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RusHydro Group1Q 2017 IFRS results &
market update
June 7, 2017
This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any securities of the Company in any jurisdiction, nor shall it or any part of it nor the fact of its presentation, communication or distribution form the basis of, or be relied on in connection with any contract or investment decision.
These written materials are not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities act of 1933, as amended. Any public offer or distribution of securities to be made in the United States will be made in accordance with a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements. The Company has not registered and does not intend to register any portion of any offering in the United States or conduct a public offering of any securities in the United States.
This presentation is only addressed to and directed at persons in member states of the European Economic Area who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) ("Qualified Investors"). In addition, in the United Kingdom, this presentation is being distributed only to, and is directed only at, (i) Qualified Investors who have professional experience in matters relating to investments who fall within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") and Qualified Investors falling within Article 49(2)(a) to (d) of the Order, and (ii) Qualified Investors to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). This presentation must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment activity to which this presentation relates is available only to (i) in the United Kingdom, relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, Qualified Investors, and will be engaged in only with such persons.
The distribution of this presentation in other jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions.
No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness. No representation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents.
This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements and reflect the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the actual results of operations, financial condition and liquidity of the Company and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation.
By attending this presentation, you agree to be bound by the foregoing limitations.
2
Disclaimer
I. Key highlights & operating results
II. Financial results
IV. Market update
III. Segment review
Key highlights of 1Q 2017
4
Key figures
~187RUB bn
Financial debt of RusHydro Group after
repayment of RUB 55 bnof RAO ES East Subgroup
debt
4.66kop./share
Dividend for 2016 approved by the BoD in
May 2017
-2.0%reduction of
manageable cash costs in 1Q 2017
in real terms
55RUB bn
Equity raised from VTB to reduce the debt of RAO ES East subgroup
29.1TWh
Total RusHydro Group output in 1Q’17 2016
(-5.4%)
30.2RUB bn
Consolidated EBITDA in 1Q’17
(+11.1% or 14.4% on comparable basis)
18.8RUB bn
Consolidated net profit in FY’16
(+27.9%)
9.6RUB bn
Fair value of 5-year non-deliverable forward contract with VTB in
respect of 55 bn shares
RAO ES East subgroup debt
Operating efficiency
Dividends
Organizational development
Operations
Corporate governance
PJSC RusHydro and VTB sign 5-year forward agreement. RUB 55 bn raised from VTB used in full to repay the debt of Far Eastern subsidiaries.
Reduction of operating and SG&A expenses on track: only 0.6% growth in total OPEX, comparable (ex. ESC Bashkortostan) manageable cash OPEX fell 2% in 1Q’17
RusHydro management commits to payout of 50% of net profit in dividends in 2017
As of April 1, 2017, management authority for PJSC RAO ES East is transferred to PJSC RusHydro; HQ of PJSC RAO ES East in Moscow was dismantled
• Total electricity output of the Group in 1Q’17 – 29.1 TWh (-5.4)%• RusHydro expects 2017 operational results mostly inline with 2016
Start of the first 3-year period of the new long-term incentive plan (LTIP) for top management, based on 3 KPIs (TSR, FCF, innovations)
1
2
3
4
5
6
RusHydro Group 1Q 2017 operating results
5
9 613 8 673
4 051 4 694
1Q 2016 1 Q 2017
Hydro
CHP and geothermal9 799 8 729
1 5991 204
5 6435 788
1Q 2016 1Q 2017
Siberia
South
Center
-7.7% -2.2%
European part of Russia and Far East (price zones), GWh Far East (non-price and isolated zones), GWh
Total electricity production by power plants of RusHydro Group in 1Q 2017 – 29,1 TWh (-5.4%).
Total production by hydropower plants (HPPs) and pump storage hydropower plants (PSHPPs) of RusHydro Group in 1Q 2017 – 20.5 TWh (-3.4%), production by thermal and geothermal plants of the Group – 8.7 TWh (-9.8%).
Power plants of RAO ES of East subgroup in 1Q 2017 produced 9.3 TWh (-9.2%), total heat output by the thermal plants was 12,102 thousand GCal (-9.2%).
Output of Boguchanskaya hydropower plant in 1Q 2017 – 3.2 TWh (+1.6%).
