Inter RAO YEES : Group Publishes Consolidated IFRS Financial Statements for the First Quarter of 2018

Inter RAO Group published interim consolidated IFRS financial statements for the first quarter of 2018.

^* - Financial indicators are provided in accordance with IFRS financial statements in billion rubles rounded to one decimal. Percentage ratios are calculated based on the data from IFRS financial statements expressed in million rubles.

¹ Since 01.01.2018, the Group has been applying IFRS 15 'Revenue from contracts with customers', according to which revenue is accounted for as the reimbursement amount, the right to which the Group intends to gain in exchange for the transfer of the promised goods or services to the customer. Comparable data for a number of items in the financial statements have been recalculated retrospectively according to the standard.

² Due to the enactment of IFRS 16 'Lease', the financial statements as of 31.12.2017 retrospectively acknowledged assets in the form of the right to use with the residual value of RUB12.0 billion, and leasing obligations in the amount of RUB12.3 billion. The total leasing obligation, including obligations in joint ventures, is RUB12.7 billion.

³ Including deposits for a period from 3 to 12 months, and leasing obligations (including the share of lease obligations in joint ventures).

The dynamics of the Group's financial performance was significantly influenced by the following key factors and events:

• Commissioning of the liower Unit 12 of Verkhnetagilskaya Tlili with the installed caliacity of 447 MW, and the liower Unit 4 of liermskaya Tlili with the installed caliacity of 903 MW in June-July 2017 under caliacity sulilily agreements (CSAs);
• Increase of the average heat sales lirices for end consumers, and the increase of the liroductive sulilily of heat energy across the Grouli's Russian assets;
• Caliacity workload olitimization in the Electric Energy Generation segment according to the market situation;
• Increase of the average sales lirices for end consumers in the Grouli's Sulilily segment;
• Increase of the lirofit margin in the Grouli's Trading segment;
• Weakening of the Russian ruble against euro;

INTERIM CONSOLIDATED STATEMENT OF COMPREHENCIVE INCOME

Group revenue increased by 10.5% (RUB23.5 billion) to RUB247.5 billion

The increase in revenue in the Supply segment by RUB17.0 billion (11.5%) to RUB164.7 billion is due to both the higher average sales prices of the suppliers of last resort for end consumers, and the acquisition of new customers by independent retailers.

The increase in revenue in the Electric Power Generation in the Russian Federation segment by RUB2.5 billion (7.9%) to RUB34.2 billion is mainly due to the sale of capacity: commissioning of the Power Unit No. 12 of Verkhnetagilskaya TPP in 2Q2017, and of the Power Unit No. 4 of Permskaya TPP in 3Q2017 under CSAs. Higher capacity sale prices in the Competitive Capacity Auction segment generated an additional impact. Along with this, the revenue from the sale of electricity reduced against the previous reporting period due to the reduced output caused by the current market situation.

Revenue in the Thermal Power Generation in the Russian Federation segment, which comprises TGK-11 Group⁴ and Bashkir Generation Company Group, increased by RUB0.1 billion (0.5%) to RUB24.3 billion. The main positive effect comes from the higher average heat prices in Bashkortostan, Omsk region and Tomsk region compared to the previous reporting period. Along with this, a number of power units reduced their electricity output due to the lower margin.

Revenue of the Trading in the Russian Federation and Europe segment increased by RUB3.0 billion (26.5%) to RUB14.2 billion in 1Q2018 compared to the previous reporting period. The revenue was mostly increased due to the higher prices and supply amounts towards Lithuania, and due to the higher average dispatch price towards Finland. The export revenues were additionally generated by the weakening of the Russian ruble against euro by 11.5% compared to the previous reporting period. Moreover, internal supply volumes increased, mostly due to the electricity imported from Kazakhstan. Some minor negative effect came from the lower supply amounts towards Belarus.

Reduced revenue in the Foreign Assets segment by RUB1.4 billion (18.2%) to RUB6.2 billion was mostly due to the lower electricity output by Trakya Elektrik according to the order of the grid operator in the Turkish Republic, and the lower disbursing tariff. Some positive effect came from Moldavskaya TPP due to the commencement of direct supplies to Moldova, and due to the Georgian assets related to the increased consumption and higher disbursing tariffs.

Operating expenses increased by RUB19.6 billion (9.6%) to RUB223.2 billion compared to the previous reporting period, which is below the revenue upward dynamics.

