Preliminary Results Y2011

Transcription

1 IR PRESENTATION Preliminary Results Y2011 The Russia Forum 2012 (Troika Dialog) January 31 February 03, 2012

2 Disclaimer The information in this presentation was received from the sources, which in opinion of IDGC of Centre ( the Company ) are reliable. Nevertheless, we do not guarantee the accuracy of the given information, which may be short or incomplete. All opinions and estimations contained in the present material reflect our opinion at the date of publication, and are subject to the change without any notice. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with any contract or investment decision. The information in this presentation includes forward-looking statements. These forward-looking statements include all matters that are not historical facts, statements regarding the Company s intentions, beliefs or current expectations concerning, among other things, the Company s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the prospectus, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if the Company s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods The Company does not bear the responsibility for consequences of use of opinions containing in the present report or applications, or for incompleteness of the information. No person is under any obligation to update or keep current the information contained herein. By attending the presentation you agree to be bound by the foregoing limitations. 2

3 I. Key strategic priorities of the Company 3

4 Industry Structure Industry restructuring Current Tariff Structure Market Board Hydro UGC 63% 100% 3% System Operator Heat UGC Power Generation 34% Sales Federal Grid Company Transmission network 220 kv and above) TGC Transmission & Distribution RАО UES of Russia HOLDING IDGC Holding IDGC (11 IDGCs distribution network 110 kv and below, 7 sales, 5 DGCs, others) Infrastructure Other power generating companies Power Generation Sales Others 17% 7% 34% Losses 4% TGCs 6% the structure is provided according to the results of 2011 tariff campaign Benchmark among IDGCs (9m2011) MCap ( ), RUR billion Revenue, RUR billion Net profit, RUR billion RAB, RUR billion МОЭСК MOESK 79 MOESK МОЭСК 91 MOESK МОЭСК 13,1 MOESK МОЭСК 205 IDGC МРСК of Centre Центра 25 IDGC МРСК of Centre Центра 50 IDGC МРСК of Centre 5,6 IDGC МРСК of Centre Центра 121 МРСК Центра МРСК Центра МРСК Центра МРСК Центра IDGC МРСК of Урала Urals 17 IDGC of Centre МРСК and Volga ЦП 47 IDGC of Centre and МРСК Volga ЦП 3,2 IDGC of Centre МРСК and Volga ЦП 85 МРСК ЦП МРСК ЦП МРСК ЦП 17 МРСК Урала 40 МРСК Урала 2,3 ЛенЭнерго МРСК ЦП IDGC of Centre and Volga IDGC of Urals IDGC of Urals Lenergo 79 МРСК Волги 16 МРСК Сибири 39 МРСК Волги 2,1 МРСК Волги 77 IDGC of Volga IDGC of Siberia IDGC Ленэнерго 11 #2 МРСК Волги 35 #2 МРСК of Volga ЦП IDGC of Volga МРСК СK СK 1,7 #2 МРСК Урала Lenergo IDGC of Volga IDGC of NC IDGC of Urals* 57 #2 IDGC МРСК of Сибири Siberia 11 ЛенЭнерго Lenergo 27 IDGC of North-West МРСК СЗ 1,3 IDGC МРСК of Сибири* Siberia* 52 IDGC of North-West МРСК СЗ СЗ 7 МРСК СЗ СЗ 23 ЛенЭнерго Lenergo IDGC of North-West МРСК СЗ 1,2 IDGC МРСК МРСК of South* Юга* СK 38 МРСК Юга 3 МРСК Юга 17 IDGC МРСК of Сибири Siberia 1,0 IDGC of South IDGC of South IDGC of North-West* МРСК СЗ* 23 4 МРСК МРСК СK МРСК Юга 0,0 МРСК СK СK 2 МРСК СK 8 IDGC of South МРСК СK* IDGC of NC IDGC of NC IDGC of NC* СЗ 18 * indicative