6
Hydro production trends 2014-2017
2 000
2 500
3 000
3 500
4 000
4 500
5 000
5 500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014
2015
2016
2017
Long-run average
200
400
600
800
1 000
1 200
1 400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014
2015
2016
2017
Long-run average
800
1 000
1 200
1 400
1 600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014
2015
2016
2017
Long-run average
Center of Russia, GWh Siberia, GWh
South of Russia & N. Caucasus, GWh Far East, GWh
1 000
1 500
2 000
2 500
3 000
3 500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014
2015
2016
2017
Long-run average
7
Water inflows to major reservoirs in 2014-2017
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
J F M A M J J A S O N D
2014 2015 2016 2017 Long-term average
0
100
200
300
400
500
600
700
J F M A M J J A S O N D
2014 2015 2016 2017
0
1 000
2 000
3 000
4 000
5 000
6 000
J F M A M J J A S O N D
2014 2015 2016 2017
-1 000
1 000
3 000
5 000
7 000
9 000
11 000
13 000
15 000
17 000
J F M A M J J A S O N D
2014 2015 2016 2017
Water inflow to reservoirs of the Volgo-Kama cascade, m³/s Water inflow to the Sayano-Shushenskaya HPP, m³/s
Water inflow to the Chirkeyskaya HPP, m³/s Water inflow to the Zeyskaya HPP, m³/s
8(1) Day ahead selling prices data from the Administrator of the trading system (ATS)
Electricity spot market overview
Non-indexation of gas tariffs for industrial consumption in 2016, expected increase as of 2H 2017 – 3%.
Increase in cross-flow between the 1st and 2nd price zones after removal of restrictions in 2014 led to long-term growth of average prices in Siberia.
Full commissioning of 2,997 MW Boguchanskaya HPP (50/50 JV of RusHydro and RUSAL) with electricity production of ~14 TWh in 2016 and projected ~17 TWh in 2017 has no pronounced effect on pricing in Siberia.
Low demand growth and general overcapacity on the market coupled with below-inflation hikes in gas tariffs (3% in 2017-2018 according to Ministry of Economy) will lead to stabilization of unregulated power prices in European Russia in the medium-term.
1002
1043
1 254
1 1361116
1204
1233
1120 1122
1224
1184 1179
11471167
1298
1204
1180
1104
1164 1154
1202
800
900
1000
1100
1200
1300
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2013 2014 2015 2016 2017
777764
639
677
723
662
762
983
1026
895
854
922
994
800
714
913
994
718
789
914
866
600
700
800
900
1000
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2013 2014 2015 2016 2017
Europe and Urals (1st price zone), RUB/MWh (1) Siberia (2nd price zone), RUB/MWh (1)
Regulated market overview
9
119 118 124 132125 113 113 111 110 115
8282
5998
179 189 182 186 190 191
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
KOM - Europe (1) KOM - Siberia (1)
13.4 13.5 13.7
15.5
17,9
15.8 15.9 16.0
18.5
22,2
2013 2014 2015 2016 2017
Europe Siberia
112,5 114,4 116,4124,8 127,5
66,1
42,4 42,8 42,9
2013 2014 2015 2016 2017
Europe Siberia
2 247 2 3132 076 2 066
2 3042 104
1 859
DPM - Europe
Electricity tariffs Heat tariffs
2016/2015 2017/2016 2016/2015 2017/2016
DGK 9.4% 5.6% 7.6% 4.0%
DEK 7.3% 7.4% - -
Kamchatskenergo 8.9% 12.1% 14.4% 8.6%
YuESK 6.4% -0.8% 9.5% 5.1%
Magadanenergo 19.5% 14.4% 9.1% 5.4%
Chukotenergo 8.1% 11.4% 5.7% 6.2%
Sakhalinenergo 4.8% 1.2% 7.7% -2.5%
Yakutskenergo 5.9% 10.8% 9.6% 11.4%
Sakhaenergo 10.0% 10.1% 8.9% 11.4%
Peredvizhnaya energetika 5.2% 22.3% - -
(1) According to the rules of the long-term capacity selection, KOM prices for 2017-2019 will be hiked to CPI of the preceding year minus 1 pp
Capacity prices in pricing zones, ‘000 RUB/MW/month (1) Weighted avg capacity tariffs in pricing zones, ‘000 RUB/MW/month
Weighted average electricity tariffs in pricing zones, RUB/MWh Heat and electricity tariffs of RAO ES of the East
I. Key highlights & operating results
II. Financial results
IV. Market update
III. Segment review
11
1Q 2017 financial results review(1)
1Q 2017 EBITDA – RUB 30.2 bn (+11.1%), comparable EBITDA growth – 14.7%;
Underlying (adjusted) net profit(2) in 1Q 2017 – RUB 20.4 bn (+21%), reported net profit – RUB 18.8 bn (+25%);
Only 0.6% increase in comparable operating costs and 2% decrease in comparable manageable cash costs driven by cost optimization and fuel savings in RAO ES East Subgroup due to significant increase in hydro output;
Weighted-average EPS in 1Q 2017 increased to RUB 0.0468 per share vs 0.0387 in 1Q 2016.
