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Bashkirenergo

May 29, 2012

Bashkirenergo publishes its Q1 2012 IFRS financial results

May 29, 2012, Ufa (Russian Federation, Republic of Bashkortostan) – OJSC “Bashkirenergo” (MICEX, RTS: BEGY, ISIN: RU0009044242) – publishes consolidated financial statements for Q1 2012 prepared in accordance with IFRS.

For the purpose to comply with the Russian legislation on March 26, 2012 the Company’s Board of Directors had a meeting where the main terms and conditions of OJSC “Bashkirenergo” reorganization were accepted for further approval at the extraordinary General meeting of shareholders which will take place on June 20, 2012.

Shareholders are proposed to make a decision on reorganization of OJSC “Bashkirenergo” in the form of a spin-off resulting in the establishment of two companies: generating company called Open Joint-Stock Company “Bashenergoactiv” (JSC Bashenergoactiv) which will obtain the shares of LLC “Bashkir Generation Company”, LLC “Bashkir Heat Distribution Grid”, and LLC “CCGT CHPP-5”, and power grid company called Joint Stock Company «Bashkirian Power Grid Company» (JSC “BPGC”).

Simultaneously with the spin-off, JSC Bashenergoactiv is to be merged with Open Joint Stock Company “INTER RAO UES” (JSC “INTER RAO UES”).

In connection with the above matter and in accordance with the rules of IFRS compilation, financial results of the generating sector for Q1 2012 were presented separately as results of the discontinuing operation.

KEY FINANCIAL RESULTS:

· The revenue from continuing operations declined by 8.5% to RUB 2,905 million compared to Q1 2011.

· Operating profit was RUB 631 million, up 38.7% YoY.

· OIBDA from continuing operations was RUB 973 million or 30% higher than similar of the previous year.

· Profit and comprehensive income for 3 months of 2012 decreased by 50% YoY and amounted to RUB 1,363 million mostly due to reduction of profit from the discontinuing operation.

· Profit from continuing operations, showing the result of power grids, grew 58% YoY and reached RUB 537 million in Q1 2012. Profit from discontinuing operation, representing the result of power generation, reduced by 65.5% YoY to 826 mln RUR.

· The Company’s debt/OIBDA ratio was at the level of 0.9 as of April 31, 2011.

KEY OPERATING RESULTS:

· OJSC “Bashkirenergo” total power generation reduced by 1% YoY to 6,310.81 mln kWh.

· The capacity factor of OJSC “Bashkirenergo” power stations was at a level of 68.68% (decrease of 0.72 p.p. compared to Q1 2011).

· Heat output of the Company amounted to 9,694.8 thousand Gcal, insignificantly reduces by 0.6% YoY.

· In Q1 2012 the specific consumption of equivalent fuel decreased by 2.8 g/kWh for electricity generation to 306.8 g/kWh, and by 1.3 kg/Gcal for heat output to 140.4 kg/Gcal compared to the similar period of the previous year.

· The transmitted electricity losses in the transmission grids reduced to 1.43% versus 1.54% in Q1 2011, distribution grid losses reduced from 12.01% to 10.99% YoY.

Andrey Makarov, CEO of OJSC “Bashkirenergo” commented the Company’s activity in Q1 2012: «The first quarter of 2012 was pretty tough for the power sector, as well as for OJSC “Bashkirenergo”. Decrease of prices on the wholesale market for electricity and capacity which started at the beginning of 2012 on the back of measures taken by the government aimed at stabilization of electricity prices brought the Company’s financial indicators under pressure. Present situation issues challenge for the Company on improvement of operating and financial efficiency, which the Company meets pretty successful. At the present time OJSC “Bashkirenergo” also keeps working on its reorganization and resolves related issues. The Company stayed vertically-integrated for a long time possessing generating assets, distribution and transmission grids. Activities carried out on Company’s reorganization are already reflected in IFRS report for the 1st quarter. Thus, financial results of the generating sector were represented separately as discontinuing operation. The final decision on the Company’s spin-off resulting in the establishment of separate generating and grid businesses, as well on general parameters of the reorganization will be taken by the General Shareholders’ Meeting on June 20».

