December 12, 2019. Moscow,
Russia. RusHydro Group (hereinafter
referred to as the “Group”, ticker symbol: MOEX, LSE: HYDR;
OTCQX: RSHYY) announces its condensed consolidated interim unaudited
financial information prepared in accordance with International
Financial Reporting Standards (IFRS) for the 3rd quarter and 9 months
of 2019.
Key
highlights for the 3Q and 9M of 2019:
Total revenue in 9M’19 was flat to 9M’18
and came in at RUB 287,620 mn (-0.4%), in 3Q’19 – RUB 87,486
(+0.1%);
EBITDA in 9M’19 – RUB 70,429 mn (-13.1%
y-o-y); in 3Q’19 – RUB 19,659 mn (-6.7% y-o-y);
Operating expenses increased in 9M and 3Q by
5.2% y-o-y and 1.9% y-o-y, respectively, mostly as a result of fuel
cost increase and growth of purchased electricity and capacity
costs;
Adjusted net profit in 9M’19 – RUB 39,842
mn (-22.1% y-o-y); net profit in 9M’19 – RUB 35,157 mn (-23.5%
y-o-y).
Financial results reflected decrease of
electricity production in 9M’19 on the back of reduced water
inflows to the majority of reservoirs of the HPPs in the first half
of the year. In 3Q 2019 production increased on the back of rainfall
flooding and increased water inflow to the following reservoirs.
3Q and 9M 2019/2018 highlights (in RUB mn)
1
|
3Q/19
|
3Q/181
|
chg.
|
9M’19
|
9M’181
|
chg.
|
Revenue
|
87,486
|
87,385
|
0.1%
|
287,620
|
288,670
|
-0.4%
|
Operating expenses
|
74,218
|
72,807
|
1.9%
|
236,621
|
225,005
|
5.2%
|
Other operating profit
|
144
|
444
|
-67.6%
|
614
|
5,340
|
-88.5%
|
Operating profit2
|
13,412
|
15,022
|
-10.7%
|
51,613
|
69,005
|
-25.2%
|
EBITDA3
|
19,659
|
21,067
|
-6.7%
|
70,429
|
81,016
|
-13.1%
|
Net profit
|
5,772
|
7,405
|
-22.1%
|
35,157
|
45,985
|
-23.5%
|
Net profit (adj.)4
|
8,733
|
10,937
|
-20.2%
|
39,842
|
51,151
|
-22.1%
|
Operating
results
Total electricity generation by RusHydro Group’s
power plants amounted to 33,295 GWh in 3Q’19, an increase of 3.3%
as compared to the corresponding period last year, in 9M’19 –
91,888 (-7.7%). In 3Q’19 total electricity generation by RusHydro
Group’s hydropower and pumped storage plants increased by 4.6% to
27,168 GWh, electricity generation by the Group’s thermal power
plants decreased by 2.6% to 6,036 GWh, and electricity generation by
renewables increased by 4.5% to 91 GWh as compared to the
corresponding period of 2018. Consequently, in 9M’19 of the year
total electricity generation by RusHydro Group’s hydropower and
pumped storage plants decreased by 10.1% to 68,824 GWh, by renewables
– by 2.0% to 308 GWh, while electricity generation by the Group’s
thermal power plants increased by 0.1% to 22,755 GWh as compared to
the same period of 2018. Total electricity generation by
Boguchanskaya hydropower plant5
in 3Q’19 amounted to 4,426 GWh, an increase of 7.4% as compared
to 3Q 2018, in 9M – 11,785 (+14.6%).
Heat output by RusHydro Group’s thermal plants
in the Far Eastern Federal Districtin 3Q’19 increased by 13.2% to
2,168 GCal as compared to the corresponding period last year. In
9M’19, heat output decreased by 3.1% against 9M’18 to 18,967
GCal.
Total electricity output by RusHydro’s retail
companies, operating in Chuvashia, Ryazan and Krasnoyarsk regions in
the 3Q’19 decreased by 1.6% to 4,127 GWh as compared to 3Q’18. In
9M’19, total output decreased by 4.5% as compared to the
corresponding period last year and amounted to 14,051 GWh.
