INTER RAO EES OAO : Inter RAO Group Released Consolidated IFRS Financial Statements for Full Year 2013

Inter RAO Group released consolidated financial statements for the full year 2013, prepared to International Financial Reporting Standards and audited by Ernst & Young.

* - Financial indicators are provided according to financial statements in billion rubles rounded to one decimal place. Percentages are calculated using resulting rounded values

Key factors and events that had material effect on the Group's financial performance:

• Acquisition of Bashkir Generation Company Group and Trakya Elektrik Üretim ve Ticaret A.Ş (Turkey) in 2012 Q4 that added 4.7 GW to installed power generation capacity of the Group
• Addition of more than 1.3 GW of new generation capacity under Capacity Delivery Agreements at Kharanorskaya TPP, Urengoyskaya TPP, Gusinoozyorskaya TPP, Dzhubginskaya TPP and other facilities at the end of 2012 and throughout 2013
• Price growth on the wholesale electricity market (10% in the first pricing zone and 1.3% in the second pricing zone)

Consolidated statement of comprehensive income

Group revenue increased by 19.1% (106.1 billion RUB) to 662.3 billion RUB.

Generation Segment achieved significant revenue growth, by 47.0 billion RUB (36.4%) to 176.2 billion RUB. This increase resulted from consolidation of Bashkir generation assets from November 2012 and additional proceeds from capacity sales due to addition of new CDA capacity (at Urengoyskaya TPP and Kharanorskaya TPP in the end of 2012; and at Gusinoozyorskaya TPP and Dzhubginskaya TPP in October and November 2013). Consolidated Group revenue from all Capacity Delivery Agreements in 2013 more than tripled to 10.6 billion RUB. Other factors with positive contribution to revenue growth included electric energy price growth on the Next-Day-Market (NDM), capacity price growth in the Competitive Capacity Allocation (CCA) segment, and assignment of involuntary generator status to Omskaya TPP-3 and TPP-4, Yuzhnouralskaya TPP and Verkhnetagilskaya TPP.

Revenue from Supply Segment increased by 45.1 billion RUB (12.6%) to 404.0 billion RUB due to increased average sales prices of electricity supply companies, and also due to integration of JSC Tomskenergosbyt whose revenue in 2013 Q4 was 2.4 billion RUB.

Growth of Turkey Segment revenue resulted from the acquisition of Trakya Elektrik Üretim ve Ticaret A.Ş in the end of 2012, whose 2013 revenue was 14.3 billion RUB compared to 1.7 billion RUB of revenue in December 2012.

Trading Segment revenue increased by 2.1 billion RUB (4.8%) to 46.2 billion RUB due to increased export of electricity to Finland, China and Mongolia, and increased import of electricity from Kazakhstan.

Operating expenses increased by 15.9% to 687.9 billion RUB.

Cost of purchased electricity and capacity increased by 28.1 billion RUB (12.9%) to 245.5 billion RUB due to growth of electricity and capacity prices.

In 2013 fuel costs increased significantly, by 39.0 billion RUB (39.7%) to 137.1 billion RUB, mostly due to addition of new power generation assets to the Group in 2012 Q4.

Transmission fees increased by 17.7 billion RUB (11.7%) due to increases in average prices of grid companies from January 1, 2013, and larger customer base.

Group EBITDA was 39.2 billion RUB, up 47.4%.

is attributable to Generation The Russian Federation Segment, which contributed 66.7%. This sector experienced 99.6% (15.3 billion RUB) growth due to addition of new CDA capacity to Urengoyskaya TPP and Kharanorskaya TPP in the end of 2012, and to Gusinoozyorskaya TPP and Dzhubginskaya TPP in October 2013, and also due to integration of Bashkir power generation assets into the Group in the end of 2012.

EBITDA from Supply Segment increased by 0.8 billion RUB (12.3%) and represented 15.3% of consolidated EBITDA. Growth of this segment is primarily attributable to multiple cost optimizations and increased sales of additional services.

EBITDA from Trading Segment decreased by 1.5 billion RUB (33.3%) due to unfavorable pricing environments at external markets and represented only 6% of consolidated EBITDA.

EBITDA from International Assets Segment increased by 0.4 billion RUB (8.4%) to 5.0 billion RUB and represented 10.8% of consolidated EBITDA. This change resulted from several factors that partially offset each other. Acquired in December 2012, Trakya Elektrik Üretim ve Ticaret A.Ş generated EBITDA of 0.7 billion RUB. EBITDA from Kazakhstan Segment increased by 0.7 billion RUB due to stronger profit of Ekibastuzskaya TPP-2. However, EBITDA from Moldova Segment decreased by 1.0 billion RUB due to reduced export of electricity to Moldova, which was hampered by significant fuel price hikes from the beginning of 2013.

