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Inter RAO – Electric Power Plants published RAS financial results for nine months of 2017

Inter RAO – Electric Power Plants published financial results for nine months of 2017 prepared to the Russian Accounting Standards (RAS).

Index* 9 months 2017 9 months 2016 Change, %
Revenue 134.2 126.8 5.9
Unit costs 105.9 101.9 4.2
Sales profit 26.7 23.6 13.0
Net income 29.3 35.1 -16.5

as of September 30 2017 as of December 31 2016 Change, %
Total assets 300.8 269.1 11.7
Equity capital 269.2 239.9 12.2
Loans and borrowings - - -
Net debt** -28.1% -3.6 -

* Billion rubles unless indicated otherwise Relative deviation (in %) is calculated using accounting data (in thousand rubles) without regard to rounding

** Net debt' index is calculated as follows: 'Short-term loans and borrowings' plus 'Long-term loans and borrowings' less 'Cash on deposit accounts'

Operating results of the Company for nine months of 2017 are published on Inter RAO – Electric Power Plants website: http://www.irao-generation.ru/press/news/

Profit and loss account

Revenue of Inter RAO – Electric Power Plants for nine months of 2017 was 134.2 billion rubles, which is 5.9% (7.4 billion rubles) higher than in the same period of 2016.

Revenue from electricity sales for the reporting period compared to nine months of 2016 increased by 1.3% (0.8 billion rubles) and amounted to 67.5 billion rubles. It is mainly caused by the increase in electricity sales by 3.0% (1.800 billion kWh) due to the growth of power generation by Inter RAO – Electric Power Plants, first of all - by the Permskaya TPP, which in the reporting period showed the significant increase in generation (by 34.6%) as compared to the same period of 2016, when the second power unit underwent the scheduled major overhaul.

Weighted average price for selling of electricity in the day-ahead market (DAM) decreased by 3.1% due to the increase of cheap generation by TPPs and NPPs. Negative impact of this factor on the dynamics of the Company's revenue from electricity sales (-0.8 billion rubles) was partially compensated for due to optimization of the load profile of generating capacities - increase of the plant mix of switched generating equipment of effective stations: Permskaya TPP, Verkhnetagilskaya TPP, Severo-Zapadnaya TPP, Sochinskaya TPP.

Moreover, the increase in revenue from electricity sales was facilitated by the growth of electricity sales from the Verkhnetagilskaya, Iriklinskaya, Kostromskaya and Gusinoozyorskaya TPPs in the balancing market (BM) due to additional loading above the trade traffic in conditions of favourable price situation.

Revenue from capacity sales for nine months of 2017 increased by 7.0% (3.1 billion rubles) as compared to the same period of 2016 and amounted to 48.0 billion rubles. It was mainly due to the increase in revenue under Capacity Supply Agreements (CSA).

Revenue under CSA increased by 3.3 billion rubles (12.7%) - to the level of 29.5 billion rubles, due to the influence of the following factors:

  • Increase in the volume of the supplied capacity (revenue growth - 2.3 billion rubles), including due to commissioning of new power units, built under the CSA program: at tVerkhnetagilskaya TPP since June 2017 (0.7 billion rubles), at Permskaya TPP since August 2017 (0.9 billion rubles) as well as as a result of remarking of the installed capacity of generating equipment at the Kharanorskaya TPP, Urengoyskaya TPP, Yuzhnouralskaya TPP-2 following the results of the appraisal conducted in Q4 2016 (revenue growth - 0.3 billion rubles).
  • Increase in the price of capacity sales from some CSA facilities (revenue growth - 1.6 billion rubles), due to the influence of the following factors:
    - increase in the DAM factor that determines the share of investment compensation in the capacity market, which influenced the capacity price of power unit 9 of the Cherepetskaya TPP and power unit 2 of the Yuzhnouralskaya TPP-2;
    - calculation of "CSA delta 10/15" that is subject to receipt from the 7th to the 10th year of CSA capacity supply, which had an effect on calculation of the price of capacity of power unit 3 of the Kashirskaya TPP and power unit 3 of the Sochinskaya TPP.
  • Decrease in price for sales of capacity from other CSA facilities (decrease in revenue by 0.6 billion rubles) due to the influence of the general factor of rate-of-return slowdown, accounted for in the price of the CSA facilities' capacity in accordance with the regulatory structure of the wholesale market, in continuation of the decrease in the yield of long-term government obligations (LGO) used in calculation of the capacity prices.