Key growth factors: ↗ growth of capacity sales from newly commissioned Zelenchukskaya hybrid HPP;↗ 100% liberalization of capacity sales from hydro in Siberia to 100% as of May 1, 2016;↗ implementation of rigorous cost cutting in the Group;↗ fuel savings resulting from significant increase in hydro output in the Far East;↗ increase in subsidies in the Far East.
Negative factors affecting profitability: ↘ divestment of LLC ESC Bashkortostan in Dec 2016
(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information(2) Net profit is adjusted for effects of impairment of fixed assets, accounts receivable, and loss on disposal of fixed assets.
Revenue, bn RUB Operating expenses, bn RUB
EBITDA, bn RUB Net profit, bn RUB
Key highlights
104.4 98.8 95.1 98.8
107.7 103.4 98.4 103.4
1Q'2016 1Q'2017 1Q'2016(excl. ESCB)
1Q'2017
Operating revenue Government grants
87.0 78.9 78.4 78.9
1Q'2016 1Q'2017 1Q'2016(excl. ESCB)
1Q'2017
27.2 30.2 26.4 30.2
25.3% 29.3% 26.8%29.3%
1Q'2016 1Q'2017 1Q'2016(excl. ESCB)
1Q'2017
EBITDA EBITDA margin
15.0 18.8 14.7 18.8
16.920.4
16.420.4
1Q'2016 1Q'2017 1Q'2016(excl. ESCB)
1Q'2017
Adjustments Net profit (reported) Net profit (adj.) (1)
30.2
-0.2 -0.6
-1.8
-0.1 -0.1
26.4
4.9
0.21.5
EBITDA 1Q'16(excl. ESCB)
Revenue Other operating income Purchased electricityand capacity
Employee benefitexpenses
Electricity distributionexpenses
Fuel expenses Third parties services Other expenses EBITDA 1Q'17
30.2
-4.4-0.2
-0.4
0.0 -0.1
27.2
5.7
0.9
1.5
EBITDA 1Q'16 Revenue Other operating income Purchased electricityand capacity
Employee benefitexpenses
Electricity distributionexpenses
Fuel expenses Third parties services Other expenses EBITDA 1Q'17
12
1Q 2017 EBITDA: cost analysis
+11.1%
+14.7%
1Q EBITDA – cost analysis
Comparable 1Q EBITDA – cost analysis (1)
(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information
78.9
-0.2
-1.5
-0.4
-0.4
78.4
0.5
1.8
0.1
0.2
0.4
0.0
OPEX 1Q'16 (excl. ESCB)
Employee benefit expenses
Purchased electricity and capacity
Fuel costs
Electricity distribution expenses
Third party services
Depreciation
Taxes other than on income
Other materials
Water usage expenses
Other expenses
OPEX 1Q'1778.9
-5.7
-1.5
-0.9
-0.5
0.0
-0.4
87.0
0.4
0.0
0.2
0.3
OPEX 1Q'16
Employee benefit expenses
Purchased electricity and capacity
Fuel costs
Electricity distribution expenses
Third party services
Depreciation
Taxes other than on income
Other materials
Water usage expenses
Other expenses
OPEX 1Q'17
73.1
-0.1 -0.9
72.3
0.50.8
0.5
1Q'16(excl. ESCB)
PJSC RusHydro ESC RusHydroSubgroup
RAO ES EastSubgroup
Other segments Misc &undistributed
operations
1Q'17
73.1
-8.5-0.980.7
0.5
0.8 0.5
1Q 2016 PJSC RusHydro ESC RusHydroSubgroup
RAO ES EastSubgroup
Other segments Misc &undistributed
operations
1Q 2017
13
Operating expenses in 1Q’2017 (1)
+0.6%Total
growth of expenses
+1.0%CPI in Russia in Jan-Mar
2017
-2%decrease in manageable
groups of cash costs
(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information(2) Operating expenses excluding depreciation and other non-cash items
1Q’2017 operating expenses
Comparable RusHydro Group OPEX in 1Q’2017 – segment analysis (RUB bn) (2) Comparable RusHydro Group OEPX in 1Q’2017 – segment analysis (RUB bn) (2)
Comparable 1Q’2017 operating expenses
