IDGC of Centre has published its financial statements for the 1st half of 2014 (RAS). Net profit showed an increase of 66.7%

31 July 2014

According to statements for the 1st half of 2014 under Russian Accounting Standards IDGC of Centre’s revenue amounted to 47.6 bln RUB, including from electricity transmission — 31.5 bln RUB, from grid connection — 0.7 bln RUB, from resale of electric energy and power — 14.9 bln RUB. Other revenue amounted to 420 mln RUB. Sales profit slightly decreased and amounted to 5.7 bln RUB. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to 8.5 bln RUB, which is 25% higher than the same period last year. Net profit increased by 66.7% to 2.0 bln RUB.

Data in bln RUB, unless specified otherwise
Indicators 1 H 2013 1 H 2014 Change, %

Revenue (total), including:

41,8

47,6

13,9%

Revenue from electricity transmission

31,3

31,5

0,6%

Revenue from grid connection

0,3

0,7

133,3%

Revenue from resale of electric energy and power

9,8

14,9

52,0%

Other revenue

0,4

0,4

0,0%

Cost of sales

34,8

41,3

18,7%

Sales profit1

5,8

5,7

-1,7%

Sales profit margin, %

13,9%

12,0%

- 1,9 p.p.

EBITDA2

6,8

8,5

25,0%

EBITDA margin, %

16,3%

17,9%

1,6 p.p.

Net profit

1,2

2,0

66,7%

Net profit margin, %

2,9%

4,2%

1,3 p.p.

Amount of electric energy transmitted3, billion kWh

27,68

27,35

-1,2%

Electric energy losses, %

9,23

8,99

-0,24 p.p.

[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 - interest receivable + depreciation charges
[3]Joint operation productive supply without taking into account losses of TGCs

The main factor affecting the company's financial performance in 2013-2014 was the pickup of the function of a supplier of last resort in 5 regions of its service area (Bryansk, Kursk, Orel, Tver and Smolensk regions). With the new activity the data in the item "Revenue from electricity transmission" is not comparable with the previous year. Part of the proceeds from the electricity transmission in the amount of 6.8 bln RUB is included in the revenue from the resale of electric energy and power (4.7 bln RUB in the statements for 1H 2013). Excluding the new activity the revenue from electricity transmission for 1H 2014 amounted to 38.3 bln RUB, which is 6.4% higher than in 2013 (36.0 bln RUB). The revenue growth from electricity transmission under comparable conditions is mainly associated with an increase in the average transmission tariff. The revenue growth from grid connection is related with the closure of major contracts in the Voronezh and Tver regions and completion of a stage contract in the Kursk region.

The cost of sales for 1H 2014 amounted to 41.3 bln RUB, which is 6.5 bln RUB higher than the figure for 2013. The cost of sales growth is also associated with the implementation of functions of a supplier of last resort by IDGC of Centre. Besides, the factors increasing the cost of sales are the growth in expenses of electricity transmission services in the Unified National (All-Russia) Electric Grid and the cost increase to purchase electricity to compensate losses due to growth in the weighted average non-regulated prices for electric energy (power).

The net profit increase compared to the same period last year is mainly attributable to the allowance for doubtful accounts receivable for electricity transmission services of retail companies, which lost their status of a supplier of last resort, reflected in 2013.

The volume of electricity transmission following the results of 1H 2014 showed a decline of 1.2% due to the termination of the contracts of the "last mile" for a number of branches from 01 January 2014 and reduction in electricity consumption by large industrial enterprises. Electricity losses were reduced from 9.23% to 8.99% due to the company's ongoing work to improve the quality and reliability of electricity transmission.

The company's net assets as at June 30, 2014 increased by 2.0 bln RUB compared to December 31, 2013 and amounted to 54.9 bln RUB. The net debt4 reached 33.3 bln RUB (as at December 31, 2013 — 32.0 bln RUB).

The Company’s statements can be found at: http://www.mrsk-1.com/en/information/statements/rbsu/2014/

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

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