Revenue from other sales during the reporting period of 2017 was 16.5 billion rubles versus 13.3 billion rubles in the comparable period of 2016 - mainly due to the increase in revenue from selling of commodities and materials to outside organizations (2.9 billion rubles), as well as due to granting agent services for the construction of the Pregolskaya TPP and the Primorskaya TPP.

Cost of goods and services sold nine for months of 2017 increased by 4.2% (4.3 billion rubles) as compared to the comparable period of 2016 and amounted to 105.9 billion rubles.

This change reflects the influence of the following partially offsetting key factors:

  • Fuel costs for nine months of 2017 increased compared to the same period of 2016 by 2.3% or 1.2 billion rubles due to the below main reasons:
    - price of reference fuel compared to nine months of 2016 increased by 1.5% (cost increase by 1.3 billion rubles);
    - volume of power generation by 'Inter-RAO Electric Power Plants' increased by 3.0% (cost increase for fuel by 1.1 billion rubles).
    - decrease of specific reference fuel consumption for power generation by 7.8 g of r.f./kWh (cost reduction by 1.2 billion rubles).
  • Curbing of the increase in cost of goods sold was facilitated by a series of actions aimed at efficiency upgrading and implemented by the Company management as a part of the operating strategy, which resulted in the increase in semi-fixed costs by 1.2% (0.3 billion rubles) as compared to the level of 2016, in the context of actual inflation of 4.1% (according to the Russian Federal State Statistics Service). In particular, the decrease in growth rates of semi-fixed costs was materially affected by decommissioning of inefficient generating equipment at the Cherepetskaya TPP (865 MW) and Verkhnetagilskaya TPP (330 MW).
  • Expenses for purchase of commodities and materials for subsequent sales increased by 3.0 billion rubles (23.6%).
  • Expenses for repairs increased by 0.7 billion rubles (36.4%) and were conditioned by planned inspections of generating equipment at the Yuzhnouralskaya TPP, held in 2017.

Gross profit for nine months of 2017 was 28.3 billion rubles, which is 12.4% (3.1 billion rubles) higher than in the same period of 2016.

Sales profit for nine months of 2017 increased to 26.7 billion rubles as compared to the same period of the previous year (growth - by 13.0% or 3.1 billion rubles).

Balance of other income/expenses (without allowance for balance of interest and income from participation in other organizations) in the end of the reporting period was 6.9 billion rubles (mainly, due to recognition of income as a result of dissolution of NVGRES HOLDING Limited) versus 16.1 billion rubles in the same period of the previous year (was caused by recovery of provision in connection with reduction of the Company's contingent liabilities on the joint and several guarantee).

Net income in the end of the reporting period was 29.3 billion rubles versus 35.1 billion rubles in the end of nine months of 2016.

Balance Sheet

Total assets of Inter RAO – Electric Power Plants for nine months of 2017 increased by 11.7% (31.6 billion rubles) and amounted to 300.6 billion rubles as of September 30, 2017.

Non-current assets in the reporting period increased by 1.6% or 3.8 billion rubles as compared to nine months of 2016 and amounted to 240.3 billion rubles. The increase is mainly connected with formation of an intangible asset with the cost of 3.8 billion rubles in connection with acquisition of rights under Capacity Supply Agreements (power unit 12 of the Verkhnetagilskaya TPP) from OGK-2.

Current assets for nine months of 2017 increased by 1.8 times (27.7 billion rubles) and amounted to 60.3 billion rubles mainly in connection with the aggregate growth of financial investments and money equivalents by 24.6 billion rubles (by 7.8 times).

