Inter RAO Group announced interim condensed consolidated financial statements prepared under the International Financial Reporting Standards for the first 9 months of 2015. The financial statements were reviewed by Ernst & Young.

Indicator, billion rubles

9 months of 2015

9 months of 2014

Change, %

Revenue

580.0

526.0

10.3%

Operating expenses

557.8

513.6

8.6%

Operating income

29.0

18.1

60.1%

Net income

23.3

11.0

2.1x

EBITDA1

49.4

39.7

24.5%

Capital expenditures

15.9

24.1

-33.9%

30.09.2015

31.12.2014

Change, %

Total assets

581.1

585.5

-0.8%

Total equity

365.5

348.2

4.9%

Loans and borrowings2

107.1

117.2

-8.7%

Net debt3

29.7

35.5

-16.4%

Free cash flow (FCF)

16.6

11.3

47.5%

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

[1] Starting from January 1, 2015, the Group has changed the calculation of EBITDA of the operating segments by excluding non-operating income and expense items from this indicator, and by changing the presentation of recognition and release of other provisions. A previously recognized provision on a dispute is reversed when there is a negative outcome for a Group company, and the appropriate expenses that reduce the Group EBITDA for this reporting period are recorded at that time as well (Note 2 to the interim condensed consolidated financial statements of Inter RAO Group). Comparative data for the first 9 months of 2014 were revised accordingly. Detailed calculation of EBITDA in accordance with the new methodology adopted by the Group is provided in Note 4 to the interim condensed consolidated financial statements of Inter RAO Group for the first 9 months of 2015.

[2] Including debt in joint ventures.

[3] Including deposits maturing in 3 to 12 months.

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

  • The addition of more than 1.4 GW of new and rehabilitated power generation capacity starting from April 2014 under Capacity Delivery Agreements ('CDA'), including power generation units at Yuzhnouralskaya TPP-2, Cherepetskaya TPP, Nizhnevartovskaya TPP, Omskaya TPP-3 and Omskaya TPP-5
  • Growth of average tariffs for heat supply from collectors for the Group's Russian assets
  • Reduction of electricity sales prices in the first pricing zone at the Next-Day Market ('NDM') with concurrent price increases in the second pricing zone
  • Optimization of capacity utilization of the Group's power generation assets in the Russian Federation
  • Increased regional presence and customer bases of guaranteeing suppliers and independent sales companies
  • Growth of exports due to the depreciation of Russian ruble against the currencies of our export contracts

Interim consolidated statement of comprehensive income

Group revenue increased by 10.3% (54.0 billion rubles) to 580.0 billion rubles.

Trading Segment has shown the most significant revenue growth. Segment revenue increased by 24.9 billion rubles (71.1%) to 60.0 billion rubles. Key drivers of this significant increase include an uplift in domestic trading volume and the depreciation of ruble against the currencies of our export contracts in the end of 2014, which helped us to increase both export sales and ruble revenue.

Revenue from Supply Segment increased by 14.0 billion rubles (4.3%) to 339.0 billion rubles due to the growth of the customer base resulting from regional expansion of the Group's guaranteeing suppliers (serving Omsk and Oryol regions since March and February 2014 respectively), and acquisition of new customers by the independent sales companies.

Revenue from Generation Segment increased by 1.3 billion rubles (1.0%) to 136.9 billion rubles, mostly representing the growth of the heat production sub-segment.

A marginal increase in the revenue from electric power generation sub-segment, which went up by 0.2 billion rubles (0.2%) to 88.4 billion rubles, is attributable to larger proceeds from capacity sales resulting from the launch of several CDA power generation units, including Unit 2 at Yuzhnouralskaya TPP-2 and Units 8 and 9 at Cherepetskaya TPP, in late 2014 and early 2015, and the growth of NDM prices in the second pricing zone. These factors were partially offset by a marginal NDM price decrease in the first pricing zone, and reduced sales prices and sales under the regulated agreements.

Revenue from thermal power generation sub-segment4 increased by 1.1 billion rubles (2.4%) to 48.5 billion rubles due to increases in average heat delivery tariffs in 2014 and 2015 in Bashkortostan, which were partially offset by a marginal decrease in the revenue from CCO capacity sales and lower power generation. Higher NDM prices for our second pricing zone stations located in Omsk and Tomsk also contributed to the revenue increase.

Revenue from Foreign Assets increased by 12.2 billion rubles (42.3%) to 41.0 billion rubles, mostly due to the appreciation of local operating currencies of the Group against Russian ruble.

Operating expenses increased by 8.6% to 557.8 billion rubles.

Cost of purchased electricity and capacity in the first 9 months of 2015 went up by 25.3 billion rubles (12.8%) to 222.4 billion rubles, while electricity transmission fees increased by 8.5 billion rubles (6.4%) to 141.7 billion rubles due to a significant increase in domestic and export electricity trade, and in the retail sales of electricity in the Group's new regions.

A slight reduction of fuel costs, by 0.2 billion rubles (0.2%) to 102.0 billion rubles, is attributable to a combination of several factors. Lower power generation by the Group's Russian assets led to lower fuel consumption. However, fuel costs of the Group's foreign assets increased, reflecting the appreciation of U.S. dollar, which is the currency of gas supply contracts, against Russian ruble and local operating currencies.