Electricity transmission costs increased by RUB5.5 billion (10.7%) to RUB57.0 billion due to the performance of enterprises in the Supply segment, and relates to the increased electricity consumption and its transmission fees.

The cost of purchased electricity and capacity increased by RUB10.2 billion (11.5%) to RUB98.8 billion compared to the previous reporting period, mostly due to the higher market prices on capacity compared to the previous reporting period, and higher procurement volumes and sales volumes in the Supply segment.

Process fuel costs declined by RUB2.4 billion rubles (6.9%) to RUB32.1 billion compared to the previous reporting period. The change factors are oppositely directed: reduced electric energy output by Trakya Elektrik to comply with the order of the grid operator, reduced electricity output by the power units of 'Inter RAO Electric Energy Generation' JSC due to the market conditions, and increased heat supplies to the Bashkir assets, and the commencement of direct supplies of electricity towards Moldova.

EBITDA increased by 18.5% to 34.8 billion rubles.

In the Supply Segment, EBITDA increased by 2.0 billion rubles (48.8%) to 6.0 billion rubles. This change was driven by higher average sale prices and productive supply, as well as by an increase in the amount of fees and penalties accepted by the consumers.

In the Electric Power Generation Segment , EBITDA increased by 1.7 billion rubles (10.4%) to 18.4 billion rubles. The considerable positive impact is mostly due to commissioning of power unit No. 12 at Verkhnetagilskaya TPP and power unit No. 4 at Permskaya TPP under CDAs. At the same time, power generation at several power plants belonging to JSC Inter RAO -

Electric Power Plants was decreased in the reported period as a part of the capacity optimization process.

In the Thermal Power Generation Segment , EBITDA decreased by 0.1 billion rubles (0.7 %) to 8.0 billion rubles. This change reflects higher heat prices and productive supply in Bashkortostan, Tomsk and Omsk regions.

In the Trading Segment , EBITDA increased by 1.3 billion rubles (by 2.1 times) and amounted to 2.4 billion rubles. This change can be mostly attributed to higher marginality and net sales in the domestic market, which were driven by increased energy import from Kazakhstan, higher Nord Pool prices and lower ruble-to-euro exchange rate.

In the International Assets Segment , EBITDA increased by 0.1 billion rubles (9.5%) and amounted to 1.2 billion rubles. The increase was related to renewed direct energy supply to Moldova and decreased personnel at the CJSC Moldavskaya SDPP, as well as to higher selling prices in Georgia.

Net income for the first quarter of 2018 amounted to 22.6 billion rubles, having increased by 3.4 billion rubles in comparison with the comparable time period. Higher net income is related to the achievements of Russian generation and sales subsidiaries.

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Total assets increased by 38.3 billion rubles (6.0%), amounting to 677.4 billion rubles.

Total assets of the Group increased due to contract for leasing movable and immovable assets at Mayakovskaya and Talakhovskaya TPPs by the Kaliningrad Generation LLC taking effect. In the Statement of Financial Position of the Inter RAO Group the net value of the assets at these stations is acknowledged as right-of-use assets. Furthermore, there was an increase in total debt receivable from household consumers and housing and utilities sector companies in the Supply and Thermal Power Generation Segments.

Equity increased by 25.7 billion rubles (5.6%), amounting to 487.2 billion rubles.

An increase in equity was mostly driven by acknowledging net income for the reported period.

Total loans and borrowings decreased by 14.5% to 13.8 billion rubles. Leasing obligations (including the share in the joint ventures) increased by 22.9 billion rubles and amounted to 35.6 billion rubles.

Total loans and borrowings of the Group decreased by 2.3 billion rubles (14.5%) to 13.8 billion rubles as a result of scheduled repayment of loans and repayment ahead of schedule.

The ratio of long-term debt to short-term debt as of March 31, 2018 amounted to 17.3% versus 82.7% (on December 31, 2017 - 28.9% versus 71.1%).

As a result of IFRS 16, Leases, taking effect, the right-of-use assets and leasing obligations are acknowledged retrospectively in the Statement of Financial Position. An increase in obligation in the reported period can be mostly accounted to signing a long-term lease contract for Mayakovskaya and Talakhovskaya TPP by Kaliningrad Generation LLC and acknowledging the corresponding leasing obligations in the Statement of Financial Position.

⁴ GTK-11 Group is represented by heat producers JSC TGK-11 (Omsk) and JSC Tomsk Generation, and heat distribution network operators JSC Tomsk RTS and JSC Omsk RTS.