RESULTS OVERVIEW

Price cutting on the wholesale market for electricity and power which started at the beginning of 2012 year affected the power output of “Bashkirenergo”. In the first quarter of 2012 the Company’s power plants produced 1% less of electric power than during similar period of the previous year. In the meantime level of transmitted electricity losses reduced significantly, by 102 b.p. in distribution grids and by 11 b.p in transmission grids. Such decline resulted from applying system approach to planning and implementation of activities aimed at losses reduction.

The total Russian power output comprised 298.2 bln kWh in Q1 2012 up 2.9% YoY, and the UPS Urals total power output increased by 1.8% amounting to 71.2 bln kWh. The OJSC “Bashkirenergo” share in All-Russian power output reached 2.11% and in the UPS Urals amounted to 8.86%.

Heat output for 3 months of 2012 reduced to 9,694.8 Gcal or by 0.6% comparing with the similar period of the previous year due to a decrease in demand from a large consumer and increase of the outside air average temperature by 2.2 ºÑ.

Decrease in specific consumption of equivalent fuel for electricity generation (-2.8 g/kWh YoY) and heat output (-1.3 kg/Gcal YoY), as well as control over the fixed costs substantially contributed to the financial results of OJSC “Bashkirenergo”. Decline of fuel consumption rate was conditioned by measures aimed at improvement of energy efficiency and integration of modern and energy conserving equipment.

Key Financial Performance Indicators,in mln RUR

    

 

   Change

Indicator

3M 2012           

3M 2011          

  %

Revenue

2 905

3 178

 -9%

Operating expenses

(2 274)

(2 723)

-16%

Operating Profit

631

455

39%

Profit before income tax

630

453

39%

Income tax expenses

(93)

(114)

-18%

Profit/(losses) from continuing operations

537

339

58%

Profit from discontinuing operations

826

2 404

-66%

PROFIT AND COMPREHANSIVE INCOME           

1 363

2 743

-50%

OIBDA

973

748

30%

OIBDA margin

22,5%

16%

6,5 ï.ï.

Key Operating Results

Indicator

 

Change.

3M 2011        

3M 2010           

%

Installed electric capacity, MW (average)

4 303

4 266

0,9%

Installed heat capacity, Gcal/h (average)

13 111

13 281

-1,3%

Electricity generation, mln kWh

6 310,81

6 376,86

-1%

Heat output, thousand Gcal

9 694,8

9 749

-0,6%

Electric capacity factor, %

68,68

69,5

-0,82%

Specific consumption of equivalent fuel for electricity generation, g/kWh        

306,8

309,6

-2,8

Specific consumption of equivalent fuel for heat output, kg/Gcal

140,4

141,7

-1,3

Distribution grid losses, %

10,99%

12,01%

1,02 ï.ï.

Transmission grid losses, %

1,43%

1,54%

-0,11 ï.ï.

REVENUE

Revenue declined by 8.5% from RUB 3,178 million in Q1 2011 to RUB 2,905 million in Q1 2012. The main factors affected revenue were price cutting on the wholesale market for electricity and power, reduction of electricity generation and decline of electric power sales on retail market.

OPERATING EXPENSES

The structure of operating expenses in Q1 2012 IFRS report do not include power generating activity due to the fact that result of this segment is accounted in a separate line “profit from the discontinuing operation”. Thus, compensation of losses to a guaranteeing supplier representing 36% of expenses reduced by 26% YoY and amounted to RUB 816 million owing to decline of prices for electric power losses. Staff costs (34.78% of operating expenses) rose by 1.4% YoY to RUB 791 million. Depreciation grew 16.7% YoY and reached RUB 342 million (15% of operating expenses). Other operating expenses (14% of operating expenses) were cut down by 40% YoY to RUB 325 million.

