Inter RAO Group announced interim condensed consolidated financial statements prepared under the International Financial Reporting Standards for the first quarter of 2015. The financial statements were reviewed by Ernst & Young.

Q1 2015 Q1 2014 Change,%
Revenue 216.5 189.6 14.2%
Operating expenses 202.3 181.7 11.3%
Operating income 17.4 9.9 75.0%
Net income 16.0 3.8 in 4.2 times
25.0 16.2 54.6%
Capital expenditures 4.5 6.9 -35.2%
As of March 31, 2015 As of December 31, 2014 Change,%
Total assets 598.4 585.5 2.2%
Total equity 363.4 348.2 4.4%
116.4 117.2 -0.7%
Net debt [4] 35.3 35.5 -0.6%
Free cash flow (FCF) 3.1 2.7 12.3%

[1] Financial indicators are provided according to financial statements in billion rubles rounded to one decimal place. Percentages are calculated using IFRS statements data expressed in million rubles.

Starting from January 1, 2015, the Group changed the calculation of EBITDA of the operating segments, having excluded non-operating income and expense items from the indicator, as well as changed the presentation of charge and release of other provisions. Previously recognized provision on dispute should be released when there is a negative outcome for the Group's companies, and the appropriate expenses that reduces the Group's EBITDA for this reporting period should be recorded (Note 2 to the interim condensed consolidated financial statements of Inter RAO Group). Comparative data for the first quarter of 2014 were revised accordingly. Detailed calculation of EBITDA in accordance with the new methodology accepted in the Group is given in Note 4 to the interim condensed consolidated financial statements of Inter RAO Group for the first quarter of 2015.

The dynamics in the Group's financial performance was significantly influenced by the following key factors and events:
  • Addition of more than 1.2 gigawatts of new and rehabilitated power generation capacity starting from April 2014 under Capacity Delivery Agreements (hereinafter, CDA) for the capacity supply, including power generation units at Yuzhnouralskaya TPP-2, the Cherepetskaya TPP, Nizhnevartovskaya TPP, Omskaya TPP-3 and Omskaya TPP-5;
  • The growth of average tariffs for heat supply from collectors on the Group's Russian assets;
  • Optimization of the plants' capacity utilization on the Group's electricity generation assets in the Russian Federation;
  • Extension of regions of presence and customer base on guaranteeing suppliers and independent sales companies;
  • Growth of exports due to the depreciation of the Russian ruble against the currencies of the export contracts.
Interim consolidated statement of comprehensive income Group revenue increased by 14.2% (26.9 billion rubles) to 216.5 billion rubles

The Trading segment has shown the most significant revenue growth . The segment revenue increased by 13.0 billion rubles (in 2.3 times) to 23.0 billion rubles. The main reason for the large increase is the depreciation of the ruble against the currencies of the export contracts, which allowed to increase both the volume of supply and revenue expressed in rubles.

The increase in the revenues from the Supply segment by 6.1 billion rubles (5.2%) to 122.8 billion rubles was due to the growth of the customer base resulting primarily from the expansion of the presence of the Group's guaranteeing suppliers (the Omsk and the Oryol regions from March and February 2014) and admission to service of new customers in the independent sales companies.

Revenue from the Generation segment increased by 2 billion rubles (4.0%) to 53.9 billion rubles reflecting growth both in electric power generation and in thermal power generation sub-segments.

Revenue from electric power generation sub-segment increased by 1.0 billion rubles (3.5%) to 31.7 billion rubles due to the increase in payments for the capacity resulting from commissioning unit No. 2 of the Yuzhnouralskaya TPP-2 and Unit No. 8 of Cherepetskaya TPP under the CDA in December 2014, as well as due to the increase in the electricity prices on the day-ahead market in the second price zone and stability in the first price zone, with the decrease in prices for capacity sold in the Competitive Capacity Outtake segment.

Revenue from thermal power generation sub-segment, represented by Group TGK-11 and Group Bashkir Generation Company increased by 1.0 billion rubles (4.7%) to 22.2 billion rubles due to the growth of average tariffs for heat supply from collectors in 2014, as well as due to the transition of Bashkir Generation Company to settlements with consumers under the one-rate heat tariff from January 1, 2015.

Revenue from Armenia segment increased by 2.3 billion rubles (65.3%) to 5.7 billion rubles reflecting increases in electricity prices in Armenia in August 2014 enacted by the national regulatory authority, and the rise in the Armenian dram against the Russian ruble.

Revenue from Turkey segment increased by 2.4 billion rubles (60.1%) to 6.4 billion rubles due to the rise in USD against the Russian ruble. At the same time, the volume of production has remained unchanged, and the sale price for consumers has fallen under the influence of the fuel component.

Revenue from Georgia segment increased by 0.9 billion rubles and reached 2.6 billion rubles. The growth factors include the increase in tariffs and the positive dynamics of the electricity consumption in Georgia, and the rise in the Georgian lari against the Russian ruble.

Operating expenses increased by 11.3% to 202.3 billion rubles

Cost of purchased electricity and capacity increased by 14.7 billion rubles (21.7%) to 82.5 billion rubles in the first quarter of 2015 and the electricity transmission fees increased by 1.1 billion rubles (2.3%) to 50.2 billion rubles due to the significant increase in the volume of electricity supply (as part of the trading activity) both abroad and on the domestic market, as well as sales activities in new regions of the Group's presence.

A small increase in the fuel costs by 0.5 billion rubles (1.3%) to 40.0 billion rubles was due to the combination of multiple factors. In particular, the cost of fuel at stations Trakya in Turkey and Mtkvari Energetika in Georgia increased significantly due to the rise in USD, in which the gas supply contracts are nominated, against the Russian ruble. At the same time, the fuel consumption by the Russian power plants decreased due to the decrease in the production of branches of Inter RAO - Electric Power Plants by 2% and of Bashkir Generation Company by 4.5%, respectively, compared with the same period of the last year, and also due to the redistribution of the load for the most efficient stations.