-9.3%Total
decrease in expenses
RusHydro Group debt profile (1)
39% – state banks
83% – fixed rate
91% – RUB denominated
14
84
28
69
17
2212
Cash & Deposits May-Dec2017
2018 2019 2020 2021-2041
39% – state banks
83% – fixed rate
91% – RUB denominated
Sourse
Currency
Interest 79% – fixed rate
93% – RUB denominated
53% – state banks 36% – public instruments
11% –other
Source
PJSC RusHydro 104.9
RAO ES East Subgroup
38.1
BoGES JV (Boguchansk HPP)
guarantee 26.5
Other8.2
Liability under the forward contract
with VTB Bank9.3 (3)
RUB 187 bn
(1) As of Apr 30, 2017(2) Debt excluding BoGES guarantee (RUB 26.5 bn) and lease payments (RUB 0.4 bn), after repayment of RUB 2.7 bn Sberbank loan and EUR 87 mn loan from Credit Agricole. (3) Liability under the 5-year forward contract with VTB recorded as a long-term derivative financial instrument at fair value through P&L in the amount of RUB 9,609 mn. The fair value of the forward contract
at the initial recognition of the instrument was RUB 10,013 million and it was recorded within equity as the result of the shareholder transaction. Subsequent changes in the fair value of the non-deliverable forward contract is recorded within profit or loss.
Total financial debt as of Apr 30, 2017, amounted to RUB 187 bn
A low interest and FX risk debt portfolio with ca. 93% of the facilities being RUB-denominated and ca. 79% bearing fixed interest rate
Strong relationship with state-owned banks, that currently account for ca. 53% of the debt book
Effective rouble interest rate of ca. 9.3% and comfortable weighted-average duration of debt at the level of 3 yrs
In March 2017, RusHydro reduced debt of RAO ES East subgroup by RUB 55 bn with equity raised from VTB Bank
In May-June 2017, RusHydro repayed RUB 2.7 bn Mosprime-linked loan from Sberbank and EUR 87 mn loan from Credit Agricole
Key highlights
Transparent debt composition (RUB bn) Transparent debt composition (RUB bn)
Debt repayment profile (2) (RUB bn)
I. Key highlights & operating results
II. Financial results
IV. Market update
III. Segment review
66.6
-0.5
65.0
0.3
1.7 0.0
Electricity sales1Q'16
(excl. ESCB)
PJSC RusHydro ESC RusHydroSubgroup
RAO ES EastSubgroup
Other Electricity sales1Q'17
66.6
-0.5
-8.974.3
1.7 0.0
Electricity sales1Q'16
PJSC RusHydro ESC RusHydroSubgroup
RAO ES EastSubgroup
Other Electricity sales1Q'17
98.8
-0.1
95.1
1.61.7 0.5
Revenue 1Q'16(excl. ESCB)
Electricity sales Heat sales Capacity sales Other Revenue 1Q'17
98.8
-7.7
-0.1104.4
1.7 0.5
Revenue 1Q'16 Electricity sales Heat sales Capacity sales Other Revenue 1Q'17
98.8
95.1
1.1 0.4
2.1 0.1
Revenue 1Q'16(excl. ESCB)
PJSC RusHydro ESC RusHydroSubgroup
RAO ES EastSubgroup
Other Revenue 1Q'17
98.8
-8.9
104.4
1.1
2.1 0.1
Revenue 1Q'16 PJSC RusHydro ESC RusHydroSubgroup
RAO ES EastSubgroup
Other Revenue 1Q'17
1Q 2017 revenue: segment review (1)
16(1) Revenue only from external parties (intergroup sales are excluded)(2) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information
-5.4% +3.8%
-5.4% +3.8%
-10.3%+2.4%
1Q’17 revenue – segment review Comparable 1Q’17 revenue – segment review (2)
1Q’17 revenue – sales review Comparable 1Q’17 revenue – sales review (2)
1Q’17 electricity sales Comparable 1Q’17 electricity sales (2)
30.2
26.4
0.10.4 2.6