Therefore, profit before tax grew by 39% YoY and reached RUB 630 million as a result of power grid operating expenses decline by 16.5% YoY (to 2,274 mln RUR).

PROFIT FROM DISCONTINUING OPERATION

Profit from discontinuing operation, representing result of power generating, was RUB 826 mln as of March 31, 2012 or 65% less than the similar of the previous year. Such change was caused by decrease in sales and price cutting on the wholesale market for electricity and power, decline of heat output related with the higher temperature of the outside air in comparison with the previous year and decrease in demand from a large consumer.

FINANCIAL POSITION

As of the balance sheet date, the total assets of OJSC “Bashkirenergo” amounted to RUB 70,129 million increasing by 7.8% from the beginning of the year. Power generating assets were recorded in a separate line “assets from discontinuing operation” which influenced the structure of assets in Q1 2012 IFRS report.

Hence, share of non-current assets reduced to 26% and amounted to RUB 18,126 million, while share of current assets grew to 74% comprising RUB 52,003 million.

The 50% decline to RUB 1,752 million in trade and other receivables was mainly driven by receipt of payment for power provided in 2011.

Capital and reserves as of March 31, 2012 made up 81.3% of the total equity and liabilities amounting to RUB 57,076 million, up 3% from the beginning of the year. Liabilities of discontinuing operation became the largest liability (RUB 9,027 million), along with deferred tax liabilities (RUB 970 million) and trade and other payables (RUB 970 million), comprising 12.8%, 1.4% and 1.4% of capital and liabilities respectively.

CAPITAL EXPENDITURE

Investment program of Q1 2012 reduced by 31% in comparison with the previous year and amounted to RUB 546 million.

Nevertheless, construction of CCGT CHPP-5 with capacity of 440 MW and 290 Gcal/h continued. The expected term of CHPP-5 putting into operation is 2014 year.

The activity on efficiency improvement of all business segments is also continued.

Implementation of automation system of centralized control (ASCC) in Bashkir distribution grids continued. LLC “BashRTS” has putted into use ASCC in 11 large central heating units of Ufa. The ASCC was also implemented in 2 large heating units of Neftekamsk. This project will make it possible to cut operation expenses, improve economic indicators of heating units, minimize human factor in technological processes and improve equipment reliability.

Renovation of heat production facilities on OJSC Bashkirenergo enterprises was in progress in Q1 2012 as well.

LLC “BsshRES” extensively implements large project on installation of automated system of energy accounting, and as a result 6,312 watthour meters were installed in dozens of settlements by the beginning of April. Only in February of 2012 economic benefit from new metering devices on the retail market was RUB 1,247 thousands.

EVENTS AFTER THE REPORTING DATE

On April 27, 2012 the Board of directors of OJSC Bashkirenergo recommended the Annual General Meeting of Shareholders to distribute the Company’s net profit in accordance with the FY2011 results amounting to RUB 6,664,990 thousand (less previously paid interim dividends for 9M results amounting to RUB 1,005,310 thousand). Total dividend payout by the FY 2011 results on A type preferred shares was recommended in amount of RUR 382,967 thousand, so dividends on each A type preferred share will comprise RUR 8.57. Taking into account previously paid interim dividends by 9M results in amount of RUR 0.92 per each share, the final payment will comprise RUR 7.65 per each A type preferred share.

OUTLOOKS

It is expected that growing rates of electricity prices shall be materially lower than in 2011. Readjustment of tariffs will start from July 1, 2012. The Federal Tariff Service stipulated 6% growth of tariffs for population (or 3% year average) and 15% for other consumers (or 7.5% year average). The set KOM prices for the 2012 capacity being 4% lower than in this year makes the management take even more cost cutting measures of the fixed costs in order to maintain the generation business margins.

On December 30, 2012 the State Committee on tariffs of RB determined long-term regulation characteristics and established tariffs 5-year ahead for OJSC “BSK” This will make it possible to forecast financial results with high degree of reliability.

It is expected revenue decline in 2012 against target indicators due to retirement of property rented by LLC “BashRTS” and changes in regulations of the wholesale market.

