Analysis of the Results of Company’s Financial and Economic Activities

By the results of 2015, revenues from the sales of products (services) amounted to RUB 35,704.2 mln, which is RUB 6,310.8 mln  (21.5 %) more than in 2014, including revenues from electric power transmission of RUB 34,403.0 mln (RUB 5,938.8 mln above the level of 2014). The net cost amounted to RUB 33,149.3 mln, which is RUB 3,230.5 mln  (10.8 %) above the level of 2014. Thus, the gross proceeds, as compared with 2014, increased by RUB 3,080.3 mln and in 2015 amounted to RUB 2,554.9 mln.

Profit before tax amounted to RUB 2,215.7mln, which is RUB 5,951.9 mln higher than in 2014.

By the results of 2015, the net profit of the Company amounted to RUB 1,452.5 mln  (RUB 5,084.8 mln above the level of 2013). This increase is due to growing revenue for the electricity transmission caused by net supplies growth.

Main Financial and Economic Indicators

Item No.

Indicator

2015

2014

2013

1

Sales proceeds from products (services), including:

35,704

29,393

33,904

1.1

from power transmission

34,403

28,464

30,505

1.2

from technological connection

1,213

848

3,336

1.3

from sales of electric power

0

0

0

1.4

from other activities

88

81

63

2

Net costs of products (services)

33,149

29,919

32,201

3

Gross profit

2,555

-525

1,702

4

Administrative expenses

0

0

0

5

Business expenses

0

0

0

6

Sale profit (loss)

2,555

-525

1,702

7

Interests receivable

479

634

475

8

Interests payable

-2,261

-1,801

-1,535

9

Income from participation in other organizations

0.06

0

0

10

Other income, total

6,851

3,039

1,601

11

Other expenses, total

-5,407

-5,084

-4,753

12

Before-tax income (loss)

2,216

-3,736

-2,509

13

Income tax and other payments

-763

104

30

14

Net profit

1,452

-3,632

-2,480

15

EBITDA*

7,670

-95

264

By the results of 2015 an increase in EBITDA was recorded as compared with its value in 2014.

Cost Structure

By the end of 2015 net costs (including administrative and business expenses) amounted to RUB 33,149 mln, which is RUB 3,230.5 mln higher than in 2014. Escalation of net costs increase is due to the increase of the electricity purchases to compensate for losses, the costs of services of distribution grid companies, the depreciation of fixed and intangible assets and other expenses.

Net Costs Structure (including administrative and business expenses) in 2015

Net Costs Structure (including administrative and business expenses) in 2015

By the results of 2015, the electricity purchases to compensate for losses amounted to RUB 6,482.8 mln (19.0 % of total expenditures). In absolute terms, as compared with 2014, the increase amounted to RUB 916.3 mln, which is due to the growth of the average cost for the electricity purchases to compensate for losses.

The cost of JSC FGC UES services amounted to RUB 4,801.3 mln (14 % of total expenditures). In absolute terms, as compared with 2014, the decrease amounted to RUB 235.5 mln, which is due to the reduction of actual net power flow.

By the results of 2015, the cost of services of distribution grid companies amounted to RUB 8,803.8 mln (27.0 % of total expenditures). As compared with the previous year the cost growth amounted to RUB 1,025.6 mln due to the increase of the amount of the electric power transmitted through the grids of related grid companies.

Depreciation of fixed and intangible assets increased, as compared with 2014, by RUB 717.9 mln due to the commissioning of fixed assets of the power grids complex of the Sochi Energy District as part of the preparation for the XXII Olympic Winter Games and XI Paralympic Winter Games 2014 in Sochi under the approved investment program of the Company.

Personnel costs in 2015 amounted to RUB 4,322.1 mln (13.0 % of total expenditures), which is RUB 68.8 mln (1.7 %) higher than at the end of 2014. The increased costs for this item were due to:

  • the addition of the tariff component amounts due to the indexation (from 01.12.2015) of the tariff rates (salaries) for industrial personnel to the level of the minimum monthly tariff rate set in accordance with the sectoral tariff agreement in the power sector of the Russian Federation in 2013-2015;
  • the changes in the system of the Company’s personnel motivation where it is necessary to reduce the level of the electric power losses in the power grids of PJSC Kubanenergo.