As the result, Group EBITDA increased by 24.5% to 49.4 billion rubles.

The largest contribution to EBITDA is attributable to Generation - Russian Assets Segment, which brought in 31.8 billion rubles. EBITDA from electric power generation sub-segment increased by 4.1 billion rubles, to 25.7 billion rubles, following the addition of more than 1.2 GW of new CDA facilities at Yuznhouralskaya TPP-2 and Cherepetskaya TPP, as well as at Nizhnevartovskaya TPP owned by NVGRES Holding Limited joint venture. Other favorable factors include the optimization of capacity utilization and higher CDA capacity sales prices.

EBITDA from thermal power generation sub-segment reduced by 0.3 billion rubles (4.9%) to 6.1 billion rubles, reflecting several factors partially offsetting each other. Lower CCO capacity sales prices and lower electricity sales due to weaker demand were partially offset by higher average heat sales prices in Bashkortostan in 2014 and 2015, and higher NDM prices in the second pricing zone.

EBITDA fromTrading Segment increased by a factor of 2.8 and reached 7.3 billion rubles. The primary driver of this change was the depreciation of Russian ruble in late 2014 leading to a significant increase in sales volume and export revenue in Russian rubles.

EBITDA from foreign assets increased by 1.4 billion rubles (33.9%) to 5.4 billion rubles. Translational foreign exchange gain resulting from the depreciation of ruble were the primary driver of this change.

EBITDA fromSupply Segment increased by 0.7 billion rubles (9.3%), reflecting expanded sales geography and larger customer base.

Group's share of losse of associates and joint ventures was (0.9) billion rubles compared to Group's share of profit in amount of 1.4 billion rubles in the comparative period of 2014.

The key driver of this change was the Group's share of the losse of Ekibastuzskaya TPP-2 in amount of 2.8 billion rubles. This negative financial result is attributable to the depreciation of Kazakh tenge in August 2015 leading to the recognition of significant foreign exchange losses on loans nominated in U.S. dollars and rubles.

However, the launch of the third power generation unit at Nizhnevartovskaya TPP under CDA in 2014 generated a major positive contribution, and the Group's share of profit in NVGRES Holding Limited increased by 0.3 billion rubles to 1.6 billion rubles.

Net income for the first 9 months of 2015 was 23.3 billion rubles compared to 11.0 billion rubles in the first 9 months of 2014.

This change is attributable to the increased efficiency of the Generation Segment and the addition of new CDA facilities, as well as major positive changes in the Trading Segment following the depreciation of ruble against the core currencies of export contracts.

Interim consolidated statement of financial position

Non-current assets reduced by 4.1 billion rubles (1.1%) to 361.0 billion rubles.

The reduction of non-current assets is attributable to reduction of the Group's investments in Ekibastuzskaya TPP-2 joint venture caused by the depreciation of tenge, and to the sales of minority ownership shares classified as available for sale, with capital expenditures not significantly exceeding the depreciation of fixed and intangible assets in the reporting period.

Current assets reduced by 0.3 billion rubles (0.1%) to 220.1 billion rubles.

The minor change in current assets is attributable to several factors partially offsetting each other. Inter RAO Group's cash spending of 17.4 billion rubles to pay the ZAO Mezhregionenergostroy loan (including the amounts due to VTB Factoring) was partially offset by accumulation of cash flow from operating activities in the Group's bank accounts.

Equity increased by 17.2 billion rubles (4.9%) to 365.5 billion rubles.

The largest contributor to equity increase is the retained earnings for the first 9 months of 2015.

Total liabilities decreased by 21.7 billion rubles (9.1%) to 215.6 billion rubles.

This reduction in total liabilities mostly reflects the repayment of CJSC Mezhregionenergostroy loan, and the seasonal reduction in accounts payable and consumer prepayments.

Total debt inclusive of the Group's share of the debt of joint ventures reduced by 8.7% to 107.1 billion rubles.

Total loans and borrowings of Group subsidiaries, excluding the Group's share of the debt of joint ventures, decreased by 10.6 billion rubles (9.9%) to 96.5 billion rubles due to scheduled and early repayment of certain debt items of several Group companies, which were partially offset by revaluation of foreign currency loans following the depreciation of Russian ruble.

The split between non-current and current debt (excluding loans and borrowings of joint ventures) was 57.8% and 42.2% as of September 30, 2015, compared to 59.9% and 40.1% as of December 31, 2014. Marginal reduction of the share of current debt reflects the repayment of the 17.4 billion ruble loan from CJSC Mezhregionenergostroy and partial reclassification of our non-current debt into current debt according to debt repayment schedule.

Loans and borrowings of joint ventures represent 10.6 billion rubles of the total debt. Of those, 9.8 billion rubles are attributable to the Group's share of the debt portfolio of Ekibastuzskaya TPP-2 used to finance its investment program.

[4] Heat Production Segment includes Bashkir Generation Company, BashRTS LLC, JSC TGK-11, JSC Tomsk Generation, LLC TomskRTS and LLC OmskRTS.

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 about 35 GW of installed power generation capacity.www.interrao.ru


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