2.3. THE FINANCIAL PERFORMANCE 24
- At year-end 2015, RusHydro recorded net profit in the amount of RUB 27,159 million, which is by RUB 3,028 million (+12,5 %) higher than in the previous year.
- RusHydro Group’s revenue (including government’s grants) increased by RUB 19,838 million (+ 6 %), amounting to RUB 361,826 million.
- The operating expenses of RusHydro Group increased by RUB 24,265 million (+ 9 %) to RUB 315,103 million, which matches the task of limiting expense growth to the annual inflation rate.
- The total assets of RusHydro Group increased by RUB 54,367 million (+ 3 %) amounting to RUB 938,137 million.
- RusHydro Group equity, as of the end of 2015, amounted to RUB 613,919 million, which is by RUB 18,768 million higher (+3 %) than in the previous year.
Despite the geopolitical situation in 2015, RusHydro managed to maintain a stable financial position, increased revenues25 6 %, keep the rate of increase in operating expenses in the range of inflation, increase the dividend payable by the Group by 15 % and to increase net profit by 12.5 %. The Group’s debt burden and relative profitability indicators remained at a comfortable level.
2.3.1. Profitability indicators
Change in net profit, RUB million
Factors affecting the growth of the Group’s net profit in 2015 were: increase in revenue, financial income and government grants.
In 2015, the Group recorded a slight increase in EBITDA of 134 million rubles (0.2 %) to 73,383 million rubles. The EBITDA margin of the Group remained at a high level and amounted to 19.8 % in the end of the reporting year.
By the end of 2015, the Group’s net profit achieved of 27,159 million rubles, which exceeded the previous year’s result by 3,028 million rubles (12.5%). Group’s net profit margin increased to 7.3 %.
Return on assets and return on equity, %
Distribution of the Company’s net profit, RUB million
In 2015, relative profitability ratios improved as a result of the increase of Group’s net profit while maintaining a stable structure of assets and equity. In 2015, return on assets (ROA) increased from 2.7 to 2.9 %, return on equity (ROE) increased from 4.0% to 4.5 %.
In 2015, the Annual General meeting of shareholders of PJSC RusHydro (AGM) (minutes dated 26.06.2015 no. 13) resolved to distribute of PJSC RusHydro profits for 2014. The dividends to shareholders amounted to 25% of consolidated net profit of RusHydro Group calculated under IFRS (24,131 million rubles), or 20% of the net profit of PJSC RusHydro calculated under RAS (30,729 million rubles).
|EBITDA, RUB million||79,171||73,249||73,383||134|
|EBITDA margin, %||24.2||21.4||19.8||(1.6)
|Net profit (loss), RUB million||20,993||24,131||27,159||3,028
|Net margin, %||6.4||7.1||7.3||0.3
|Net profit (loss) per one share, RUB||0.0638||0.0689||0.0865||0.0176|
|Return on assets (ROA), %||2.5||2.7||2.9||0.2|
|Return on equity (ROE), % (26)||3.7||4.0||4.5||0.5
2.3.2. Revenue and expenses27
Revenue and expense dynamics, RUB million
Revenue structure for group companies, (excluding intercompany operations), RUB million
During the reporting year, revenue increased for all segments of RusHydro Group activities including electricity sales, the revenue from which increased RUB 19,838 million (6 %) to RUB 361,826 million.
The revenues increased in all segments of the Group’s companies (excluding the Other segment). The highest growth was noted at PJSC RAO Energy Systems of the East where revenue (excluding government grants) grew by RUB 12,506 million (8.3%) to RUB 162,441 million against electricity generation growth. The key factors of the change in the revenues of PJSC RAO Energy Systems of the East from electricity sales are:
- the growth of the average sales rate and net electricity supply;
- the growth of electricity sales as per bilateral electricity purchase and sale contracts between DGK JSC and Inter RAO PJSC;
- the growth of electricity sales to consumers of Amur region (due to the admission of Energokomfort Amur LLC, a subsidiary of DEK PJSC, to the Group on 30/09/2014);
- the growth of the sales of electricity purchased by Yakutskenergo PJSC from Vilyuiskaya HPP-3 JSC.
The growth of the revenues of ESK RusHydro subgroup from electricity sales results from:
- the planned increase in electricity tariffs;
- the growth of electricity consumption in the regions where Krasnoyarskenergosbyt PJSC and CHESK JSC operate;
- attracting new customers by ESC RusHydro JSC.