For comparison purposes, Operating EBITDA excludes loss from sale of minority stakes in 2013 (2.4 billion RUB) and profit from sale of minority stakes in 2012 (1.5 billion RUB). Operating EBITDA increased by 65.8% to 41.6 billion RUB.

Group share of profits of associates and joint ventures increased by 22.2% to 3.3 billion RUB.

The 0.6 billion RUB increase in share of profits of associates and joint ventures is attributable to 0.7 billion increase in Group's share of profit of Ekibastuzskaya TPP-2, which resulted from higher average electricity sales prices.

Net loss was 24.0 billion RUB compared to net loss of 22.3 billion RUB in 2012.

Net loss in 2013 resulted from recognition of 19.6 billion RUB impairment of Group's power generation and international assets. This impairment resulted from the review of capital expenditures and long-term energy prices on the Wholesale Electricity Market; 3.3 billion RUB impairment of available-for-sale financial assets due to decline in market prices; and increased bad debt allowances in the Group's power generation assets for companies that lost their wholesale market entitlement. Revaluation of the option agreement with Vnesheconombank contributed 10.4 billion RUB to Group losses.

Therefore, adjusted net income for 2013 and 2012-exclusive of non-financial items in the structure of net loss/income-is 17.5 billion RUB and 12.8 billion RUB respectively, representing an increase of 4.7 billion RUB (36.7%).

Consolidated statement of financial position

Non-current assets reduced by 15.1 billion RUB (4.2%) to 342.8 billion RUB.

The main factor behind the reduction of Group's non-current assets was sale 33.87% of shares of JSC Volga TGC and 27.71% of shares of JSC TGK-6, together with reclassification of the remaining 7.5% of shares of JSC Volga TGC into assets held-for-sale (current assets). Additional factors contributing to reduction of non-current assets include 19.6 billion RUB impairment of fixed assets, which was partially offset by completion of construction in progress, capital expenditures and additions of new fixed assets in the reporting period, resulting from implementation of the investment program by individual power generation facilities of the Group.

Current assets reduced by 0.9 billion RUB (0.5%) to 169.7 billion RUB.

Factors contributing to reduction of Group's current assets include the reduction of cash and cash equivalents as they were used to finance operating and investing activities of the Group, which was partially offset by increased accounts receivable resulting from higher average sales prices in Supply segment and reclassification 7.5% of shares of JSC Volga TGC into assets for sale.

Equity reduced by 18.6 billion RUB (5.3%) to 334.6 billion RUB.

The main reason of equity reduction was lower retained earnings due to Group's net loss in 2013.

Total liabilities were 178.0 billion RUB, representing an increase of 2.6 billion RUB (1.5%)

This increase was driven by several factors that partially offset each other, the strongest factor being the increased liability on the call and put option agreement with Vnesheconombank. Other factors contributing to larger total liabilities include greater accounts payable attributable to WECM purchases and construction of power generation facilities (11.7 billion RUB in total) partially offset by 6.7 billion RUB reduction in Group debt and retirement of 3.1 billion RUB of deferred tax obligations due to impairment of fixed assets.

Net debt inclusive of Group's share of the debt of joint ventures reduced by 7.9% to 59.6 billion RUB.

Consolidated loans and borrowings of Group subsidiaries excluding Group's share of the debt of joint ventures reduced by 6.7 billion RUB (11.2%) to 52.8 billion RUB due to scheduled and early loan repayments by Group subsidiaries.

The split between non-current and current debt (excluding loans and borrowings of joint ventures) was 76.2% and 23.8% at the end of 2013.

Loans and borrowings of joint ventures were 6.8 billion RUB; of those, 6.2 billion RUB represent Group's share of debt portfolio of Ekibastuzskaya TPP-2 used to finance its investment program (construction of the third power generation unit).

Chairman of the Management Board of JSC Inter RAO Boris KOVALCHUK stated: "The program of improving operational efficiency launched in 2013 is already demonstrating its first results - increasing returns of the Group. We are steadily continuing work in this direction, optimizing expenses, reducing management costs and improving management efficiency. One of our priorities is the implementation of the investment program within the planned time frame reducing costs through the transparency of the pricing process, regulating of the main components of the estimated costs and their validity with the customer. In 2014, we will continue launching new power generation capacities within the CDA thus providing both positive revenue growth in the segment and increasing the share of generation in the structure of the main financial indicators of the Group."

Full consolidated IFRS financial statements and the presentation of 2013 results are available on the website of JSC Inter RAO.

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Inter RAO Group is a diversified energy holding working in various segments of Russian and international electric power industry. Inter RAO is a leading Russian exporter and importer of electric energy actively increasing electricity generation and sales, and developing new lines of business. The corporate strategy of Inter RAO is focused on making INTER RAO UES a global energy enterprise and a key player in the international energy market. Inter RAO Group owns and operates 34 GW of installed power generation capacity.

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