Other expenses in 2015 amounted to RUB 9,868.9 mln (17 % of total expenditures), which is RUB 737.5 mln higher than at the end of 2014. The main reason of the costs growth is increased costs on the technological connections to the grids of other companies in the amount of RUB 1,213.9 mln due to the recognition of the cost for the technological connection of 220 kV Buzhora SS to the grids of JSC FGC UES in December 2015.

Effectiveness Management Program, Reduction of Specific Operating Costs in Accordance with Directive of the Russian Federation No. 2303-P13 of 16.4.2015.

The reduction of managed operating costs in 2015 as compared with 2012 in order to implement the Strategy for the development of the Russian Federation power grid complex, approved by Decree of the Government of the Russian Federation No. 511-r of 03.04.2013 amounted to RUB 418 mln or 10.1 %.

In order to implement the Directive of the Russian Federation No. 2303-P13 of 16.4.2015 on the annual reduction of specific operating costs by not less than 2-3 % the reduction of special operating costs in 2015 as compared with the level of 2012 amounted to 207 million Rubles or 3.5 %.

Within the improvement of the operating efficiency the Company implemented the following measures:

  • measures related to the energy conservation and energy efficiency;
  • measures to improve the efficiency of operating activities;
  • measures to improve the efficiency of investment activities and procurement procedures;
  • measures on the productivity improvement;
  • measures related to other (non-core) activities.

In 2015, the specific costs per 1 c.u. at 2012 values equaled 6.48 ths RUB/c.u., which is 10 % reduction in operating expenses for the reporting period to the level of 2012.

This positive trend is the result of systematic work on optimization of the Company’s costs connected to the enterprise’s production activities.

Analysis of the Company Financial Status and Activity Results

Indicator/Year

As of 31.12.2013

As of 31.12.2014

As of 31.12.2015

Liquidity Ratio and Current Paying Capacity

Absolute liquidity ratio

0.95

0.44

0.12

Quick assets ratio

1.38

0.72

0.38

Current liquidity ratio

1.49

0.81

0.45

Current assets coverage ratio

0.33

-0.24

-1.26

Turnover and Efficiency Ratio

Accounts payable turnover ratio

-3.10

-2.50

-2.77

Growth rates correlation of accounts receivable and accounts payable**

1.11

0.79

1.21

Correlation of the total accounts receivable and accounts payable

0.42

0.33

0.40

Share of accounts receivable in the revenue

0.13

0.11

0.12

Financial Stability Ratio

Financial Independence Ratio

0.52

0.48

0.50

Total debt/EBITDA ratio

23.85

32.27

2.23

EBITDA/paid interests on debenture ratio

0.48

0.30

3.50

Business Efficiency Indicators

Return on equity (ROE), %

-9.95

-11.55

4.69

Return on total assets (ROTA) from revenue before taxes, %

-4.67

-5.92

3.52

EBITDA profitability, %

2.18

1.84

21.48

By the results of 2015, as compared with 2014 the liquidity ratio dropped due to:

  • the decrease in the amount of cash,
  • the increase in the amount of short-term debt capital due to the transfer of long-term loan amounts with maturity as of 31.12.2015, amounting to less than 12 months.

In 2015, turnover and efficiency ratios showed a positive trend. There was an increase in both accounts receivable and accounts payable; however, the upward rate of payables was lower, which determined the dynamics of the efficiency ratios.

The financial independence ratio increased by 0.02 as compared to 2014 and as of 31.12.2015, amounted to 0.50. By the results of 2015 the business efficiency indicators are positive due to the receipt of a positive financial result and decrease of the tax burden of the Company.


* In 2015, EBITDA was calculated in accordance with the following methodology:
EBITDA= Profit before tax + Interests payable + Depreciation.

** Calculated using the following formula: (line 1230 of the Balance Sheet (Form 1) for the reporting period / (line 1230 of the Form 1 for the previous period)/(line 1450 of the Form 1 for the reporting period  + line 1520 of the Form 1 for the reporting period)/(line 1450 of the Form 1 for the previous period  + line 1520 of the Form 1 for the previous period).