The growth of the revenues of PJSC RusHydro from the sale of electric power contributed:
- the growth of power sales prices at the competitive capacity auction for HPPs of the second price zone due to HPP power market liberalisation as of 05/01/2014
- the indexation of regulated tariffs on capacity.
The operational expenses of the RusHydro Group in 2015 increased by 24,265 million rubles (8 %) to 315,103 million rubles, which matches with the task of limiting expense growth to the annual inflation rate (actual inflation according to Rosstat, in the year 2015 was 15.5 %).
revenue in 2015
Change in revenue, RUB million
Revenue structure breakdown by types of activities, RUB million
In 2015, the total revenue of the Group grew by 6% from RUB 341,988 million to RUB 361,826 million. Revenues grew in all business segments of RusHydro Group (excluding the Other segment), including the sales of electricity where revenues grew by RUB 14,975 million rubles (6%) to RUB 254,518 million.
At the same time, there was an increase in the government grants received by the Group as a compensation of the difference between the approved tariffs for electricity and heat power and reduced consumer tariffs, as well as compensation for fuel losses in the Far East amounting to RUB 1,886 million rubles (15%) up to 14,314 million rubles.
increasing in revenue
Change in operating expenses, RUB million
Structure of operating expenses, RUB million
The operating costs of the Group (excluding impairment losses) grew by 8% to RUB 315,103 million against RUB 290,838 million in 2014. The expenses grew mainly as a result of the growth of fuel costs, the employee benefit expenses of subsidiaries, costs for the purchase of electricity and power, and expenses for third-party services, and losses from the disposal of fixed assets due to the technical incident at the Zagorskaya PSPP-2.The highest growth among the operating costs of RusHydro Group in 2015 is seen in fuel costs which increased by RUB 7,448 million to RUB 54,087 million (16%).
The main reasons for fuel cost growth are the growth of the electricity output of the HPP owned by DGK JSC caused by the decrease of production at Zeyskaya HPP resulting from low water inflow to the HPP, as well as the increase of specific fuel consumption and the growth of the average fuel equivalent price in the segment of RAO Power System of the East Subgroup.Employee benefit expenses grew by RUB 7,367 million (11%) to RUB 72,871 million. The growth of employee benefit expenses is connected with the performance by the employer of the requirements of the trilateral Sectoral Tariff Agreement in the electric power industry for 2013-2015 on the indexation of salaries in line with the consumer price index in Russia (according to the official data of the Federal State Statistic Service, the consumer price index was 15.5 in 2015).Within the structure of the Group’s operational expenses in 2015, labour remuneration expenses form 23% of the total, being the most significant expense item.
At the same time, 19% of costs are formed by expenses from the purchase of electricity and capacity, 17% are formed by fuel expenses, 14% are formed by expenses on electricity distribution, 7% by amortisation, 3% by taxes paid, excluding profit tax, and 10% on expenses on services provided by third-party contractors, including the services of JSC “SO UES” and JSC “ATS”, whereas 4% are formed by other materials and 4% – by other expenses (28).
2.3.3. Assets, equity and liabilities
Assets, equity and liabilities, RUB mn
|Property, plant and equipment||633,846||686,190||744,585||9
|Other non-current assets||65,137||48,540||47,124||-3
|Total liabilities and equity||856,112||883,770||938,137||11|
Asset structure and dynamics, RUB million
Liabilities structure and dynamics, RUB million
As of the end of 2015, the total assets of the RusHydro Group increased RUB 54,367 million (6 %) amounting to RUB 938,137 million. The key factor contributing to Group asset growth during the reporting year was the increase in property, plant and equipment by RUB 58,395 million (9 %) due to further implementation of the investment programme and significant Group investment in infrastructural objects that are nationally significant.
At the same time, other non-current assets decreased 1,416 rubles (3 %). Current assets decreased RUB 2,612 million (2 %). At the same time, cash assets increased RUB 13,631 million (40 %).
As a result, the share of property, plant and equipment in the Group’s 2015 total balance increased to 79 %. The Group maintains a stable asset structure.
RusHydro Group equity, as of the end of 2015, amounted to RUB 613,919 million, which is higher than the amount as of the end of the previous year. Retained earnings and other reserves of the Group increased by 23 558 million rubles (13 %).The total Group liabilities increased RUB 35,599 million (12 %) and amounted to RUB 324,218 million in 2015, which is due to the necessity of attracting funds for financing investment.