Key
events in January - September 2019
On January 2, 2019, the Cental and Western
districts of Yakutia were connected to the Unified Energy System of
Russia. PJSC Yakutskenergo, a subsidiary of PJSC RusHydro,
transferred the supervision and control of the territory to the
System Operator;
On February 8, 2019, PJSC RusHydro has
divested its 40% share in LLC VolgaHydro, a hydropower equipment
manufacturing joint venture in the Saratov region, to Voith Group
for RUB 450 mn;
On March 29, 2019, PJSC RusHydro and UC RUSAL
commissioned the first stage of Boguchany aluminium smelter (BoAZ),
part of Boguchanskiy Energy and Metals Complex (BEMO). Total funding
of the smelter’s first phase with annual operational capacity is
estimated at 298 thousand tons of aluminium amounts to USD 1.69 bn.
It is being financed by own funds of partners in BEMO project along
with project financing from VEB.RF (formerly – Vnesheconombank);
On April 19, 2019, The Board of Directors
approved PJSC RusHydro’s dividend policy, which stipulates for a
base scenario of dividend payout ratio at 50% of the company’s
IFRS net profit. At the same time, a minimal payout level is set at
the average amount of dividends paid over the last three years. Such
measure guarantees shareholders a minimal dividend amount and
improves the company’s investment attractiveness. The changes to
the dividend policy will be in effect for three years;
On April 29, 2019, the first phase of
placement of RusHydro’s additional share issue for the
construction of Pevek-Bilibino 110 kV high-voltage overhead lines in
light of upcoming reconstruction of the Chaun-Bilibino power system
following decommissioning of the Bilibinskaya nuclear power plant
took place. PJSC RusHydro has placed 7,000,092,298 shares including
7,000,000,000 shares in favor of the Russian Federation represented
by the Federal Agency for State Property Management
(Rosimushchestvo) at one ruble per share;
On June 28, 2019, AGM of PJSC RusHydro
elected new Board of Directors and approved 2018 dividends of RUB
0.0367388 per share in total amount of RUB 15.9 bn (50% of the
Group’s net profit for 2018 under IFRS, and an increase of 42%
over the amount distributed in dividends for 2017);
On July 17, 2019, the government of the
Russian Federation approved all projects submitted by RusHydro for
construction and modernization of thermal power plants in the Far
East: construction of Artyomovskaya CHP-2, Khabarovskaya CHP-4,
second phase of Yakutskaya GRES-2 and modernization of
Vladivostokskaya CHP-2. Return on the projects will be guaranteed by
the mechanism stipulated in the government’s program on
thermal power modernization;
On September 7, 2019, RusHydro put into
commission Nizhe-Bureyskaya HPP in the Amur region. The facility’s
installed capacity and average annual electricity output stands at
320 MW and 1.67 TWh, respectively. It will supply power to customers
in unified energy system of the East.
Revenue
Revenue breakdown in 3Q and 9M 2019/2018 (in
RUB mn)
|
3Q’19
|
3Q’18
|
chg
|
9M’19
|
9M’18
|
chg
|
Electricity sales
|
60,260
|
62,526
|
-3.6%
|
194,309
|
198,869
|
-2.3%
|
Incl. grants as per Resolution of the Russian Gov't No. 895
(premium to the price translated to the budgets of the regions of
Russian Federation) 6
|
6,087
|
6,598
|
-7.7%
|
18,263
|
19,794
|
-7.7%
|
Capacity sales
|
11,556
|
10,670
|
8.3%
|
34,997
|
32,090
|
9.1%
|
Heat and hot water sales
|
3,082
|
2,905
|
6.1%
|
27,113
|
26,998
|
0.4%
|
Other sales
|
8,583
|
8,291
|
3.5%
|
20,128
|
20,892
|
-3.7%
|
Other government grants
|
4,005
|
2,993
|
33.8%
|
11,073
|
9,821
|
12.7%
|
Total revenue
|
87,486
|
87,385
|
0.1%
|
287,620
|
288,670
|
-0.4%
|
In 9M’19, total revenue of the Group amounted to
RUB 287,620 mn as compared to RUB 288,670 in the 9M’18. The change
is associated with the following key factors:
decrease in revenue from electricity sales of
PJSC RusHydro by RUB 7,652 mn due to decline in production of
hydropower plants by 11%;
increase in revenue from electricity of RAO
ES East subgroup (incl. government subsidies) by RUB 2,014 mn on the
back of tariff and sales volume growth;
increase in revenue from electricity sales
in ESC Rushydro subgroup by RUB 969 mn following new supply
agreements, increase of tariffs on electricity sales as well as
electricity sales volume growth on the wholesale market;
increase in capacity sales revenue by RUB
2,907 mn on the back of sales volume growth of PJSC DEK;
increase in heat and hot water sales revenue
by RUB 115 mn following tariff growth;
decrease in other sales revenue by RUB 764 mn
is mainly driven by decrease in revenue from grid connections and
electricity distribution services in PJSC Yakutskenergo and PJSC
Magadanenergo.