5 Introduction IDGC of Center 1 Belgorodenergo 2 Bryanskenergo 3 Voronezhenergo 4 Kostromaenergo 5 Kurskenergo 6 Lipetskenergo 7 Orelenergo 8 Smolenskenergo 9 Tambovenergo 10 Tverenergo 11 Yarenergo Service area km 2 15% of the Russian population 5 7 The Company controls 83,6% of power transmission market tariffs are regulated by the State 2 Smolensk Bryansk Kursk Belgorod 1 8 Voronezh Tver 11 IDGC of Centre Orel Lipetsk Tambov 4 Yaroslavl Kostroma 9 MCap, RUR billion as at January 27, 2012 Revenue (IFRS) RUR billion Length of lines, km thousand* Substation capacity, MWA 27,4 68,1 374, kv /0.4 kv Staff number Number of shareholders** *- overhead power lines kv ** - as at the date of registry closed

6 Story line Board of directors approved the Regulations on the dividend policy based on a system executing a set of criteria December 04 As part of RAO UES reforming IDGC of Centre and North Caucasus had been registered for RGC integration April 07 The final structure of the Company had been accepted, including 11 regional grid companies of central Russia (the decision of The board of directors of RAO UES) March 08 Affiliation of RGCs May 08 Listing on MICEX and RTS The first stage of Smart Grid program is completed in Belgorod 5 years RAB tariff system had been adopted in Orelenergo and Bryanskenergo irab amounts USD 3.9 billion (RUR 118 bln) The company acquired 100% of Yargorelectroset, the share of IDGC of Centre in regional grid assets increased to 90% Successful implementation of the business plan and the investment program for 2010, the actual volume of CAPEX amounted to 103% of the plan USD 401 million (RUR 12 billion) 5 years RAB tariff system adopted in Kostromaenergo, Tambovenergo, Voronezhenergo, Smolenskenergo and Yargorelectroset The Company fulfilled its obligations for dividend payments of USD 20.1 million (RUR 611 million) (the pay-out ratio 12.6%); Company stocks moved across to MICEX quotation list A2; 1H2011 IFRS financials have been reported, demonstrating growth of the key financial indicators Company developed and approved the Program of innovative development for Board of directors approved Business Plan and Investment Program for

7 Strategic goals of the Company (1) 1 2 Improvement of quality and reliability of customer services implementation of production program; implementation of repair program. The planned amount of repair program for 2012 is RUR 1,5 bn, 6% up than expected fact of 2011; implementation of Investment program. The investment program for 2012 includes capital expenditures of RUR 14,3 bn, expecting reduction of CapEx by (-5,5%) in compare with expected fact for 2011 Improving the efficiency of operating and investment activities implementation of selected economically attractive investment projects, approved within the investment program for 2012; reduction of management costs Improving the investment attractiveness 3 extension of long-term regulation period in order to save the parameters and to reduce the tariff pressure on consumers; implementation of measures for share liquidity improvement; possible privatization

8 Strategic goals of the Company (2) 4 Improving the energy efficiency and providing the innovative development full implementation of asset management methodology, integration of asset management system with geo-informational system, that will allow to manage the technical risks (risks of failure of process equipment) 5 Improving the availability of power grid infrastructure integration of power grid assets of TGC and consolidation of power grids Development of human capital 6 implementation of knowledge and competence of key functional specialists and staff reserve assessment system; development of personnel motivation system 8

9 Company structure and key shareholders Russian Federation Group of companies 11 operating business units 53.69% IDGC Holding Minor shareholdres 50.23% 49.77%* IDGC of Center, JSC Energyservice company, JSC The main activities are providing saving energy services, energy efficiency Subsidiaries 100% Centre of innovations and energy efficient technologies * - including the State share 0.46% Yargorelectroset, JSC Yargoreletroset, JSC is the largest Territory Grid Organization in the Central Federal Region. The result of acquisition of the 100% stake is that IDGC of Center now controls more than 90% of power grid assets in the Yaroslavl region Energetik, JSC 51% YarESK, JSC 100% CIEET, Closed JSC Share capital structure, % 50,23 15,90% Free float 30% 18,09% IDGC Holding, JSC GENHOLD LIMITED 8,40% 3,20% 2,73% 1,45% THE BANK OF NEW YORK MELLON IMMENSO ENTERPRISES LIMITED Energosoyuz Holdings Limited RUSENERGO FUND LIMITED Others 9