188.8.131.52. Analysis of the structure and changes in debt. Credit ratings
Long-term debt structure, %
Short-term debt structure, %
The Group’s net debt (the difference between the total amount of outstanding short-term and long-term borrowed funds and the total amount of cash and cash equivalents) as of the end 2015 amounted to RUB 149,368 million rubles (growth for 2015 was 6 732 million rubles). The relative leverage ratios of Group RusHydro remain at comfortable levels which reaffirms the Group’s stable financial position.
The long-term debt of the Group 2015 grew by RUB 15,992 million (13%) to RUB 135,179 million, mainly due to the refinancing of the Euro bonded loan (whereunder the outstanding debt was classified as short-term at the end of 2014), the issue of long-term RUBle bonds of PJSC RusHydro in 2015, as well as the attraction of long-term loans to finance the Group’s investment activities. The structure of the long-term debt at the endof 2015 comprises 66.5 % of loan funds, 32.2 % of the bonds placed, and 1.2 % of other long-term debt financing.
The short-term debt of the Group at the end of 2015 amounted to RUB 62,214 million. The growth of the short-term debt by RUB 4,371 million was mainly caused by the conversion of long-term loans and bonds into liabilities because of their maturity in 2016. Therefore, the outstanding short-term debt under the long-term loans amounts to 40.4% of the short-term debt of RusHydro Group, including placed bonds for the total sum of RUB 15 billion with 57.4% of short-term loans and ~ 2,2 % – other short-term borrowings.
As of the end of 2015, more than 91% of the consolidated financial debt Group RusHydro (including the guarantee for obligations of JSC Boguchanskaya HPP on the credit of GK “Vnesheconombank”) is RUBle-denominated, which hence the insignificance of currency risk for the Group . At the same time, more than 40% of the overall volume of debt financing are commitments to major Russian State banks. The Group also has open credit lines in the largest Russian banks. The sum of the unused loans amounted to approximately 97 million rubles, which exceeds the needs in the short-term debt refinancing and significantly decreases financial risks.
Given the increase in Group total financial debt and deterioration in the macroeconomic environment as of the end of 2015, the amount of interest paid on RusHydro Group term loan means increased only RUB 5,790 million (42 %), amounting to 19,498 million rubles.
Credit ratings (at the end of 2015)
|Rating Agency||Fitch Ratings||Standard & Poor's||Moody's (together with CJSC "Moody's Interfax Rating Agency")|
|The credit rating on the National scale||АА(rus)||ruАА||Aa2.ru|
|The credit rating on the International scale (in foreign currency)||ВВ+||ВВ||Ba2|
|Outlook on the credit rating||Negative||Stable||Stable|
|Outlook revision date in 2015||21.01.2015||04.02.2015||07.12.2015|
2.3.4. Cash flow
Cash flow, RUB million
|Net cash generated by operating activities||62,428||57,926||69,800||11,874|
|Net cash used in investment activities||(51,155)||(60,433)||(48,381)||12,052|
|Net cash generated by (used in) financing activities||(16,706)||1,091||(8,584)||(9,675)|
|Foreign exchange gain (loss) on cash balances||48||1,338||796||(542)|
|Decrease in cash and cash equivalents||(5 385)||(78)||13,631||13,709|
|Cash and cash equivalents at the end of the year||34,472||34,394||48,025||13,631|
The Group’s net cash generated by Group operating activities increased 11,874 million rubles (21 %) to 69,800 million rubles. At the same time, the net flow of funds used in financing activities decreased 12,052 million rubles (20 %), reaching 48,381 million rubles. During 2015, the Group implemented a large-scale investment programme, increasing capital expenditures 8,813 million rubles (20 %) to 48,381 million rubles.
In RusHydro’s financial activities, a net cash outflow in the amount of 8,584 million rubles was recorded during the reporting period against the background of a increase in the volume of repaid borrowings compared with the previous year.
Despite the deterioration of macroeconomic conditions, the Group avoided a significant exchange rate loss in 2015 due to a significant share of RUBle-denominated loans in the overall debt structure. At the same time, the foreign exchange gain on RusHydro Group cash balances decreased almost 1,5 times, totaling 795 million rubles.