IDGC of Centre held a meeting of the Board of Directors that approved the adjusted Business plan of the Company, including the Investment program, for 2014

18 March 2014

March 14, 2013 in person and in absentia a meeting of the Board of Directors IDGC of Centre was held. The meeting approved the adjusted Business plan of the Company for 2014 and approved a draft of the adjusted Investment program of the Company for 2014-2019. According to the results of the meeting of the Board of Directors General Director of IDGC of Centre was instructed to ensure approval of the adjusted Investment program of the Company for 2014-2019 by regional authorized bodies of executive power in accordance with Resolution of the Government of the Russian Federation dated 01.12.2009 № 977 "On investment programs of electric power industry subjects".

The adjusted Business plan of IDGC of Centre was formed with taking into account the following: outcome of the tariff campaign in 2014, termination to perform the functions of a supplier of last resort by the branches: "Orelenergo" - from 01.02.2014, "Kurskenergo" and "Tverenergo" - from 01.04.2014; decrease in operating expenses in 2014 within the framework of the Cost Management Program.

Indicators of the adjusted Business plan of the Company for 2014 are as follows:

Data in billion RUB, unless specified otherwise

Indicators

Actual for 2013

Adjusted plan for 2014

Change, %

Revenue (total), including:

92,9

92,6

-0,3%

Revenue from electricity transmission1

75,2

76,4

1,6%

Revenue from grid connection

0,9

1,2

33,3%

Revenue from resale of electric energy and power1

16,0

14,1

-11,9%

Other revenue

0,9

0,9

0,0%

Cost of sales1

78,5

81,5

3,8%

EBITDA2

11,5

15,0

30,4%

Net profit

0,3

2,7

800,0%

Amount of electric energy transmitted3, billion kWh

55,2

54,7

-0,9%

Electric energy losses, %

9,16%

9,48%

0,32 p.p.

Net debt4

32,0

34,9

9,1%

[1] According to the management accounting (revenues less internal business volume)
[2] EBITDA is calculated as follows: net profit + profit tax and other similar mandatory payments + interest payable - interest receivable + depreciation charges
[3] Joint operation productive supply without taking into account losses of TGCs
[4] Net debt is calculated as follows: long-term debt + short-term debt - cash and cash equivalents - short-term financial investments

Planned revenue from electric energy transmission within the adjusted Business plan for 2014 is by 1.6% higher than actual in 2013, due to the increase in the average tariff for the transmission of electric energy, based on resolutions approved by regional energy commissions. As part of the adoption and execution by IDGC of Centre’s branches of the functions of a supplier of last resort the adjusted Business plan for 2014 provides for revenue from the resale of electric energy and power in the amount of 14.1 bln RUB, which is by 11.9% less than the fact of 2013. The main cause of the indicator decline is the "transfer" of the functions of a supplier of last resort from the branches of the Company to winners of tenders held by the Ministry of Energy of Russia.

Cost of sales for 2014 is planned at 3.8% higher than in 2013, but below the level of inflation, which, according to the Forecast of socio-economic development of the Russian Federation, this year will be 5.6%. The main factors positively affecting the forecast of costs of the company are: lower operating costs per unit of production assets by 5% to the base in 2012; reducing costs for the purchase of goods (works, services) per unit of production by 10% to the base of 2010; decreasing investment costs by 10% against the level of 2012.

Earnings Before Interest, Taxes, Depreciation, and Amortization are projected at 30% higher than the actual values in 2013. Net income of the company according to the Business plan will reach 2.7 bln RUB, and the profit from electricity transmission services is expected to reach 1.6 bln RUB.

Predicted value of joint operation productive supply according to the adjusted Business plan for 2014 is 54.7 billion kWh, which is 0.9% lower than the fact for 2013. The main reason for the productive supply decline against the fact for 2013 is a reduction in consumption due to the termination of "last mile" contracts. In 2014 IDGC of Centre planned increase in losses regarding the fact in 2013 by 0.32%. The increase in the relative amount of losses is associated with decreased supply to the grid in 2014.

The key factors taken into account in the adjustment of the Investment Program are: limiting the growth of rates starting from 2014; revision of the value of investment projects based on targets for reduction of specific investment costs by 30% against the level of 2012 by 2017 (in rubles per physical unit (km, MVA); the fact of the Investment program implementation by the end of 2013.

Key indicators of the adjusted Investment program for 2014-2019 are as follows:

Indicator

UOM

2014

2015

2016

2017

2018

2019

Capex, net of VAT

bln RUB

11,9

11,9

12,8

12,7

13,0

13,4

Commissioned capacity

MVA

920

1 008

1 384

1 302

1 011

781

km

4 179

3 540

3 934

4 491

4 627

5 509

The adjusted Business plan of the Company, including the Investment program, for 2014 ensures implementation of the Electric Grid Development Strategy of Russia, aimed at improving the reliability, quality and availability of power supply to customers and meeting the interests of shareholders, keeping the breakeven activity in conditions of tariff rates "freezing".

«Other IR news of the Company can be found at: http://www.mrsk-1.com/en/investors/presentations/ir_news/»

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