10 Share capital structure and corporate governance Supreme governing body: Auditor General Meeting of Shareholders Developed corporate governance practice, leading position among IDGCs Audit Commission External control for financial activities of the Company Strategic governing body: Board of Directors 5 Committees: Management board Committee on Strategy History of IDGC of Center corporate rating on the national scale NRCG Confirmed August 11 Upgraded (7+) March 11 Confirmed July 09 Confirmed February 09 Assigned September 08 Chairman of the Management Board General Director Internal Control and Audit Department Internal control for financial activities of the Company Committee on Audit Committee on personnel Committee on reliability Committee on TC* 10 * - technological connection

11 Development of energy saving technologies - Energyservice Company, JSC Russian Government Program Energy saving and improving the energy efficiency till 2020 * The key activities Participation in investment and repair programs of IDGC of Centre (development, reconstruction, repair of energy equipment, строительство, clearing and expansion of firebreaks) Organizing and conducting energy audits, developing action plans on losses reduction of energy sources for customers; Financial engineering and implementation of turnkey energy saving projects СМР CIW в within рамках the концессионных concession agreements соглашений СМР CIW по within прямым the straight договорам contracts с МРСК with Центра IDGC of Centre Услуги Services прочим for the заказчикам other customers Ремонтная Repair activities деятельность Расширение Expansion of просек firebreaks Проведение Conducting энергетического the energy research обследования Услуги Services контактного of contact center центра 8% 7% The structure of forecast revenue** 3% 29% Revenue forecast for 2012 is RUR 1,8 bn* 4 Implementation of concession agreements in the area of power grid construction and development of street light lines; 13% 15% 25% 5 Providing services on sales companies market (energy saving contracts, energy meters market) * - 100% subsidiary of IDGC of Centre ** - BP for

12 II. Financial and operating indicators: preliminary results 2011 (RAS) 12

13 Key RAS figures FF 68,1 60,4 49,1 65,7 57,6 46, ПФ 18,1% 19,9% 15,6% 11,0 13,6 7, ПФ 7,8% 7,6% 2,7% 4,7 5,2 1, ПФ Revenue RUR bn от from технологического technological присоединения connection прочие other services услуги from power от distribution передачи э/э EBITDA margin % EBITDA RUR bn Net Profit margin % Net Profit, RUR bn Indicators FF* Revenue growth, inc.: 12,6% 23,1% 12,8% Growth of revenue from power distribution Growth of revenue from technological connection 16,7% 22,8% 14,1% (40,8%) 32,7% (23,3%) EBITDA growth 13,0% 43,6% 23,7% Net profit growth 44,4% 255,2% 9,7% ROE 3,14 11,12 11,25 13 Productive supply 53,4 54,1 51,5 (inc. TGCs) kwh bn ПФ * - Forecast Fact

14 Dynamics of costs structure 70,0 RUR bn Dynamics of costs structure FF*: 60,0 11,8% 50,0 24,5% Type of cost, RUR bn FF* %2011/ ,0 30,0 30,4 37,8 42,3 Purchased energy for losses compensation 6,8 9,2 8,7-5,6% FGC UES, JSC services 7,8 11,0 12,8 16,5% DGCs services 8,0 9,4 11,2 18,7% 20,0 10,0 0,0 14 4,8% 1,3% 14,1 14,7 14, факт fact 2010 факт fact 2011 ПФ FF Неподконтрольные Uncontrollable costs затраты Подконтрорльные Controllable costs затраты Services of contractors for maintenance and repair of equipment 0,6 0,5 0,5-7,6% Labor costs 6,0 7,5 8,0 6,8% Insurance fee 1,4 1,9 2,6 40,5% Raw and materials 1,4 1,7 2,0 20,7% Amortization of fixed assets and NMA 4,0 4,3 5,2 20,5% Leasing 1,8 1,3 0,9-31,5% Rent fee 0,3 0,4 0,5 32,4% Others 6,3 5,3 4,8-11,1% Total 44,4 52,6 57,2 8,9% * - Forecast Fact

