Inter RAO YEES PAO : Group Published IFRS Interim Condensed Consolidated Financial Statements for the First Three Months of 2016

Inter RAO Group Published IFRS Interim Condensed Consolidated Financial Statements for the First Three Months of 2016.

- 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]Including debt in joint ventures.

[2]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:

• Addition of 325 MW of new and rehabilitated capacity units under the Capacity Delivery Agreements ('CDA')
• CDA capacity price increases reflecting the increased profitability of long-term government bonds, the adjustment of NDM (Next-Day Market) multiplier formula, and CPI-based indexation of operating expenses
• Increase in average heat sales prices for end consumers across Russian assets of the Group
• Optimization of fuel purchase prices across Russian assets of the Group
• Increase in average end consumer sales prices in the Supply Segment of the Group
• Reduction of export sales reflecting prevailing market conditions
• Devaluation of ruble against the main currencies of export contracts, by 20.0% against U.S. dollar and by 16.9% against euro.
• Sale of a 50% stake in Electric Networks of Armenia and Razdan Energy Company (Razdan TPP) in the fourth quarter of 2015 and the recognition of these companies as joint ventures starting from November 2015.

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Group revenue increased by 3.7% (7.9 billion rubles) to 224.4 billion rubles.

The revenue of the Supply Segment increased by 16.2 billion rubles (13.2%), to 139.0 billion rubles, reflecting higher average end consumer prices, higher electricity sales by volume due to colder weather in the winter of 2015-2016, and the addition of new consumers to the customer base of the Group's independent retailers.

Revenue from the Generation Segment increased by 1.6 billion rubles (2.9%), to 55.5 billion rubles, reflecting the growth of the Thermal Power Generation Sub-Segment.

Revenue from the Thermal Power Generation Sub-Segment, which includes TGK-11 Group and Bashkir Generation Company Group, increased by 2.1 billion rubles (9.6%), to 24.4 billion rubles. This change reflects the increased revenue from heat sales resulting from higher average heat sales prices in 2015 in Bashkortostan, Omsk and Tomskregions. A minor reduction of the revenue from the Electric Power Generation Sub-Segment, by 0.5 billion rubles (1.8%) to 31.1 billion rubles, reflects lower electricity output, due to the reconstruction of two power generation units at Permskaya TPP. However, the revenue from capacity sales has increased following the launch of Unit 9 at Cherepetskaya TPP, the recertification of CDA units launched earlier, the indexation of capacity sales prices to reflect the increased profitability of long-term government bonds, the adjustment of NDM multiplier, and the indexation of operating expenses.

Revenue from the Trading Segment has reduced by 3.9 billion rubles (17.1%), to 19.1 billion rubles. The primary driver of this reduction was the discontinuation of commercial electricity sales to Ukraine, and the reduction of sales to Finland, Kazakhstan and China reflecting prevailing market conditions.

A significant reduction of revenue from Foreign Assets Segment, by 6.3 billion rubles (39.3%) to 9.6 rubles, is for the most part attributable to the divestment of 50% stake in the Group's Armenian assets whose performance was not included in the revenue of Inter RAO Group for the first three months of 2016.

Operating expenses increased by 1.1% to 204.5 billion rubles

Electricity transmission costs increased by 8.1 billion rubles (16.1%), to 58.3 billion rubles, reflecting the performance of the Group's supply assets and the increase in electricity consumption, and transmission fees.

Cost of purchased electricity and capacity reduced by 0.8 billion rubles (1.0%) year-on-year, to 81.7 billion rubles, reflecting several partially offsetting factors. A significant reduction of costs in the first three months of 2016 is associated with the sale of the Group's ownership stake in the assets located in Armenia, and also with lower electricity sales through trading. However, the costs of the Group's guarantee suppliers have increased reflecting larger sales volumes and higher purchased electricity and capacity prices compared to the same period a year ago.

Fuel costs decreased by 5.5 billion rubles (13.9%), to 34.4 billion rubles, due to lower output of the power plants of the Russian Generation Segment, and also due to the purchase of natural gas from Rosneft under more favorable conditions. Our Trakya plant in Turkey achieved additional cost savings following the reduction of natural gas prices.

As the result, Group EBITDA was 31.8 billion rubles, up 27.4%.

The largest contribution to EBITDA is attributable to the Generation - the Russian Federation Segment, which brought in 22.9 billion rubles. Electric Power Generation Sub-Segment increased its EBITDA by 4.1 billion rubles, to 15.1 billion rubles, following the launch of Unit 9 under the CDA framework at Cherepetskaya TPP, the recertification of existing units, and the indexation of CDA capacity sales price. Significant savings on fuel purchases also contributed to this increase. The positive effect of these factors was partially offset by the reduction of electricity output due to lower demand.

