Inter RAO YEES : Group Publishes Consolidated IFRS Financial Statements for the 9 months of 2018

14 November 2018

Inter RAO Group published interim financial information under international standards for the 9 months ended September 30, 2018.

Indicator, billion rubles*	9 months 2018	9 months 2017	Change, %
Revenue 1	688.2	621.1	10.8%
OPEX	631.8	585.0	8.0%
Operating income	63.8	41.4	54.1%
Net income	55.7	41.5	34.3%
EBITDA	87.4	68.0	28.6%
Capital expenditures	17.8	21.7	-17.9%
As of 30.09.2018	As of 31.12.2017	Change, %
Total assets 2	689.1	639.1	7.8%
Total capital	471.1	461.5	2.1%
Loans and borrowings	13.0	16.2	-19.3%
Leasing obligations 2	34.5	12.7	by a factor of 2.7
Net debt 3	-146.4	-135.5	8.1%

* - Financial indicators are provided based on these IFRS financial statements in billion rubles rounded to one decimal. Percentage ratios are calculated based on the data from the IFRS financial statements expressed in million rubles.

¹ Since January 1, 2018, the Group has been applying IFRS 15 Revenue from Contracts with Customers, according to which revenue is accounted for as the reimbursement amount, the right to which the Group intends to gain in exchange for the transfer of the promised goods or services to the customer. Comparable data for a number of items in the financial statements have been recalculated retrospectively according to the standard.

² As IFRS 16 Leases took effect, the financial statements as of December 31, 2017 recognized assets in the form of the right to use with the residual value of 12.0 billion rubles, and leasing obligations in the amount of 12.3 billion rubles. The total leasing obligations, including obligations in joint ventures as of December 31, 2017, is 12.7 billion rubles.

³ Including deposits for a period from 3 to 12 months and leasing obligations (including the share of leasing obligations in joint ventures).

The changes in the Group's financial performance were significantly influenced by the following key factors and events:

• Commissioning of the Power Unit 12 of Verkhnetagilskaya TPP with the installed capacity of 447 MW, and the Power Unit 4 of Permskaya TPP with the installed capacity of 903 MW in June and July 2017, as well as Zatonskaya CHPP with the installed capacity of 440 MW in Bashkortostan in March 2018 under capacity supply agreements (CSAs);
• Commissioning of leased power plants in the Kaliningrad Region in March 2018: Mayakovskaya TPP and Talakhovskaya TPP with the installed capacity of 156 MW each;
• Increase of the average heat sales prices for end consumers, and the increase of the productive supply of heat across the Group's Russian assets;
• Increase in average end consumer sales prices in the Supply Segment of the Group;
• Increase of the profit margin in the Group's Trading segment.

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Group revenue increased by 10.8% (67.2 billion rubles) to 688.2 billion rubles.

The increase in revenue in the Supply Segment by 41.7 billion rubles (10.0%) to 457.7 billion rubles is related both to higher average sales prices of suppliers of last resort for end consumers and the acquisition of new customers by suppliers of last resort and independent retailers, and to the fact that a new supplier of last resort began to operate in the Vladimir Region.

The increase in revenue in the Electric Power Generation in the Russian Federation Segment by 5.5 billion rubles (6.3%) to 93.2 billion rubles is mainly due to revenue from the sale of capacity of new power units of Verkhnetagilskaya TPP and Permskaya TPP under CSAs, as well as commissioning of Mayakovskaya TPP and Talakhovskaya TPP leased by the Group in the Kaliningrad Region. Higher capacity sale prices in the CSA segment generated an additional impact. Along with this, the revenue from the sale of electricity decreased against the previous reporting period due to the reduced output caused by the current market situation and by the need for maintenance.

Revenue in the Thermal Power Generation in the Russian Federation segment, which comprises TGK-11 Group⁴ and Bashkir Generation Company Group, increased by 2.1 billion rubles (4.3%) to 51.1 billion rubles. The main positive effect comes from the higher average heat sales prices in Bashkortostan, in the Omsk Region and the Tomsk Region. Besides, heat sales increased, as the heating season in 2018 lasted longer. There was also a reduction in power generation due to a decline in margin.

Revenue of the Trading in the Russian Federation and Europe segment increased by 9.4 billion rubles (22.4%) to 51.3 billion rubles for the 9 months of 2018 compared to the previous reporting period. The revenue increased due to higher prices on Nord Pool in Lithuania and Finland, and due to the increase in supply to these regions and the fact that the average ruble exchange rate decreased by 12.9% against the euro. The fact that sales to Belarus have been stopped had a negative impact on the revenue.