As a result, the EBITDA equals 25.0 billion rubles, up to 54.6%

The main increase in the EBITDA index equal to 16.8 billion rubles was made due to the "Generation - Russian assets" segment. EBITDA increased in both "Electric Power Generation" (increase by 2.6 billion rubles up to 11.1 billion rubles) and "Thermal Power Generation" sub segments (increase by 1.2 billion rubles up to 5.7 billion rubles) thanks to the optimization of the stock of turned-on equipment at the stations and fuel expenses. In addition, increase of the average energy supply tariff from collectors in Bashkortostan in 2014 influenced the EBITDA growth ("Thermal Power Generation" sub segment) as well as implementation of new capacities built in the framework of capacity assignment contracts with total capacity over 1 GW at Yuzhnouralskaya TPP-2 and Cherepetskaya TPP as well as at Nizhnevartovskaya TPP that belongs to the joint venture NVGRES Holding Limited company "Electric Power Generation" sub segment).

EBITDA's increase in the "Supply" segment equals RUR 1.4 billion, or 62.2%. Increase in this index is due to recognition of 0.6 billion rubles revenue thanks to distribution company tariff re-calculation for past periods as well as consumption growth due to extension of coverage and that of the client base.

The "Trading" segment 4.1 times exceeded the EBITDA index calculated for the same period of 2014 and mounted to 3.3 billion rubles. This occurred due to decrease of the ruble exchange rate which caused a significant increase in sales volume export revenue in rubles.

Foreign assets showed an increase of EBITDA by 1.5 billion rubles (2.5 times) up to 2.5 billion rubles. In particular, EBITDA index of the "Armenia" segment grew thanks to reduction of bought electricity costs of "Armenian electricity supply network" CJSC and that of the "Turkey" segment is due to reduction of consumed fuel costs maintaining the same generation as well as to the compensation for plant's unclaimed capacities by the state.

Group's share of profit of associates and joint ventures increased by 2.1 times to 0.9 billion rubles

Increase of Group's share of profit of associates and joint ventures by 0.5 billion rubles was due to the growth in generation of Nizhnevartovskaya TPP CJSC as a result of в implementation in March 2014 of the 3rd power unit in the framework of CSA as well as the received interest in profit of the "Ekibastuzskaya TPP-2 Station" at a rate of 0.1 billion rubles against the loss in the compared reporting period due to reduction of negative exchange rate differences resulting from reevaluation of credits nominated in rubles and USD.

Net income for the 1st quarter of 2015 equals to 16.0 billion rubles against 3.8 billion rubles in the 1st quarter of 2014

Following the results of the 1st quarter of 2015 the Group received 16.0 billion rubles of net profit which is due to "Generation" segment efficiency growth and implementation of new capacities in the framework of CSA as well as significant positive changes in the "Trading" segment thanks to the weakness of ruble against the main export contract currencies.

Interim consolidated statement of financial position Non-current assets increased by 1.3 billion rubles (0.4%) to 366.4 billion rubles

The Group's non-current assets increased due to the construction of the Termogas Machala TPP in Ecuador, the growth of value of shares in such joint ventures as the Nizhnevartovskaya TPP and the Ekibastuzskaya TPP-2, which was partially offset by sale of several minority stakes classified as available-for-sale.

Current assets increased by 11.6 billion rubles (5.3%) to 231.9 billion rubles

The increase in current assets was related mainly to Trade receivables items as energy consumption increased in winter, as well as due to debt repayment by customers which is traditionally higher at the end of the year.

Equity increased by 15.2 billion rubles (4.4%) to 363.4 billion rubles

The largest contribution to equity increase is attributable to the growth of the Group's retained earnings for the first quarter of 2015.

Total liabilities amounted to 235.0 billion rubles, having decreased by 2.3 billion rubles (1.0%).

The decline in total liabilities was related primarily to the use of advance payments made by consumers at the end of 2014 in accordance with seasonal specific features of settlements, in the first quarter of 2015.

Total debt inclusive of the Group's share of the debt of joint ventures decreased by 0.7%, to 116.4 billion rubles

Total loans and borrowings of Group subsidiaries, excluding the Group's share of the debt of joint ventures decreased by 0.8 billion rubles (0.8%) to 106.3 billion rubles, due to planned and early partial repayment of debt of several Group companies, as well as due to revaluation of foreign currency loans following the depreciation of Russian.

The split between non-current and current debt (excluding loans and borrowings of joint ventures) was 56.1% and 43.9% as of March 31, 2015, compared to 59.9% and 40.1% as of December 31, 2014. Share of non-current debt decreased as part of the partial reclassification of long-term loans into short-term debt as repayment was to be made according to the repayment schedule, and due to refinancing part of long-term loans using short-term ones in order to optimize interest expense given that interest rates were increasing.

Loans and borrowings of joint ventures represent 10.1 billion rubles of the total debt. Of those, 9.4 billion rubles are attributable to the Group's share of the debt portfolio of the joint venture Ekibastuzskaya TPP-2 used to finance its investment program.

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Inter RAO Group is a diversified energy holding serving various segments of Russian and international electric power industry. The Group is the leading exporter and importer of electricity in Russia actively increasing electricity generation and sales, and developing new lines of business. The corporate strategy of Inter RAO is focused on making Inter RAO a global energy enterprise, a key player in the global energy market, and the leading Russian energy company by energy efficiency. Inter RAO Group owns and operates over 35 GW of installed power generation capacity. www.interrao.ru


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