At the beginning of 2012 five of six power-generating units at Karmanovskaya hydro electric power plant (branch of OJSC “Bashkirenergo”) were elected by the System Operator of the Unified Power System in the competitive procedure and got the right to participate in the standard primary frequency control. This will make it possible to improve profitability of operations in the wholesale market for electricity and power for both power plant and Company as the whole.

OJSC BASHKIRENERGO AND SUBSIDARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF mARCH 31, 2012 AND DECEMBER 31, 2011 (UNAUDITED)

in millions of Russian Roubles

 

31/03/2012               

 

31/03/2011     

 

ASSETS

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

Fixed assets   

 18,039 

 

52,213

 

Advances paid for acquisition of property, plant and equipment        

   62

 

1,332

 

Inventories

-

 

156

 

Trade and other receivables 

3

 

9

 

Other non-current assets

22

 

59

 

 

 

 

 

 

 

18,126

 

53,769

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Inventories

303

 

1,300

 

Trade and other receivables

1,749

 

3,531

 

Advances paid and prepaid expenses

1,443

 

270

 

Investments

-

 

2,006

 

Income tax prepaid

808

 

244

 

VAT recoverable and other taxes prepaid

207

 

960

 

Cash and cash equivalents

171

 

2,953

 

Assets on discontinuing operation

47,322

 

-

 

 

 

 

 

 

 

52,003

 

11,264

 

 

 

 

 

 

TOTAL ASSETS

70,129

 

65,033

 

EQUITY AND LIABILITIES

 

 

 

 

Capital and reserves

 

 

 

 

 

 

 

 

 

Share capital

1,093

 

1,093

 

Treasury shares

(282)

 

(282)

 

Retained earnings

56,265

 

54,902

 

 

 

 

 

 

Equity attributable to owners of the parent company

57,076

 

55,713

 

 

 

 

 

 

Non-controlling interests

-

 

-

 

 

 

 

 

 

TOTAL EQUITY

57,076

 

55,713

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

Loans and borrowings

-

 

2,265

 

Employee benefit obligations

236

 

625

 

Deferred tax liabilities

970

 

918

 

Other non-current liabilities

292

 

241

 

 

 

 

 

 

 

1,498

 

4,049

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Loans and borrowings

-

 

3

 

Trade and other payables

970

 

2,312

 

Advances received from customers

640

 

1,036

 

Accrued expenses and provisions

453

 

847

 

Income tax payable

-

 

29

 

Other taxes payable

465

 

1,044

 

Liabilities on discontinuing operation

9,027

 

-

 

 

 

 

 

 

 

11,555

 

5,271

 

TOTAL LIABILITIES

13,053

 

9,320

 

TOTAL EQUITY AND LIABILITIES

70,129

 

65,033

 

OJSC BASHKIRENERGO AND SUBSIDARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE three months ENDED mARCH 31, 2011 (UNAUDITED)

in millions of Russian Roubles

 

 

 

3 months ended        

 

 

 

 

March 31, 2012       

March 31, 2011

Revenue

 

 

 

 

 

Electricity and capacity

 

 

2,831

3,104

 

Heat energy

 

 

-

-

 

Other revenue

 

 

74

74

 

 

 

 

2,905

3,178

 

Operating expenses

 

 

 

 

 

Compensation of losses to quarantining supplier

 

 

(816)

(1,106)

 

Staff costs

 

 

(791)

(780)

 

Depreciation

 

 

(342)

(293)

 

Repair and maintenance of equipment and grid

 

 

(136)

(230)

 

Materials and spare parts

 

 

(44)

(59)

 

Purchase of electricity and heat

 

 

(35)

(28)

 

Fuel

 

 

(21)

(23)

 

Taxes, other than income tax

 

 

(9)

(6)

 

Rent

 

 

(7)

(8)

 

Change in provision for tax and legal contingencies

 

 

26

4

 

Change in provision for doubtful debts

 

 

-

(1)

 

Charity

 

 

-

(95)