0.5 0.2
EBITDA 1Q'16(excl. ESCB)
PJSC RusHydro ESC RusHydro Subgroup RAO ES East Subgroup Other segments Misc &undistributed
operations
EBITDA 1Q'17
30.2
-0.4
27.2
0.1 2.6
0.5 0.2
EBITDA 1Q'16 PJSC RusHydro ESC RusHydro Subgroup RAO ES East Subgroup Other segments Misc &undistributed
operations
EBITDA 1Q'17
17
1Q 2017 EBITDA: segment review
• Stable pricing environment supporting declining hydropower output (-7.7% in 1Q’17 in price zones)
• 100% liberalization of capacity sales from hydro in Siberia
• Launch of 140 MW Zelenchukskaya hybrid HPP under CSA (DPM) contract
• Rigorous cost-cutting
• Increase in end-user tariffs
• Lower load of the most inefficient CHPs due to increased hydro output
• Substantial fuel savings
• Increase in government subsidies
+11.1%
+14.7%
1Q’17 EBITDA – segment review
Comparable 1Q’17 EBITDA – segment review (1)
Disposal of LLC ESC Bashkortostan to Inter RAO Group in Dec 2016
(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information
13.9 14.318.6 18.7
68.6%67.6%
1Q 2016 1Q 2017
Operating profit
EBITDA
EBITDA margin, %
8.59.0
1Q 2016 1Q 2017
24.3 25.3
27.1 27.7
1Q 2016 1Q 2017
Revenue, external Revenue, intergroup
Segment review (1/3) – PJSC RusHydro
18
+2.1%
+5.4%
+0.7%
+3.0%
Revenue, bn RUB
Operating expenses, bn RUB
Operating profit & EBITDA, bn RUB
RusHydro’s average achieved selling spot power prices in European Russia in 1Q’17 – RUB 1,271/MWh (+0.5%); in Siberia in 1Q’17 – RUB 900/MWh (-3.4%).
3.4% decrease of electricity output from hydropower plants and 7.7% decline in hydropower output in price zones in 1Q’17 as compared to 1Q’16 due to high base effect of 2016 and average water inflows in 2017.
Operating expenses increased by 5.4% mostly on the back of higher electricity purchase.
Increase in capacity sales due to launch of 140 MW Zelenchukskaya hybrid HPP in the South of Russia contracted under CSA (DPM) agreement.
Increase in capacity prices of the competitive capacity auction (KOM) for the hydropower plants of the second price zone following full liberalization of capacity market for hydro in Siberia with increase of capacity sold at KOM price from 80% to 100% since May 1, 2016;
3% p.a. tariff hike in regulated gas in 2017-2018 should give support to unregulated power prices in European Russia in the medium-term.
Key highlights
5.5 8.38.2 10.8
15.6%
19.7%
1Q 2016 1Q 2017
Operating profit
EBITDA
EBITDA margin, %
47.8 48.6
1Q 2016 1Q 2017
52.7 54.7
52.854.8
1Q 2016 1Q 2017
Revenue, external Revenue, intergroup
Segment review (2/3) – RAO ES East Subgroup
19
+4.0%
+1.7%
Electricity generation by the plants of RAO ES East in 1Q 2017 –9,291 GWh (-9.2%) due to higher hydro electricity output by Zeyskaya and Bureyskaya hydropower plants;
Significant fuel savings resulting from substitution of fossil fuel power generation by hydro due higher electricity generation by hydropower plants of the Far East;
Increase of 5.6% and 7.4% in electricity tariffs for JSC DGK (ca. ¾ of Subgroup’s electricity generation volumes) and PJSC DEK respectively compared to 2016;
Heat output was down 9.2% in 1Q’17 to 12,102 ths Gcal on higher temperatures;
Increase in government grants mostly due to compensation of expenses related to electricity purchased in Chukotka in 2016.
