2.7

Review of revenues and expenses

Total revenues in 2015 totaled RUB 60,535 mn (+ RUB 928 mn or 2% YoY), incl. RUB 58,227 mn transmission fee (+ RUB 746 mn YoY). The upshift was influenced by changes of average tariff for energy transmission and reshuffled consumer structure (in terms of voltage class). Expenses, incl. administrative costs, amounted to RUB 56,069 mn (+ RUB 717 mn or 1% YoY). The increase was, mainly, impacted by growth of expenses on payments to regional grid operators and depreciation costs. Pre-tax profit totaled RUB 3,205 mn (+ RUB 854 mn YoY), net income amounting to RUB 2,466 mn (+ RUB 459 mn YoY). Net income grew due to increased revenues from transmission services and reduced expenses on loss compensation and FSK payments.

Key financial and economic metrics (RUB mn):

2015 2014 2013
Total revenues, incl.: 60,535 59,608 57,444
Transmission fees 58,227 57,481 55,258
Connection fees 1,862 1,720 1,884
Energy sales 0 0 0
Other revenues 446 407 302
Expenses -55,114 -54,499 -54,047
Gross profit 5,421 5,109 3,397
Administrative expenses -955 -854 -886
Commercial expenses 0 0 0
Profit (loss) on sales 4,466 4,255 2,510
Interest receivable 291 174 90
Interest payable -870 -942 -732
Income from shareholding 161 96 282
Other revenues 5,864 5,887 4,032
Other expenses -6,707 -7,120 -5,032
Pre-tax profit 3,205 2,351 1,149
Income tax and other payments -739 -344 -736
Net profit (loss) 2,466 2,007 468
EBITDA* 8,453 7,409 5,486
* EBITDA = Pre-tax profit – interest payable + depreciation and amortization
2_7

12M 2015 expenses on loss compensation have totaled RUB 8,735.2 mn (16% of overall expenses). Absolute YoY cut totaled RUB 229.1 mn, affected by changes in load loss prices and unregulated wholesale market price. 12M 2015 payments to FSK have reached RUB 13,903.5 mn (25% of overall expenses). Absolute decrease on FY2014 has totaled RUB 957.7 mn, subject to changed unregulated price for normative losses. 12M 2015 payments to other grid companies have totaled RUB 14,402.5 mn (26% of overall expenses). Payments increased RUB 913.1 mn YoY due to the revised tariffs and incorporation of new local energy distributors.

RUB 262 mn YoY upshift in depreciation and amortization of fixed and intangible assets was influenced by commissioning of new facilities as the Company’s investment program progressed. Wages and social benefits in 2015 totaled RUB 9,832 mn, contributing 18% to total expenses (+6% or RUB 528 mn YoY). The growth was due to increased minimal monthly tariff rate and consecutive indexation of production personnel wages since 01.07.2015. Other expenses totaled RUB 4,818 mn (9% of total expenses), consisting of tangible costs, production-related works and services, property rentals, insurance, third-party services and other expenses. Absolute YoY increase has totaled RUB 201 mn or 4%, affected by increased material charges and third-party services.

RECEIVABLES AND PAYABLES

Total receivables of the Company, minus bad debt reserve, at the beginning of the year, have totaled RUB 7,662 mn, reaching RUB 8,379 mn by the year-end. The upshift of other receivables made a major contribution to the changes of total receivables. Customer and purchaser receivables totaled RUB 6,964 mn (- RUB 67 mn or -1% YoY). Advances paid amounted to RUB 38 mn (- RUB 92 mn or -70% YoY). Other receivables totaled RUB 1,377 mn (+ RUB 876 mn YoY). The increase was due to conclusion of receivable assignment contracts.

As of 31.12.2015 As of 31.12.2014 As of 31.12.2013
Total receivables, incl.: 8,379 7,662 6,525
Customers and purchasers 6,964 7,031 5,811
Energy transmission 6,507 6,507 5,554
Bills receivable 0 0 0
Advances paid 38 130 82
Other receivables 1,377 501 632

Energy transmission receivables contributed most (78%) to the Company’s receivables. Overdue claim administration, performed by the Company during 2015, has resulted in 1,430 positive judgments worth RUB 7,236.8 mn and 91 negative judgments worth RUB 52.2 mn, namely:

  • Energy transmission: 128 positive judgments worth RUB 7,035.9 mn (RUB 6,680.1 mn principal and RUB 335.8 mn interest, incl. use of other’s monetary assets in line with Art. 395 of the Russian Civil Code, contract penalties, legal interest and other fines);
  • Technological connection: 50 positive judgments worth RUB 13.5 mn (RUB 10.5 principal and RUB 2.9 mn interest, incl. use of other’s monetary assets in line with Art. 395 of the Russian Civil Code, contract penalties, legal interest and other fines);
  • Other legal relationship (incl. no-contract consumption): 1,252 positive judgments worth RUB 187.3 mn (RUB 177.1 mn principal and RUB 10.2 mn interest, incl. use of other’s monetary assets in line with Art. 395 of the Russian Civil Code, contract penalties, legal interest and other fines).

Therefore, a share of satisfied claims of the Company with regard overdue receivables totaled 98%. To recover money upon positive judgments in 2015 there were RUB 1,933.7 writs of execution, RUB 1,211.6 mn or 62% redeemed.