The International Assets Segment saw a slight decrease in the revenue by 0.1 billion rubles (0.6%) related to diverse changes. Trakya Elektrik's reduced revenue was due to the lower electricity output in accordance with the order of the grid operator in the Republic of Turkey, and the lower disbursing tariff. Some positive impact on revenue in 2018 came from Moldavskaya TPP due to a longer period of supplies to Moldova, and from the Georgian assets related to the increased consumption and higher disbursing tariffs.

Operating expenses increased by 46.8 billion rubles (8.0%) to 631.8 billion rubles compared to the previous reporting period, which is lower than the growth of revenue.

Electricity transmissioncosts increased by 18.2 billion rubles (12.0%) to 169.8 billion rubles due to the performance of enterprises in the Supply Segment, and this is related to the increased electricity consumption and its transmission fees.

The cost of purchased electricity and capacity increased by 19.6 billion rubles (8.0%) to 266.0 billion rubles compared to the previous reporting period, mainly due to the higher market prices for capacity compared to the previous reporting period, and higher volumes and market prices for purchased electricity in the Supply Segment, as well as the start of operation of a supplier of last resort in the Vladimir Region.

Fuel costs declined by 3.3 billion rubles (3.7%) compared to the previous reporting period and amounted to 86.3 billion rubles. International assets saw the most considerable changes: the effect of reduced electricity output by Trakya Elektrik to comply with the order of the grid operator was partially offset by a longer period of supplying electricity to Moldova in 2018

EBITDA increased by 28.6% to 87.4 billion rubles.

In the Supply in the Russian Federation Segment, EBITDA increased by 4.0 billion rubles (27.6%) to 18.5 billion rubles. This improvement was related to higher average sales prices of suppliers of last resort and independent retailers, and to an increase in productive supply.

In the Electric Power Generation in the Russian Federation Segment, EBITDA increased by 4.6 billion rubles (11.6%) to 44.1 billion rubles. In the CSA sector, the most considerable positive impact was related to commissioning of power units of Verkhnetagilskaya TPP and Permskaya TPP in 2017, as well as commissioning of Talakhovskaya TPP and Mayakovskaya TPP leased by the Group in the Kaliningrad Region in March 2018 and the start of power and capacity supply.

In the Thermal Power Generation in the Russian Federation Segment, EBITDA increased by 2.4 billion rubles (25.8 %) to 11.5 billion rubles. The positive impact was related to commissioning of Zatonskaya TPP in March 2018, higher prices for heat and an increase in its productive supply in Bashkortostan, the Tomsk Region and the Omsk Region.

In the Trading in the Russian Federation and Europe Segment, EBITDA increased by 5.3 billion rubles (103.6%) and amounted to 10.3 billion rubles. The increase in EBITDA is related mainly to the growth of supply to Finland and Lithuania, and the increase in Nord Pool prices with the weakening of the ruble against the euro.

The International Assets Segment saw EBITDA increase by 1.9 billion rubles (46.1%) to 6.1 billion rubles. There was a positive effect in all assets of the Group.

The net income for the 9 months of 2018 totaled 55.7 billion rubles, having increased by 14.2 billion rubles compared to the previous reporting period.

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Total assets increased by 50.0 billion rubles (7.8%), amounting to 689.1 billion rubles.

Total assets of the Group increased due to the fact that the contract for leasing movable and immovable assets at Talakhovskaya and Mayakovskaya TPPs took effect. In the Statement of Financial Position of the Inter RAO Group the value of the assets at these power plants is recognized as right-of-use assets. Besides, the amount of cash and deposits increased due to accumulated cash from operating activities and repayment of accounts receivable for a stake of JSC Irkutskenergo sold in 2016.

Equity increased by 9.6 billion rubles (2.1%), amounting to 471.1 billion rubles.

The increase in equity was related to diverse changes, including the recognition of net income for the reporting period, distribution of dividends and acquisition of the company's own shares.

Loans and borrowings decreased by 19.3% to 13.0 billion rubles. Leasing obligations (including the share in the joint ventures) increased by 21.8 billion rubles and amounted to 34.5 billion rubles.

Total loans and borrowings of the Group decreased by 3.1 billion rubles (19.3%) to 13.0 billion rubles as a result of scheduled repayment of loans and repayment ahead of schedule.

The ratio of long-term debt to short-term debt as of September 30, 2018 amounted to 10.1% versus 89.9% (on December 31, 2017, it was 28.9% versus 71.1%).

As a result of IFRS 16 Leases taking effect, the right-of-use assets and leasing obligations are recognized retrospectively in the Statement of Financial Position. An increase in obligations in the reporting period is related primarily to signing a long-term lease contract for Mayakovskaya and Talakhovskaya TPPs and recognizing the corresponding leasing obligations in the Statement of Financial Position.

⁴ TGK-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.