Operating
expenses7
Operating expenses in 3Q and 9M 2019/2018 (in
RUB mn)
|
3Q’19
|
3Q’181
|
chg
|
9M’19
|
9M’181
|
chg
|
Employee benefit expenses
|
18,308
|
18,025
|
1.6%
|
57,383
|
55,183
|
4.0%
|
Fuel expenses
|
11,871
|
10,642
|
11.5%
|
49,905
|
44,902
|
11.1%
|
Purchased electricity and capacity
|
9,385
|
9,126
|
2.8%
|
33,957
|
29,136
|
16.5%
|
Grid company services on electricity distribution
|
8,725
|
9,178
|
-4.9%
|
27,548
|
29,249
|
-5.8%
|
Third parties services
|
10,149
|
9,433
|
7.6%
|
25,043
|
25,155
|
-0.4%
|
Depreciation
|
6,434
|
5,824
|
10.5%
|
18,894
|
16,757
|
12.8%
|
Taxes other than on income
|
2,942
|
3,054
|
-3.7%
|
8,687
|
9,131
|
-4.9%
|
Other materials
|
3,626
|
3,172
|
14.3%
|
7,788
|
7,180
|
8.5%
|
Water usage expenses
|
1,124
|
1,025
|
9.7%
|
3,165
|
3,021
|
4.8%
|
Other expenses
|
1,654
|
3,328
|
-50.3%
|
4,251
|
5,291
|
-19.7%
|
TOTAL
|
74,218
|
72,807
|
1.9%
|
236,621
|
225,005
|
5.2%
|
Total operating expenses in the 9M’19 amounted
to RUB 236,621 mn as compared 225,005 mn in the 9M’18 due to the
following factors:
increase in purchased electricity and
capacity by RUB 4,821 mn partially covered by additional revenue
mostly at RAO ES East Subgroup following change in volume and tariff
increase;
increase in fuel expenses mainly in JSC DGK
by RUB 2,938 mn as a result of fuel purchase price increase
following procurement results and in PJSC Kamchatskenergo by
RUB 674 mn or as a result of purchase price increase of heating
oil and its increased consumption due to restrictions in consumption
of other types of fuel (gas, coal);
increase in depreciation expense following
commissioning of CHP Vostochnaya and off-site construction of
Sakhalinskaya GRES-2 in the 2H’18, commissioning of
Nizhne-Bureyskaya HPP in 2H’19, and adoption of IFRS 16, Leases
since 01.01.2019;
increase in employee benefit expenses by RUB
2,200 in accordance with existing collective agreements.
Profit
In the 9M’19, EBITDA decreased by 13.1% to RUB
70,429 mn as compared to RUB 81,016 mn in the same period of 2018.
The Group’s net profit decreased by 23.5% to RUB
35,157 mn. Adjusted net profit in the reporting period amounted to
RUB 39,842 – a 22.1% decrease as compared to the same period last
year.
The difference between the reported and adjusted
profit is attributed mainly to the following non-cash effects (before
income tax) and recognition of change in fair value of the derivative
financial instrument:
financial income in the amount of RUB 995 mn
as a result of change in fair value of non-deliverable forward
contract following increase of market price of PJSC RusHydro’s
shares in the reporting period;
impairment of financial assets in the amount
of RUB 1,503 mn resulting from measuring expected credit losses of
receivables;
impairment of property, plant & equipment
and unfinished construction in the amount of RUB 2,414 million;
impairment of other assets in the amount of
RUB 2,045 mn.
Key
indicators of financial position
As of September 30, 2019, the Group's assets
increased by RUB 25,417 mn or 2.7% to RUB 957,348 mn against RUB
931,931 as of December 31, 2018. Change in assets is primarily
attributable to:
As at the end of the reporting period, the Group's
liabilities increased by RUB 7,077 mn or 2.0% to RUB 352,789 mn as
compared to RUB 345,712 as of December 31, 2018. The structure of
liabilities has changed accordingly: long-term liabilities decreased
by RUB 11,151 mn and short-term liabilities increased by RUB 18,228
mn mainly due to increase of accounts payable, current debt and
current portion of non-current debt.
As of September 30, 2019 the liability on issued
shares in the amount of RUB 7,000 mn is reflected, as
additional share issue in the course of implementation of preemptive
right, under which PJSC RusHydro placed 7,000,092,298 shares
among shareholders, was not completed.