As of 31.12.2015 As of 31.12.2014 As of 31.12.2013
Total payables, incl.: 9,671 8,775 7,253
Trade liabilities 5,888 4,069 4,018
Bills payable   0 0
Taxes and levies 790 705 296
Advances received 1,746 2,484 1,888
Other payables 1,247 1,517 1,051

Payables in 2015 grew RUB 896 mn YoY and as of 31.12.2015 totaled RUB 9,671 mn. Payables underwent the following changes:

  • trade liabilities increased RUB 1,819 mn due to RUB 410 mn liability owed to developing companies, RUB 34 mn owed to repair firms, RUB 612 mn owed to electricity transmission suppliers, RUB 594 mn owed to electric and thermal power suppliers to compensate losses, RUB 169 mn owed to other suppliers and contractors. The uplift was caused by CIW, performed in line with the investment program; increased liabilities owed to regional grid operators due to bad repayment discipline of last-resort providers and energy sales companies operating in the same area; recognition of claims with regard to 2013-2014 losses;
  • advances received totaled RUB 1,746 mn (- RUB 738 mn or -30% YoY). The cut was impacted by reduced advances with regard to technological connection, energy transmission and other advanced line transfer compensations.
  • Taxes and levies increased RUB 85 mn YoY and as of 31.12.2015 totaled RUB 790 mn.
  • Other payables totaled RUB 1,247 mn or - RUB 270 mn on 2014. This reduction was due to decreased long-term connection advances and increased short-term liabilities.

CREDIT PORTFOLIO

Loans and borrowings of the Company as of 31.12.2015 totaled RUB 13.7 bn.

Срок обязательства 31.12.2013 31.12.2014 31.12.2015 (2015/2014) (2015/2014)%
Short-term loans and borrowings - 1,933,760 7,400,000 + 5,466,240 +3.8%
Incl. bonds - - 3,000,000 + 3,000,000 100%
Interest arrears 161,117 167,748 188,511 + 20,763 +12%
Long-term loans and borrowings 12,231,733 10,297,973 6,297,973 - 4,000,000 -0.39%
Incl. bonds 3,000,000 3,000,000 1,600,000 - 1,400,000 -0.47%
TOTAL 12,392,850 12,399,482 13,886,484 +1,487,002 +12%

By the year-end the credit portfolio consists of long-term and short-term loans and borrowings. The Company has no credit contracts, with principal debt over 5% of book asset value. Liabilities under each contract are discharged by the Company on time. Key creditors are largest state-controlled banks. As of 31.12.2015 the weighted average interest rate of the Company’s credit portfolio totaled 9.08% p.a. By the year-end the Company has achieved the set debt limits and retained its A-level credit profile.

Bonds

During the reported period the Company had 2 exchange-traded bonds: series BO-01 worth RUB 3.0 bn and series BO-02 worth RUB 1.6 bn. BO-01 bonds were placed on MICEX on 31.01.2013, with maturity ending on 28.01.2016. Coupon rate was set at 8.4% p.a. for the entire maturity. A coupon yield for each coupon period is RUB 41.88 per one bond. BO-02 bonds were placed on MICEX on 27.11.2015. The issue maturity is 10 years, designated offer due 7 years after the effective date and redemption offer due 4 years upon holders’ consent. 1-14 coupon rates were set at 11.58% p.a., equal to coupon yield for each coupon period at RUB 57.74 per one bond. In 2015 IDGC of Urals (OAO) has discharged its bond-related liabilities in full.

IDGC of Urals (OAO) has issued the following securities:

Series ID number Nominal value Maturity
BO-01 4B02-01-32501-D RUB 3.0 bn 1,092nd day after the effective date
BO-02 4B02-02-32501-D RUB 3.0 bn 3,640th day after the effective date
BO-03 4B02-03-32501-D RUB 3.0 bn 3,640th day after the effective date
BO-04 4B02-04-32501-D RUB 4.0 bn 3,640th day after the effective date
BO-05 4B02-05-32501-D RUB 5.0 bn 3,640th day after the effective date

Registered exchange-traded bonds series BO-03-05 were not placed during 2015.

FINANCIAL STANDING OF THE COMPANY

31.12.2015 31.12.2014 31.12.2013
Liquidity and instant solvency ratios
Absolute liquidity ratio 0.18 0.20 0.12
Current liquidity ratio 0.63 0.79 0.92
Turnover and efficiency ratio
Receivables/Payables growth ratios 0.99 0.97 1.35
Total receivables/Total payables 0.87 0.87 0.90
Financial soundness indicators
Equity/Total Assets 0.54 0.53 0.56
Total Debt/EBITDA 1.64 1.67 2.24
Performance indicators
ROE 7.23 6.24 1.51
ROTA 5.02 3.97 2.17
EBITDA margin 13.96 12.43 9.65

Liquidity ratios demonstrate how a firm can use current assets to discharge its short-term liabilities. Absolute liquidity ratio by the year-end totaled 0.18 to show that cash and short-term financial investments cover 18% of short-term liabilities of the Company. Current liquidity ratio declined 0.16 YoY due to increased liabilities as a result of conversion of long-term loans and borrowings into short-term ones as their maturity drew to a close.

Financial soundness indicators expose how a firm depends on borrowings and determine risk level for firm’s creditors. Equity/Total Assets ratio demonstrate how equity contributes to total assets. By the year-end the ratio almost mirrors 2014 figures. Total debt/EBITDA is a leverage ratio and expose how a firm can use operating cash flows to discharge its liabilities. By the year-end the ratio is 1.64, outperforming generally accepted value (up to 3.0). Improved financial result of the Company has a positive impact on ratio trend.

In comparison to 2014 efficiency ratios remained almost the same. Receivables growth rate matches payables growth rate, receivables contributing 16% to the revenues of the Company. The Company is able to fulfill its liabilities without losing its financial stability.