15 Loan portfolio dynamics & credit rating Net debt/ebitda, RUR billion 9,3 10,8 6,8 7,6 Recommended ratio Net Debt/EBITDA = 3 Structure of loan portfolio %, % 1,4 1,4 1,3 1,4 11,0 14,7 13,6 18, ПФ EBITDA Чистый Net debt долг Net Debt/EBITDA 12% 18% 3% Avg. rate 8,35% 49% Сбербанк Sberbank ВТБ VTB Росбанк Rosbank Альфа-Банк Alfa-Bank Газпромбанк Gazprombank 2,0 1,5 1,0 0,5 0,0 Credit rating history History of IDGC of Centre credit rating Confirmed Standard&Poor s February 11 Confirmed July 10 Assigned November 09 NRА* Confirmed (outlook Positive ) December 11 Upgraded (level AA-) December 10 Confirmed October 10 Upgraded (level A+) September 08 Upgraded (level А) August 07 * National Rating Agency 15

16 Expected CAPEX for amounts to RUR 102 billion* 16 Year Commissioning, RUR billion Commissioning power on fixed assets km MVA , , * 13, F 14, Sources of finance in % 2% 2% 60% * Forecast Fact Тарифные Tariff sources источники Заемные Borrowed средства sources Прочие Other own собственные sources средства Плата Payments за ТП for technological connection Main uses of CAPEX in ,2% 3,0 % 0,4% 1,32 6,1% 0,43 0,05 0,88 6,3% 0,91 35,9% 14,35 5,16 39,0% 5,6 RUR billion - Replacement of the main power equipment - New construction(substations, overhead и cable lines) - ASMD systems, connection, IT - Developing/Modernization of accounting systems - Modernization and reconstruction - Purchase of fixed assets - Others 100% 14.35

17 Tariffs 2012 main schedule points Government approved the Decree 1178 of 29 December, 2011 "On the pricing of regulated tariffs in the Electric Power Industry before 1 January 2012 The approval of regional regulators of common rates of tariffs for the period from 01 January 2012 till 30 June 2012, at the level 2011 (subject to execution of the Decree 1172) - is satisfied. Before 1 April 2012 Adoption of regional regulators solutions as follows: - Establishing (or revising) of a long-term options for RABregulation from 01 July 2012 and aligning them with the FTS of Russia; - Establishing of tariffs for electricity transmission for 2H2012, provided not exceeding the 11% average growth rate compared with approved tariff level from 01 January July 2012 In the case of absence IPR to 2018 Approval of FTS of Russia of long-term RAB regulation strandards Method of long-term indexing Approval of the new tariff decisions 17

18 Key points of 1178 Decree long-term period of regulation (LPR) Must be approved by the FTS of Russia (RECs can not make changes) Efficiency index from 1% to 3% (3% - in the case of growth (OPEX/CU* i-1 : OPEX/CU i > 2*CPI forecast 1-st year of RAB regulation ( i period of transition) Criteria for LPR regulation «Leverage»: Value of debt at the end of each year of the period must be >=25% of the invested capital; Correspondence of growth of the average tariff rate with Ministry of Economical Development (MED) forecast (no increase in 2013 above 10%) * conventional unit Rates of return ** invested capital Territorial grids: for new IC** - approved by FTS in agreement with MED; for old IC approved by regional regulatory agencies (1=< return on old capital<=return on new capital) 18 Invested capital basis Based on the actual commissioning of the actual inputs on CAPEX since taking into account actual load Amount of losses *** 10% penalty is applied in the case of absence of the program For 1 st period of LPR in accordance with MED standard, further taking into account temps of decrease in accordance with an energy saving program***) Require changes in the guidelines for tariff regulation on RAB basis 231 of 26 June, 2008 and approval of the FTS in agreement with MED on rates of return on new capital

19 III. M&A projects - grid assets integration and key steps for investment attractiveness improvement 19

20 Integration key steps Target/ Program Methods and advantages of consolidation Plans for Providing monopoly on power grid services market in the regions of presence with more than 97% share; Long-term target program for the consolidation of power grid assets have been developed and approved (power grid assets consolidation plan for ) Company consolidates the assets primarily in 3 ways: acquisition of power grid, long term property rent, purchase of shares of power grid companies; The basic advantages of consolidation are as follows: implementation of a unified technical policy, the development of a unified scheme of long-term development of power grids, improving the reliability of electricity supply to consumers of all categories, increasing of power grid capacity It is planned in 2011 to consolidate municipal power grid assets in some regions were Company operates; Program provides working with more than 5 thousand owners 20