The fair value of the non-deliverable forward
contract, recognized under the terms of transaction with PJSC VTB
Bank, decreased from RUB 31,896 mn (as of December 31, 2018) to RUB
27,170 mn (as of September 30, 2019) following increase of market
price of RusHydro’s shares in 9M’19.
Events
after the reporting date
On November 18, 2019, PJSC RusHydro has
placed loan participation notes issued by RusHydro Capital Markets
DAC in the amount of RUB 15 bn. The LPNs will mature in 2024 and
bear an interest of 6.8% p.a. payable twice per year;
On November 21, 2019, PJSC RusHydro and PJSC
VTB Bank signed a supplementary agreement to improve the terms of
the forward contract. The supplemental agreement provides for
lowering the forward rate by 0.5% p.a. and extension of the
agreement for three years through 2025 allowing sourcing a strategic
investor and jointly working on increasing RusHydro’s share price;
On November 22, 2019, PJSC RusHydro
inaugurated Sakhalinskaya GRES-2 in the Sakhalin region of the Far
East to replace the obsolete Sakhalinskaya GRES. The power plant’s
installed capacity and long run electricity output stands at 120 MW
and 0.84 TWh, respectively;
On November 28, 2019, PJSC RusHydro
commissioned of 300 GCal peaking boiler plant at Yakutskaya GRES.
The new facility will increase the reliability of heat supply in the
capital of Yakutia and partially substitute the capacity of
Yakutskaya GRES which will be gradually phased out.
On December 5, 2019, JSC Hydroinvest, a 100%
subsidiary of PJSC RusHydro, entered into a share sale agreement
with PJSC Hrazdan Energy Company (HrazTES, Tashir Group), to divest
CJSC MEK, a company operating Sevan-Hrazdan cascade of hydropower
plants in Armenia for RUB 172.96 mn.
The full financial statements are available on the
Company’s website at:https://www.eng.rushydro.ru/investors/reports
1
As of January 1, 2018 the Group has
changed its accounting policy to reflect the initial cost of
property plant and equipment excluding accumulated depreciation and
impairments. As a result accumulated depreciation for the 9 months
of 2018 has been restated.
2
Operating profit is calculated as the difference between
revenue, other operating profit and operating expenses.
3
EBITDA is calculated as operating profit / loss excluding
depreciation of property, plant and equipment, gains on changes in
the carrying value of financial assets at fair value through profit
or loss, impairment of property, plant and equipment, impairment of
other assets, impairment of financial assets, loss on disposal of
property, plant and equipment, loss on disposal of other non-current
assets and other non-monetary items of operating income and
expenses.
4
Net profit is adjusted for the effects of recognition of
financial income/expense arising from the change in fair value of
non-deliverable forward contract, impairment of fixed assets,
impairment of other assets, impairment of financial assets,
profit / loss on disposal of property, plant and equipment,
loss on disposal of other non-current assets as well as other
operating income arising from the change in fair value of financial
assets measured through profit or loss.
5
The Boguchanskaya hydropower plant is part of the Boguchanskiy
Energy and Metals Complex (BEMO), a joint venture (JV) between
RusHydro and UC RUSAL, and is not part of RusHydro Group. According
to RusHydro’s shareholding in the JV (50%), the results of the
plant are reported in the official financial statements in “Share
of results of associates and jointly controlled entities”.
Operations of the HPP have been put into the press-release for
general reference.
6
In July 2017, the Resolution of the Russian Government No. 895
“On reaching basic rates (tariffs) for electric power (capacity) in
the territories of the Far East Federal region (the “Far East”)”
became effective, under which rates for consumers in the territories
of the Far East should be reduced starting from 1 January 2017 to the
basic level of RUB 4.00 / kWh, from 1 January 2018 to RUB 4.30
/ kWh. According to the Resolution of the Russian Government No.
1614-r of 28 July 2017, PJSC RusHydro was appointed as the recipient
of a premium to the price for capacity provided by the Company in the
price zones of the wholesale market under CCS agreements. The premium
to the price for capacity is set in order to achieve the basic level
of rates (tariffs) for electricity (capacity) planned for the next
regulation period in the Far East constituent regions. Within the
amounts defined by Resolution No. 1615-r of the Russian Government
dated 28 July 2017, the Company translates the collected amounts of
margin in the form of free-of-charge targeted contributions to the
budgets of the respective regions. The Group companies being
guaranteeing suppliers will receive compensation for the shortage of
income related to the reduction of rates, through subsidies from the
Far East constituent regions.
7
Here and hereinafter the operating expenses
do not include impairment loss.
|