Key highlightsRevenue, bn RUB
Operating expenses, bn RUB
Operating profit & EBITDA, bn RUB
+31.0%
+52.4%
0.6 0.4 0.0 0.41.0 0.6 0.2 0.6
3.8%3.3%
0.9%
3.3%
1Q 2016 1Q 2017 1Q 2016(excl. ESCB)
1Q 2017
Operating profit EBITDA EBITDA margin, %
25.216.7 16.8 16.7
1Q 2016 1Q 2017 1Q 2016(excl. ESCB)
1Q 2017
Operating expenses
26.217.3 17.0 17.3
1Q 2016 1Q 2017 1Q 2016(excl. ESCB)
1Q 2017
Segment review (3/3) – ESC RusHydro subgroup (electricity retail) (1)
20
+2.0%-34%
-0.4%-33.7%
Revenue, bn RUB
Operating expenses, bn RUB
Operating profit & EBITDA, bn RUB
Retaining profitability levels on the back higher operational efficiency even in continuing situation of insufficient retail tariffs;
Electricity output by RusHydro Group’s retail companies in 1Q 2017 amounted to 5,945 GWh (-7%), excluding the results of LLC ESC Bashkortostan in 2016;
The decline was mostly driven by PJSC Krasnoyarskenergosbytdecreased its output due to a number of consumers switching to wholesale electricity purchases, higher temperatures and other factors;
In December 2016, the Group completed the transaction to divest 100% of LLC ESC Bashkortostan to Inter RAO Group. The transaction amount was RUB 4.1 bn. By December 31, 2016, the Group received a tranche in the amount of RUB 3.6 bn and deferred consideration in the amount of RUB 0.5 bn that was actually received by the Group in February 2017. As of December 31, 2016, the Group recognized gain on the sale of LLC ESC Bashkortostan in the amount of RUB 3.048 bn in other operating income.
Key highlights
+257.6%-43.7%-35.2%
(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information
I. Key highlights & operating results
II. Financial results
IV. Market update
III. Segment review
Key drivers of 2017 financial performance
22
26
3744
64
79 7373
100
26
24 13
2009 2010 2011 2012 2013 2014 2015 2016 2017
Operational EBITDA (Rub bn) Targeted investment component (Rub bn)
Key positive factors in 2017
↗ Maintaining high operational results of 2016 on the back of favorable hydrological conditions;
↗ Substitution of expensive thermal generation by hydro output due to high inflows in the Far East;
↗ Commissioning of Zelenchukskaya hybrid HPP-PSHPP and Gotsatlinskaya HPP under capacity supply agreements (DPM);
↗ Reduced interest payments after repaying RUB 55 bn of RAO ES of East Subgroup;
↗ Commissioning of Nizhne-Bureyskaya HPP in 2H’17;↗ 100% liberalization of hydro capacity in Siberia;↗ Integration of headquarters and reduction of non-
operational personnel;↗ Successful cost optimization.
Negative factors affecting profitability/risks in 2017
↘ Reduced revenue after sale of LLC ESC Bashkortostan and dams of Angara cascade (PJSC Irkutskenergo);
↘ Risk of reduced inflows to main reservoirs, dry summer;
↘ Stagnation of spot electricity prices due to low demand and non-indexation of gas tariffs;
↘ Increase in fuel costs in case of increased utilization of thermal capacity and interruption in fuel supply;
↘ Increase in non-controllable costs.
23
Best dividend story and practice among Russian SOE utilities
2.5 2.53.7
5.26.0
15.0
19.9
2011 2012 2013 2014 2015(25% of
IFRS profit)
2016(50% of RAS
profit)
2017(50% of
IFRS profit)
2011 2012 2013 2014 2015 2016(2)
Krasnoyarskaya HPP 0.0% 4.9% 0.0% 0.0% 0.0% 0.0%
Quadra 1.9% 2.6% 0.0% 0.0% 0.0% 0.0%
Unipro (EOn Russia) 0.0% 2.6% 10.8% 16.2% 8.8% 7.2%
RusHydro 0.6% 1.0% 1.3% 2.3% 2.5% 6.5%
Irkutskenergo 0.4% 0.8% 3.3% 5.4% 7.7% 0.0%
Mosenergo 0.6% 1.7% 2.2% 4.6% 1.0% 3.6%
InterRAO 0.0% 0.0% 0.0% 0.0% 0.1% 0.8%
Enel Russia 0.0% 0.0% 0.0% 5.0% 9.0% 0.0%
TGK-1 0.2% 0.5% 1.7% 2.6% 4.8% 4.9%
OGK-2 0.3% 0.1% 0.0% 0.0% 2.9% 2.1%
T Plus (KES Holding) 0.0% 0.0% 0.0% 0.0% 0.00% 0.0%
0.86 0.79 0.961.36
1.56
3.88
4.66
0,6% 1,0%
1,3%
2,3% 2,5%
6.5%
5.6% (3)
0,5%
1,5%
2,5%
3,5%
4,5%
5,5%
6,5%
7,5%
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
5
5,5
6
2011 2012 2013 2014 2015(25% of
IFRS profit)
2016(50% of
RAS profit)
2017(50% of
IFRS profit)
DPS, kop.