Liabilities of Inter RAO – Electric Power Plants as of September 30, 2017 increased by 2.3 billion rubles (7.8%) and amounted to 31.4 billion rubles. Dynamics of this indicator are influenced by partially offsetting factors: accrual of bonus depreciation due to commissioning of new power units of the Permskaya and Verkhnetagilskaya TPPs (2.7 billion rubles), recognition of accounts payable for assignment of claims under Capacity Supply Agreements (3.1 billion rubles) and satisfaction of accounts payable to Inter RAO for the purchase of fixed assets (2.0 billion rubles), reduction of accounts payable for taxes and levies (1.6 billion rubles).

RAS Balance sheet of Nizhnevartovskaya TPP

Index* 9 months 2017 9 months 2016 Change, %
Revenue 13.4 13.6 -1.5
Unit costs 10.0 10.6 -5.0
Sales profit 2.9 2.4 19.0
Net income 2.3 1.8 31.3

As of September 30 2017 As of December 31 2016 Change, %
Total assets 25.4 -34,6% -26,0%
Equity capital 21.6 19.3 12.1
Loans and borrowings - 11.2 -100.0
Net debt -1.7 0.8 -

* Billion rubles unless indicated otherwise Relative deviation (%) is calculated using accounting data in thousand rubles without regard to rounding.

** 'Net debt' index is calculated as follows: 'Short-term loans and borrowings' plus 'Long-term loans and borrowings' less 'Cash and cash equivalents' less 'Cash on deposit accounts'

Profit and loss account

Revenue of the Nizhnevartovskaya TPP for nine months of 2017 decreased by 0.2 billion rubles (1.5%) as compared to the same period of 2016 and amounted to 13.4 billion rubles.

Revenue from electricity sales decreased compared to nine months of 2016 by 9.2% (0.9 billion rubles), mainly due to the reduction in the electricity sales volume by 11.8% mainly due to planned repairs of the plant power units and amounted to 8.5 billion rubles.

Revenue from capacity sales in the reporting period of 2017 increased by 15.4% (0.6 billion rubles) as compared to the same period of 2016 and amounted to 4.7 billion rubles. It was mainly due to the increase in revenue under Capacity Supply Agreements (CSA). The main factor of this increase was the growth of capacity selling price connected with the increase in the DAM factor that determines the share of investment compensation in the capacity market.

Cost of goods sold decreased by 5.0% (0.5 billion rubles) and amounted to 10.0 billion rubles, which is mainly caused by the reduction of fuel costs as a result of decrease in the total time of power units operation.

Gross profit for nine months of 2017 increased by 0.3 billion rubles (10.9%) as compared to the same period of 2016 and amounted to 3.3 billion rubles.

Sales profit for nine months of 2017 increased by 19.0% (0.5 billion rubles) and amounted to 2.9 billion rubles.

Balance of other income and expenses (without allowance for balance of interest and income from participation in other organizations) was 0.02 billion rubles versus 0.1 billion rubles for the same period of 2016.

As a result, the net income of the Nizhnevartovskaya TPP for nine months of 2017 increased by 31.3% (0.6 billion rubles) as compared to the same period of 2016 and amounted to 2.3 billion rubles.

Balance Sheet

Total assets of the Nizhnevartovskaya TPP decreased by 26.6% (9.2 billion rubles) and amounted to 25.4 billion rubles as of September 30, 2017.

Non-current assets increased by 1.4% (0.3 billion rubles) and amounted to 20.3 billion rubles. The major cause of this increase was the purchase of improved spare parts for the third power unit for the purpose of modernization to be conducted in September-October 2017.

Current assets decreased by 65.2% (9.5 billion rubles), to 5.1 billion rubles - mainly due to the reduction of cash and cash equivalents by 83.7% (8.8 billion rubles), to 1.7 billion rubles, in connection with complete repayment of an intra-group loan taken out for construction of the third power unit.

Total liabilities as of September 30, 2017, decreased by 75.2% (11.5 billion rubles) and amounted to 3.8 billion rubles, mainly due to repayment of the intra-group loan.