including: 020 (35,426,527) (29,702,799) transmission services 021 (35,076,990) (29,099,278) other activities 022 (349,537) (603,521) Operating profit ,498,826 11,506,094 Administrative expenses 040 (2,409,919) (1,962,240) Profit (loss) from sales ,088,907 9,543,854 Interest income 060 2,914,297 3,748,192 Interest expense 070 (490,939) (1,278,202) Income from investments in associates Other incomes ,455,781 35,018,971 Other expenses 100 (50,445,259) (35,458,916) Profit (loss) before tax ,522,787 11,573,899 Deferred tax assets ,940 67,465 Deferred tax liabilities , ,990 Profit tax 150 (4,779,053) (2,637,324) Other similar mandatory payments ,387 48,704 Net profit (loss) for the period ,131,057 8,681,824

16 Page 15 Balance Sheet as at June 30, 2010 (RAS) ASSETS, RUR thousand Code At the beginning of the reporting period As of the end of the reporting period Intangible assets 110 1,396,257 1,148,802 PP&E ,390, ,627,318 Construction-in-progress ,529, ,652,510 Long-term financial investments ,970,387 79,020,451 Other non-current assets 150 1,415,088 1,475,314 TOTAL NON-CURRENT ASSETS ,702, ,924,395 Inventories 210 2,427,514 4,472,039 Value-added tax 220 2,070,794 1,999,082 Accounts receivable (non-current), including: ,492,819 6,571,803 customers and clients , ,979 advances paid other debtors ,306,873 6,383,824 Accounts receivable (current), including: ,170, ,144,188 customers and clients 241 8,949,413 13,054,971 advances paid ,036,337 73,429,502 other debtors ,185,141 42,659,715 Short-term financial investments ,127,725 42,016,355 Cash ,312,141 12,043,899 TOTAL CURRENT ASSETS ,601, ,247,366 TOTAL ASSETS ,988, ,516,871

17 Balance Sheet as at June 30, 2010 (RAS) EQUITY AND LIABILITIES, RUR thousand Code At the beginning of the reporting period As of the end of the reporting period Page Share capital ,757, ,780,667 Additional paid-in capital ,088, ,974,763 Reserve capital ,134,044 10,134,044 Retained earnings for the previous years 460 (67,725,491) (67,457,062) Retained earnings for the reporting year ,131,057 TOTAL EQUITY ,254, ,563,469 Loans and credits 510 6,000,000 6,000,000 Deferred tax liabilities 515 1,435,064 2,151,128 Other non-current liabilities 520 5,098 18,549 TOTAL NON-CURRENT LIABILITIES 590 7,440,162 8,169,677 Loans and credits 610 7,481, ,036 Accounts payable, including: ,802,620 29,647,365 suppliers and contractors ,018,708 10,579,487 accounts payable to the employees , ,313 taxes and fees payable , ,673 advances received 627 7,114,653 9,143,173 other creditors ,861,996 8,457,719 Accounts payable to the shareholders ,898 46,898 Prepaid expenses , ,316 TOTAL CURRENT LIABILITIES ,609,306 30,438,615 TOTAL EQUITY AND LIABILITIES