IDGC of Centre held a meeting of the Board of Directors, the Company's Business Plan, including the Investment Program, for 2015 was approved

12 December 2014

December 11, 2014 a meeting of the Board of Directors of IDGC of Centre was held in person and in absentia. At the meeting the Business Plan, including the Investment Program, for 2015 and forecast figures for 2016-2019 were approved. In addition, the Board of Directors approved the report of General Director of the Company «On execution of the Business Plan (including the Investment Program) of the Company in 3Q 2014 and following the results of 9 months 2014».

The Business Plan for 2015 is formed with the implementation of the Program of performance management, including the reduction of operating costs in 2015 by 10.8% to the base in 2012, decreasing investment costs for the purchase of goods, works and services per production unit and an increase in revenue with implementation of the Program of energy saving and energy efficiency.

Indicators of the Company’s Business Plan for 2015:

Data in bln RUB, unless specified otherwise
Indicators Expected performance in 2014 Plan for 2015 Change, %

Revenue (total), including:

86,4

78,9

-8,7%

Revenue from electricity transmission1

75,8

77,0

1,6%

Revenue from grid connection

1,4

1,1

-21,4%

Revenue from resale of electric energy and power1

8,3

0,0

-

Other revenue

0,9

0,8

-11,1%

Cost of sales1

77,7

72,5

-6,7%

EBITDA2

14,2

14,0

-1,4%

EBITDA margin, %

16,4%

17,7%

1,3 p.p.

Net profit

1,9

0,9

-52,6%

Net profit margin, %

2,2%

1,1%

-1,1 p.p.

Amount of electric energy transmitted3, billion kWh

54,36

54,32

-0,1%

Electric energy losses, %

9,18%

9,44%

0,26 p.p.

[1]According to management accounting
[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 in the comparison of performance expected in 2014 and planned for 2015 was to exclude the income and expenses related to services of resale of electric energy and power due to the transfer of functions of a supplier of last resort from five branches of the Company to winners of tenders of the Russian Ministry of Energy. The scenario conditions during the formation of the Business Plan also took into account the integration of activities of the branch «Yarenergo» and a subsidiary of the Company JSC «Yargorelectroset» in connection with the liquidation of the latter and the transfer of assets and functions of its servicing to IDGC of Centre. Planned revenue for electric power transmission services within the Business Plan for 2015 is 1.6% above the expected performance in 2014, due to an increase in the average tariff and a slight decrease in the volume of services provided. The decrease in grid connection revenue to 1.1 billion rubles is due to the lack of planned for execution in 2015 large grid connection contracts. Other revenue for 2015 is expected to reach 786 million rubles, which is 121 million rubles less than expected in 2014.

The cost of sales for 2015 is planned at 6.7% lower than in 2014. The greatest effect on the decline in the indicator was accounting of 7.4 billion rubles in the cost of sales for 2014 to purchase electricity for sale not planned in 2015. Effective work to reduce controllable expenses remains one of the priorities for 2015.

Earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to reach 14.0 billion rubles, while EBITDA margin will increase from 16.4% in 2014 to 17.7% in 2015. Net profit in accordance with the Business Plan will be 851 million rubles. By the end of 2015 25% of the net profit will be used to pay dividends.

Projected joint operation productive supply to consumers within the Business Plan for 2015 will amount to 54.36 billion kWh, which is 0.1% less than expected in 2014. The slight decrease of productive supply is due to some decline in electricity consumption. In 2015 the growth of losses against the expected performance in 2014 is planned at 0.26%. The growth of the relative value of the losses is associated with a decrease in the electricity supply to the grid of regional grid companies in 2015, due to cancellation of the «last mile» agreements for facilities, as well as an increase in the grid load and consolidation of power grid assets.

Indicators of the Company’s Investment Program for 2015:

Data in bln RUB, unless specified otherwise
Indicators Expected performance in 2014 Plan for 2015 Change, %

Capital investments net of VAT

11,9

10,5

-11,8%

Financing with VAT

14,3

12,4

-13,3%

Commissioning of fixed assets net of VAT

12,5

11,0

-12,0%

The approved Business Plan, including the Investment Program, for 2015 is aimed at improving the reliability, quality and availability of power supply to consumers and maintaining the activity profitability despite the negative impact of the current legislation to address the issue of cross-subsidization. The Business Plan includes measures to optimize both operating and investment costs, the decline in the Company's receivables and keeping its financial stability: the size of credit facilities at the end of the year will not exceed 3х EBITDA.

Other Company’s IR news can be found at: http://www.mrsk-1.com/en/investors/presentations/ir_news/

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