DY, %
Board of Directors of RusHydro recommended the AGM to pay out 50% of 2016IFRS net profit or 4.66 kopecks per share.
As of 2015, RusHydro dividend policy provides for dividend payment based onconsolidated IFRS net profit.
2016 dividends based on RAS net profit were determined in conformity withGovernment order regarding SOE dividends, providing for payout of 50% of thehighest resulting net profit (under IFRS of RAS).
Dividends to be paid out reduces RusHydro liabilities (and effective rate) underthe forward contract with VTB. 50% of net profit payout reduces annual forwardrate by more than 4%(1).
Dividends (RUB bn)
DPS and dividend yieldDividend yield of the Russian generating companies
(1) Dividends not only would fully cover due quarterly payment on forward, but will also finance more than 40% of the next quarterly payment.(2) Calculated based on the date of announcement of recommendations on dividends by the Board of Directors.(3) Calculated based on close price on May 24, 2017 - date of announcement of recommendation on dividends by the Board of Directors.
RusHydro Group investment plan 2017-2022, RUB bn, including VAT
24
Adjustment primarily due to shift of launch and funding timelines of fossil fuel power projects in the Far East, as well as construction of small hydro(1).
(1) RusHydro has submitted 2 bids to a 2017 auction to award contracts for the construction of renewables : Krasnogorskayasmall HPP 1 & 2 with capacity 24.9 MW each (to be commissioned in 2021 and 2022)
26.1 21.728.8 24.5 27.5 27.9 27.7 28.6 26.3 27.6 26.0 26.8 24.9
23.721.9
30.327.7
16.225.3
4.6 6.5 2.41.3
20.9
12.5
23.4
21.3
5.0
19.0
1.3
30.8
21.9
31.240.5
24.9
33.6
18.8
21.9
18.620.6
18.921.0
20.1
4.8
3.8
3.5 4.1
3.0
3.5
2.5
2.8
2.8
3.1
2.62.2
2.0
106.3
81.8
117.2 118.1
79.6
109.8
53.6
61.1
47.653.7
47.551.3
47.0
2016plan
2016fact
2017old
2017new
2018old
2018new
2019old
2019new
2020old
2020new
2021old
2021new
2022plan
Other
RAO ES Subgroup (rehabiltation and new construction)
Priority projects in the Far East
New construction, HPPs, RusHydro and subsidiaries
Rehabilitation and modernization of HPPs, RusHydro and subsidiaries
Overall capacity commissioned in 2016 – 240.9 MW, including: • 140 MW – Zelenchukskaya hybrid hydro & pumped storage plant• 30.6 MW – Zaragizhskaya small hydropower plant• 70.3 MW – other capacity increase, including uprate from modernization
Overall capex limit of the Group for 2017 estimated at RUB 120 bn (including VAT)
Planned capacity increase in 2017 – 607.1 MW, including: • 193.5 MW – 1st phase of Yakutskaya TPP-2• 320 MW – Nizhne-Bureyskaya HPP• 93.5 MW – other capacity increase, including uprate from modernization
Evaluation of efficiency of forward contract
25(1) Number of RusHydro shares held by VTB is RUB 55 bn. Profit base for dividend distribution as of 2018 is indicated for calculation purpose only, and doesn’t constitute an officia l financial guidance.