 

Loss on disposal of property, plant and equipment

 

 

-

-

 

Other operating expenses

 

 

(99)

(98)

 

 

 

 

(2,274)

(2,723)

 

Operating profit

 

 

631

455

 

 

 

 

 

 

 

Finance income

 

 

4

2

 

Finance cost

 

 

(5)

(4)

 

 

 

 

 

 

 

Profit before income tax

 

 

630

453

 

 

 

 

 

 

 

Income tax

 

 

(93)

(114)

 

 

 

 

 

 

 

Profit from continuing operations

 

 

537

339

 

 

 

 

 

 

 

Profit from discontinuing operations

 

 

826

2,404

 

 

 

 

 

 

 

TOTAL PROFIT AND COMPREHENSIVE INCOME FOR THE PERIOD

 

 

1,363

2,743

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Owners of the parent company

 

 

1,363

2,743

 

Non-controlling interests

 

 

-

-

 

 

 

 

 

 

 

EARNINGS PER SHARE FROM CONTINUING AND DISCONTINUING OPERATIONS

 

 

 

 

 

Basic and diluted earnings per share (in Roubles)

 

 

1.29

2.57

 

 

 

 

 

 

 

EARNINGS PER SHARE FROM CONTINUING OPERATIONS

 

 

 

 

 

Basic and diluted earnings per share (in Roubles)

 

 

0.49

0.25

 

OJSC BASHKIRENERGO AND SUBSIDARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED mARCH 31, 2012 (UNAUDITED)

in millions of Russian Roubles

 

3 months ended

March 31, 2012                

 

3 months ended

March 31, 2011

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Profit before income tax

1,746

 

3,483

 

Adjustments for:

 

 

 

 

Depreciation

913

 

917

 

Change in provision for tax and legal contingencies

(28)

 

(64)

 

Change in provision for unused vacations and bonuses

9

 

49

 

Loss/(income) on disposal of property, plant and equipment

2

 

(70)

 

Change in allowance for doubtful receivables

(50)

 

233

 

Income from the disposal of a subsidiary

13

 

11

 

Finance income

(40)

 

(5)

 

Finance losses

1

 

10

 

Other adjustments

 

 

 

 

 

 

 

 

 

Operating cash flow before movements in working capital         

2,566

 

4,564

 

 

 

 

 

 

Change in inventories

(320)

 

(223)

 

Change in trade and other receivables

(1,164)

 

(4,772)

 

Change in advances paid and prepaid expenses

(1,236)

 

(133)

 

Change in taxes receivable, other than income tax

(28)

 

(330)

 

Change in trade and other payables

(717)

 

2,561

 

Change in advances received from customers

1,420

 

(528)

 

Change in taxes payable, other than income tax

159

 

1,075

 

Net cash provided by operations

680

 

2,214

 

 

 

 

 

 

Income tax paid

(368)

 

(844)

 

Interest paid

-

 

(8)

 

 

 

 

 

 

Net cash generated from operating activities

312

 

1,362

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

(546)

 

(790)

 

Proceeds from disposal of property, plant and equipment

-

 

269

 

Disposal of Special Purpose Entities

-

 

(158)

 

Purchase of investments

-

 

(37)

 

Proceeds from disposal of investments

-

 

38

 

Interest on deposits

40

 

5

 

 

 

 

 

 

Net cash used ininvesting activities

(506)

 

(673)

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Dividends paid

-

 

-

 

Buy-back of ordinary shares

-

 

-

 

Proceeds from loans and borrowings

-

 

2,790

 

Principal repayments on loans and borrowings

-

 

(2,950)

 

 

 

 

 

 

Net cash received from (used in) financing activities

-

 

(160)

 

Net increase/(decrease) in cash and cash equivalents

(194)

 

529

 

Cash and cash equivalents at beginning of the period

2,953

 

569

 

Cash and cash equivalents classified as disposal group

(2,588)

 

-

 

Cash and cash equivalents at end of the period

171

 

1,098

 

 

 

 

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