IDGC of Center reports FY 2011 preliminary results & 2012 outlook

10 January 2012

The Board of Directors of IDGC of Center at the meeting on December 28, 2011 announced the preliminary results of the Company for the year 2011, and approved the business plan, the investment program and the values of key performance indicators for 2012.

Key actions of the Company in 2011 were implementation of initiatives to improve the reliability and service quality, enhancement of operational efficiency, support of innovative development, and increasing the availability of the grid infrastructure.

The approval of the Program of innovative development of IDGC of Center for 2011-2016 is an important milestone in solving the strategic task to raise the level of technological development and achieve a leading position in the industry.

The estimated volume of the Program for 2012 amounts to RUR 2.2 billion rubles, which is 3.1% of estimated revenue for 2012.

At year-end, the Company expects 12.3% revenue growth (including revenue from electricity transmission — 13.7%), 22.5% gross profit growth, and 10% EBITDA growth as compared to 2010:

RUR billion

Indicators

FY 2010 (fact)

FY 2011 (estimated)

% change

Revenue (total), including:

60.4

67.8

12.3%

Revenue from electric power transmission

57.6

65.5

13.7%

Revenue from technological connection

2.2

1.6

-27.3%

Other revenue

0.7

0.7

12.9%

Gross profit

9.1

11.1

22.0%

EBITDA*

11.0

12.1

10.0%

EBITDA margin, %

18.1%

17.8%

-0.3 p.p.

* EBITDA is calculated by the formula: net profit + profit tax and other similar obligatory payments + interest payable + depreciation accruals

Source: the Companys data

Loan portfolio of the Company for 2011 increased 1.4 times (from RUR 14.9 billion up to RUR 21 billion), which is attributable to the necessity to implement the investment program. It should be noted that cash flow from operations has allowed financing more than 40% of capital investments for 2011 by own funds. Net debt outlook at the end of 2011 is RUR 19.5 billion. Net Debt/EBITDA ratio remains at a fairly low level — 1.7 at the limits established by the Company at 3 EBITDA. This will allow IDGC of Center to attract the borrowings to implement the investment program, scheduled for 2012, on favorable conditions.

Estimated CapEx growth for 2011 will amount to 22.2% year-on-year, while the total volume of capital investments during the reporting period is expected to reach RUR 14.95 billion, that will allow IDGC of Centre commissioning over 4.5 thousand km of transmission lines and over 1,300 MVA capacity in the reporting period, which exceeds FY 2010 indicators by 9.2% and 30.7% respectively.

The key priorities for the Company’s management for 2012 are as follows: extension of long-term tariff regulation (the system of tariff regulation on the basis of the regulated capital base — RAB), enhancement of operational efficiency and investment attractiveness of IDGC of Center. In 2012 the Company expects growth in key financial and operating indicators, in particular, revenue from electricity transmission — 5%, EBITDA — 8.4%:

RUR billion

Indicators

FY 2011 (estimated)

FY 2012 (outlook)

% change

Revenue (total), including:

67.8

70.6

4.1%

Revenue from electric power transmission

65.5

68.7

5.0%

Revenue from technological connection

1.6

1.0

-38.2%

Other revenue

0.7

0.9

17.6%

Gross profit

11.1

11.1

-0.6%

EBITDA

12.1

13.1

8.4%

EBITDA margin, %

17.8%

18.5%

0.7 p.p.

Source: the Company’s data

The expected growth in revenues from electric power transmission power is attributable to increase in electric energy transmission of IDGC of Center in 2012. The planned decrease in revenue from technological connections in 2012 is associated with the closure of several large contracts in 2011. The company expects a decline in net profit in 2012 due to the limitation of growth rates, which cannot exceed 11% from the set level of 2011 starting from 01.07.2012.

Among the key performance indicators (KPI), approved for 2012, the Company plans a reduction of electric power losses that would be possible by doing substantial work on modernization of networks — equipment with metering devices, replacement of aged equipment, as well as implementation of the renovation program.

Key Performance Indicators (KPI)

FY 2010

FY 2011 (estimated)

FY 2012 (outlook)

Return on equity (ROE), provided by cash flow, %

10.87%

7.19%

7.48%

Electric power losses / Supply to network, %

10.01%

9.93%

9.83%

For reference:

Net profit, RUR billion

4.7

4.03

3.7

Equity, RUR thousand

41.2

45.9

49.4

Source: the Company’s data


Forward-looking statement

The information in this release was received from the sources which, in opinion of IDGC of Centre (“the Company”), are reliable. Nevertheless, we do not guarantee accuracy of the given information which may be short or incomplete. All opinions and estimations containing in the present material reflect our opinion at the date of publication and are subject to change without notice.

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