EBITDA from theThermal Power Generation Sub-Segment increased by 2.0 billion rubles (37.4%), to 7.8 billion rubles, due to higher average heat sales prices in our regions and addition of new high-efficiency CDA capacity at Omskaya TPP-5. CCO and CDA capacity sales prices have also increased for the power plants serving this sub-segment.

EBITDA from theForeign Assets Segment increased by 0.6 billion rubles, or 23.9%, to 3.1 billion rubles. All sub-segments showed some improvement, including the Armenia Sub-Segment, despite only 50% of the net income of its assets being included in EBITDA for the first three months of 2016. Turkey and Moldova sub-segments made positive contributions following the reduction of average ruble exchange rate year-on-year.

EBITDA from theSupply Segment increased by 0.6 billion rubles (13.7%) to 4.4 billion rubles. This change reflects the fact that the revenue from electricity distribution increased higher than variable costs due to the increase in sales premium for all consumer groups and the indexation of tariffs in 2015.

EBITDA from the Trading Segment has reduced by 0.6 billion rubles (17.2%) year-on-year, to 2.7 billion rubles. This reduction is attributable to lower transit flows between different WECM pricing zones and the reduction of export sales to Ukraine, Kazakhstan, China and Finland.

Group's share of profits of associates and joint ventures increased by 0.7 billion rubles to 1.6 billion rubles.

This change is mostly attributable to the recognition of the Group's share of net profit of Electric Networks of Armenia and Razdan Energy Company (Razdan TPP) in the first three months of 2016. These assets were considered Group subsidiaries in the same period of the previous year, and their performance was apportioned respectively in the Group statements.

Net income for the first three months of 2016 was 17.0 billion rubles, up 1.0 billion rubles (5.9%).

For the first three months of 2016, consolidated net profit of the Group was 17.0 billion rubles. This result is attributable to higher sales prices in several reporting segments and market sectors, and also to savings on fuel purchases in Russia and abroad.

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Non-current assets reduced by 0.4 billion rubles (0.1%) to 340.2 billion rubles.

This reduction is primarily attributable to foreign exchange losses on translation to rubble of non-current assets of our abroad subsidiaries as ruble grew stronger against the main currencies of the countries where we operate towards the end of the reporting period. This factor was partially offset by the recognition of the Group's share of profits in joint ventures, including Electric Networks of Armenia, Razdan TPP and NVGRES Holding Limited.

Current assets increased by 1.3 billion rubles (0.6%) to 224.0 billion rubles.

The overall change was driven by partially offsetting factors. Increased accounts receivable from electricity and heat consumers was largely offset by reduction of cash balances of ruble accounts and short-term deposits.

Equity increased by 13.7 billion rubles (3.8%) to 379.1 billion rubles.

The largest contribution to equity increase comes from the retained earnings of the Group for the first three months of 2016.

Total liabilities were 185.0 billion rubles, down 12.8 billion rubles (6.5%).

The reduction of total liabilities mostly reflects the reduction of debt as well as lower advances received balance compared to the beginning of the year due to seasonal variations.

Total debt including Group's share of the debt of joint ventures reduced by 12.0% to 79.4 billion rubles.

Total loans and borrowings of Group subsidiaries, excluding the Group's share of the debt of joint ventures, decreased by 9.5 billion rubles (12.4%), to 66.9 billion rubles, due to scheduled and early repayment of certain debt items of several Group companies, and also due to the appreciation of Ruble compared to the end of 2015.

The split between non-current and current debt as of March 31, 2016 (excluding loans and borrowings of joint ventures) was 67.2% and 32.8%, compared to 55.8% and 44.2% as of December 31, 2015. The increase in the share of long-term loans primarily reflect the conversion of some short-term loans into long-term loans, and also scheduled and early repayment of certain items by Group companies.

Loans and borrowings of joint ventures contributed 12.5 billion rubles to consolidated debt. Of those, 9.5 billion rubles represent the Group's share in the debt portfolio of Ekibastuzskaya TPP-2 established to finance its investment program, and further 2.5 billion rubles represent the Group's share in the debt portfolio of Electric Networks of Armenia, which was reclassified as a joint venture following the sale of the 50% ownership stake in it.

[3]TGK-11 Group includes two heat producers, JSC TGK-11 (Omsk) and JSC Tomsk Generation, and two heat distribution network operators, JSC TomskRTS and JSC OmskRTS.

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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 Russia's leading electric utility by energy efficiency. Inter RAO Group owns and operates 33 GW of installed power generation capacity.www.interrao.ru