21 M&A projects - grid assets integration TGCs in IDGC of Centre service area The other TGCs average share in revenue in IDGC of Centre service areas 20%; Amount of other TGCs = Required Gross Revenue (RGR) of the Company due to the assets consolidation in regions may increase to RUR 10 billion by 2015, RGR share may grow by 97%; One of the key goals of the Company is the integration of power grid assets that will allow: increasing the reliability level of power supply enlarging the power distribution sales market improving the quality of customer service balancing the tariff on power distribution 0 Tambov Kursk Kostroma Orel Tver Lipetsk Belgorod Bryansk Smolensk Share of the Company in the power transmission market, F Yaroslavl Voronezh Market share in terms of money F 83% 83.6% 83.8% 84% 97% 21

22 Stock performance and liquidity increase Q11 3Q11 4Q11 1Q Company s shares were listed on MICEX (quotation list B), RTS Company s shares were included in the index: MICEX PWR Company s shares were included in RTS EU* Confirmation of presence in RTS EU and RTS-2 Dividends payment USD million (RUR 610 million), pay-out-ratio 13% Quotation list update (MICEX A2 ) Quotation list update (MICEX-RTS A1 ) Dividends for 2010: Total (RUR million) 610,9 Net profit share 13% Dividend yield 1,33% Company s priorities for 2012: Stable dividend policy Quotation list update (MICEX A1) Depositary receipts launching Inclusion in international indexes Launching of option program - forecast * - RTS energy utilities 22

23 August Август September 2008 Октябрь October November 2008 December Декабрь January 2009 Февраль 2009 February 2009 March 2009 Апрель 2009 April 2009 May 2009 Июнь 2009 June 2009 Август July August 2009 Октябрь October November 2009 December Декабрь January 2010 Февраль 2010 February 2010 March 2010 Апрель 2010 April 2010 May 2010 Июнь 2010 June 2010 July 2010 Август 2010 August 2010 Октябрь October November 2010 December Декабрь January 2011 February Февраль March 2011 Апрель April May 2011 Июнь 2011 June 2011 July 2011 Август 2011 August 2011 September 2011 Октябрь 2011 October 2011 November 2011 December Декабрь 2011 Company s shares and sector indexes dynamics 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% -80% -90% Stock market indicators* 2011 MRKC Russian peers P/E 4,9 5,3 6,9 EV/ EBITDA 3,3 2,9 4,7 EV/S 0,7 0,5 1,0 EV/RAB 0,37 0,37 1,28 Int. peers Информация о намерениях Правительства о переходе на RAB -регулирование Company reports the good financials for 2009 and plans on all the branches to adopt RAB after Jul 01, 2010 Remaining branches to adopt RAB (Nov 10, Jan 11) Beginning of trading: May 21, 2008 Quotation list: «А2» MICEX Shares of IDGC of Centre are part of the calculation base in indices: - MICEX PWR Feb 17. Head of Russian Government announced the need to curb the growth rate of tariffs on power Shares of the Company have been included into MICEX A2 quotation list Company reports good IFRS financials on 1H2011 IDGC of Centre MICEX MICEX Power 23 МРСК Центра Индекс ММВБ Индекс ММВБ-Энергетика * Data calculation forecast 2011

24 Attractive object for investment 1 External favorable factors Presence in 11 regions of Central Russia, with strong growth prospects; Second largest company of 11 interregional distribution grid companies in terms of capitalization, revenue, net income, the value of RAB; Significant underestimation as compared with foreign peers (in multiples P / E, EV / EBITDA, EV / S, EV / RAB); Growth of electricity consumption in the whole of Russia for the period , CAGR - 2,8% * Internal favorable factors 2 Leading position in innovation in the distribution sector (smart grid, smart metering); Highest level among the analogs of corporate governance (National grade 7 +); The leader of the transition to RAB-regulation; Growing financial and economic indicators for the period (sales CAGR - 20%, EBITDA CAGR - 33% net profit CAGR - 97%); Low debt level, credit rating S &P; Strong management team *Source: Agency for Energy Forecasting 24

25 Thank you for your attention! IR specialists will provide you with any additional information upon your request: Head of IR - Miroshnichenko Tatiana ir@mrsk-1.ru IDGC of Center 4, 2 nd Yamskaya str., Moscow, Russia T: F: Tickers: MICEX: Bloomberg: Reuters: MRKC MRKC RX MRKC.MM Follow us: 25