2017 2018 2019 2020 2021
1 Effective forward rate 7.4%Forward nominal value p. 2 ∗ rate p. 6∗5+Commission p.3−dividends p.7+dividends outflow p.8
Forward norminal value p. 2/5
2 Forward nominal value, Rub mn 55 000
3 Commission for organizing the transaction, RUB mn 575
4 Key rate of the Central Bank (current level),% 9.25% 9.25% 9.25% 9.25% 9.25%
5 Forward margin, % 1.5% 1.5% 1.5% 1.5% 1.5%
6 Forward rate (p. 4 + p. 5), %9.25%+1.5%
=10.75%9.25%+1.5%
=10.75%9.25%+1.5%
=10.75%9.25%+1.5%
=10.75%9.25%+1.5%
=10.75%
7Dividends, paid to VTB, less income on dividends (VTB share in the capital 12.9%), RUB mn (1)
39 751*50%*12.9% - 13%=
2 231
50 000*50%*12.9% - 13%=
2 806
50 000*50%*12.9% - 13%=
2 806
50 000*50%*12.9% - 13%=
2 806
50 000 *50%*12.9% - 13%=
2 806
8
Dividends outflow due to sale of treasury shares (treasury stock after the transaction – 3.52% of charter capital), Rub mn
39 751*50%*3.52% - 13%=
609
50 000 *50%*3.52% - 13%=
766
50 000 *50%*3.52% - 13%=
766
50 000*50%*3.52% - 13%=
766
50 000 *50%*3.52% - 13%=
766
9Forward rate (for each year) adjusted for dividends and commission, %
(55 000*10.75%-2231+575+609)/
55000 = 8.8%
(55 000*10.75%-2806+766)/
55000 = 7.0%
(55 000*10.75%-2806+765)/
55000 = 7.0%
(55 000*10.75%-2806+765)/
55000 = 7.0%
(55 000*10.75%-2806+765)/
55000 = 7.0%
26
2017 outlook
Continued trend of strengthening financial stability and optimization of debt portfolio• Further optimization of borrowing costs and maintaining comfortable debt repayment schedule• Target net debt / EBITDA ≤ 2.0• RusHydro rating S&P upgrade in May 2017 to further strengthen company’s credit quality
Approval of RusHydro value growth program by the Board of Directors (expected in Sep’17) • Increase in operating revenue (optimization of management cost and investment projects, economically justified tariffs for the Far
East Federal district, return on investment) • Positive effect of the forward transaction with VTB
Concentration and utilization of internal resources for development • Increased operational efficiency on the basis of developed cost optimization plan • Investment program optimization – review of technical solutions and transfer of part of financing to later periods with maintaining
commissioning timeline of key facilities• Further optimization of portfolio of non-core assets and assets, not essential for main activity of the Group
New generation capacity commissioning and modernization of existing facilities• Commissioning of the 1st phase of Yakutskaya TPP-2 (194 MW), Nizhne-Bureiskaya HPP (320 MW), modernization and increase in
capacity of existing power plants (93.5 MW)• Increase in RusHydro group installed capacity in 2017 is expected at 607.1 MW
27
Preliminary 2017 disclosure and IR calendar
The dates are preliminary and subject to possible change
(1) The Annual General Shareholders Meeting is held no earlier than two months and no later than six months after the end of the fiscal year. (2) In accordance with the Federal law No. 282-FZ of December 29, 2012, from 2014 the dividend record date may not be earlier than 10 days, and may not be later than 20 days after, the date of
the resolution of the general shareholders meeting approving the payment of the dividend.
June 17-19 Renaissance Capital Investor Conference (Moscow)
June 20-21 VTB Capital Forum (London)
June 26 Annual General Meeting of Shareholders 1
July 10 Dividend record date (2)
July 20 1H 2017 operational results
July 31 1H 2017 RAS results
August 29 1H 2017 IFRS results
September 4-6 HSBC Investor Conference (London)
September 14 Morgan Stanley Power & Utility Summit (London)
October 20 9M operational results 2017
October 31 9M 2017 RAS results
November 13-14 Goldman Sachs CEEMEA 1x1 Conference (London)
November 29 9M 2017 IFRS results
December MOEX Forum (London)
Thomson Reuters Extel 2011:No.1 IR Team in Russian Utilities
Thomson Reuters Extel 2012:No.1 IR Team in Russian Utilities
IR contact detailstel.: +7 (495) 225 32 32
ext. 1607, 1319, 1304
Thomson Reuters Extel 2013: No.1 IR Team in Russian Utilities Best CFO, mid-cap (Russia), #1 Best IRO. mid-cap (Russia), #2 Best overall IR, mid-cap (Russia), #3
Thomson Reuters Extel 2014: No.1 IR Team in Russian Utilities Best IRO, Russian Utilities