IDGC of Centre’s Board of Directors approved the Company’s Business Plan for 2019

25.03.2019

A meeting of the Company’s Board of Directors was held on 22 March 2019, which approved the Company’s Business Plan for 2019 and forecast indicators for 2020-2023. The Business Plan for 2019 is formed taking into account the Forecast of socio-economic development of the Russian Federation until 2024 (hereinafter – the Forecast), prepared by the Ministry of Economic Development of Russia. Scenario conditions for the formation of the Business Plan for 2019 provide for indexation of tariffs for electricity transmission services in accordance with the Forecast, increase in labour productivity by at least 2%, decrease in the level of specific operating expenses by at least 2%, as well as indicators of dividend policy in accordance with Order of the Government of the Russian Federation dated 29.05.2017 № 1094.

Indicators of the Company’s Business Plan for 2019:

Data in bln RUB, unless specified otherwise

Indicators

Planned for 2019

Actual for

2018

Change

Revenue (total), including:

96,3

93,9

2,6%

Revenue from electric energy transmission

92,6

90,0

2,9%

Revenue from grid connection

1,3

1,9

-31,6%

Revenue from other activity

2,4

2,0

20,0%

Cost of sales

86,8

83,9

3,5%

Sales profit1

7,2

7,7

-6,5%

Sales profit margin, %

7,5

8,2

-8,5%

EBITDA2

18,7

16,6

12,7%

EBITDA margin, %

19,4

17,7

9,6%

Net profit

2,4

1,4

71,4%

Net profit margin, %

2,5

1,5

66,7%

Amount of electric energy transmitted, billion kWh

47,3

47,0

0,6 %

Electric energy losses, %

10,26

10,60

-0,34 p.p.

Indicators

As at 31.12.2019

As at 31.12.2018

Change

Total assets

127,5

122,5

4,1%

Net assets

60,1

58,5

2,7%

Loans and credits

44,6

40,4

10,4%

Cash and cash equivalents + Financial investments (short-term)

0,0

0,8

-100,0%

Net debt3

44,6

39,6

12,6%

[1] Revenue net of costs, selling and administrative expenses

[2] EBITDA is calculated as follows: net profit + profit tax and other similar mandatory payments + interest payable + depreciation charges

[3] Net debt is calculated as follows: long-term debt + short-term debt – cash and cash equivalents – short-term financial investments

Planned revenues for electric energy transmission services in the framework of the Business Plan for 2019 is 2,9% higher than in 2018, which is due to growth of net supply and tariffs for electricity transmission services. The projected revenue from grid connection services in 2019 is expected to be 1,3 bln RUB, which is 31,6% lower than the actual revenue in 2018. The decrease in the revenue is due to early implementation of a number of grid connection contracts in 2018. In 2019, the Company predicts receipt of revenue from other activities in the amount of 2.4 bln RUB. Other revenues include revenues from the sale of value-added (unregulated) services (72% of other revenues), which include the following areas: setup of outdoor lighting systems, reconstruction of power grid facilities in the interests of customers, placement of third-party equipment at power grid facilities of the Company and performance of work related to the competence of customers in the implementation of the grid connection procedure.

The increase of cost of sales relative to the fact of 2018 is associated with growth of influenceable costs, which account for 33,9% of all expenses of the company. In 2019, non-influenceable costs are planned with an increase of 1.5 bln RUB, or 2,6% of the fact of 2018, the main reason for the increase in the costs is a significant increase in unregulated prices on the wholesale market in 2019 in accordance with the forecast of the Ministry of Economic Development.

Earnings before interest, taxes, depreciation and amortization (EBITDA) is projected above the outcome in 2018 and will be 18,7 bln RUB. Implementation of the risk of increasing arrears for services rendered by the company can provide negative impact on the financial result. Positive factors for the company’s financial results can be exceeding the forecast in terms of the provision of electricity transmission services and results of the cost management program above the forecast. Net profit for 2019 is projected at 2,4 bln RUB.

The projected value of the volume of electric energy transmission services, according to the Business Plan for 2019, will increase by 0,6% and will be 47,3 billion kWh. The size of planned relative value of losses in 2019 is lower than the actual value in 2018 by 0,34 p.p. and is 10,26%.

The Company’s total assets as at 31 December 2019 are projected above the actual level of 2018 and will be 127,5 bln RUB. The Company’s net assets following the results of 2019 are forecast at the level of 60,1 bln RUB, which is 2,7% above the same indicator at the end of 2018. Net debt3 is planned at the level of 44,6 bln RUB, which means the indicator will increase by 5,0 bln RUB during 2019, mainly due to the financing of the investment program of the branch “Tverenergo” and projects for consolidation of power grid assets.

Other IR-news of the Company can be found at: https://www.mrsk-1.ru/en/investors/presentations/ir_news/.

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