August 29, 2017. Moscow, Russia. RusHydro Group (hereinafter referred to as the “Group”, ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces its condensed consolidated interim unaudited financial information prepared in accordance with International Financial Reporting Standards (IFRS) for the 2^nd quarter and 1^st half of 2017.

Key highlights for 1H 2017:

• Financial results reflected increase in sales of capacity due to liberalization of hydropower capacity market in Siberia and launch of Zelenchukskaya HPP, divestment of LLC Energy of Bashkortostan (LLC ESC Bashkortostan) in the end of 2016, effect of the forward contract with VTB Bank recognized as long term derivative instrument;

• Total revenue in 2Q 2017 - RUB 84,295 mn (-2.7%), in 1H 2017 – RUB 187,654 mn ( - 3.4%), excluding contribution of LLC ESC Bashkortostan comparable revenue for the 2Q and 1H increased by 5.8% è 5.4%, respectively^[1];

• 2Q 2017 EBITDA^[2] – RUB 21,313 mn (+2.4%), 1H 2017 EBITDA – RUB 51,547 mn (+7.3%); excluding contribution of LLC ESC Bashkortostan increase in comparable EBITDA for the 2Q and 1H – 4.9% è 10.4%, respectively;

• Operating expenses in 2Q 2017 decreased by 4.2%, in 1H 2017 – by 7.0% mainly due to divestment of LLC ESC Bashkortostan in the end of 2016; excluding contribution of LLC ESC Bashkortostan comparable operating expenses for the 2Q and 1H increased by 5.6% and 2.9%, respectively;

• Net profit for 1H 2017 – RUB 22,303 mn (-12.5%); net profit adjusted for non-cash items^[3] – RUB 32,298 mn (+8.5%).

2Q and 1H 2017/2016 highlights (in RUB mn)

Comparable 2Q and 1H 2017/2016 highlights (in RUB mn), excl. LLC ESC Bashkortostan^[1]

Operating results

Total electricity generation by power plants of RusHydro Group in 2Q 2017 amounted to 34,409 GWh (+6.4%), in 1H 2017 – 63,535 GWh (+0.7%). In 2Q 2017, total production by hydropower and pumped storage plants amounted to 27,506 GWh (+7.1%), total output by fossil fuel and geothermal plants – 6,903 GWh (+3.6%). In 1H 2017, total production by hydropower and pumped storage plants amounted to 47,959 GWh (+2.4%), total output by fossil fuel and geothermal plants – 15,576 GWh (-4.3%).

Main factors, determining operating results in January-June 2017, were:

• aggregated inflows to reservoirs of the Volgo-Kama cascade in 1H 2017 slightly higher than long-run average;

• inflows to reservoirs of Siberia in 1H2017 on the level of 2016;

• inflows to reservoirs in the South of Russia slightly higher or close to normal;

• reduction of energy consumption in the Far East and lower outflows from United Power System of the Far East to Siberia as well as lower export to China;

In the 1^st half of 2017, heat output by thermal plants of RusHydro Group in the Far East decreased by 8.2% to 16,756 thousand GCal as compared to the same period of 2016. The decrease is due to higher temperatures and reduced length of heating season in a number of towns of the Far Eastern Federal District.

Events in January – June 2017

• In January 2017, the Company finalized execution of pre-emptive right by eligible shareholders to acquire Company’s shares of additional issue, registered by Bank of Russia on 7 December 2016. During the pre-emptive right period the Company placed 33,348,661 additional shares priced at RUB 1 per share, or 0.08% of the total volume of additional issue.

• In March 2017, the Company and PJSC Bank VTB signed agreements related to a purchase of 55 bn ordinary shares of the Company (40 bn shares of the new issue and 15 bn shares of quasi-treasury stock) and conclusion of a 5-year non-deliverable forward contract in respect of these shares. The cash in the amount of RUB 55 bn received by the Company through the sale of shares was used to repay the debt of RAO ES East subgroup. In accordance with the forward contract, the Company has no obligation to buy back its own shares; for the purposes of final settlement under the forward contract it is envisaged that PJSC Bank VTB sells the Company’s shares. Any difference between PJSC Bank VTB’s income from the sale of the above shares at the end of the forward contract and the forward price is due to be settled in cash between the Company and PJSC Bank VTB. The forward price is defined as the purchase cost of the shares increased by the total amount of interests charged less total dividends paid during the contract period.
  
  On 11 May 2017, the placement of the Company’s ordinary shares of additional share issue 2016–2017 was completed. 40,033,348,661 shares were placed as a result of the additional issue, which represents 99.02% of the additional issue's total number of securities. The placed securities were paid by cash.
  
  All the proceeds from capital raising were used to repay debt of companies of RAO ES East Subgroup.

• As of April 1, 2017 the management structure of Group’s subsidiary – PJSC RAO ES of East has changed. Headquarters of PJSC RusHydro and PJSC RAO ES East have been integrated; Far East Division has been established within PJSC RusHydro.

• On June 26, 2017, AGM of PJSC RusHydro elected new Board of Directors and approved 2016 dividends of RUB 0.0466245 per share in total amount of RUB 19.9 bn (calculated as 50% of RusHydro Group net profit for 2016 under IFRS).

Revenue

Revenue breakdown in 2Q and 1H 2017/2016 (in RUB mn)

Comparable 2Q and 1H 2017/2016 revenue (in RUB mn), excl. LLC ESC Bashkortostan^[1]

In the 1^st half of 2017, total revenue of the Group decreased by 3.4%. The change is associated with the following key factors:

• decrease in revenue from electricity sales of ESC RusHydro subgroup due to sale of LLC ESC Bashkortostan in the end of 2016 and decreased revenue of PJSC Krasnoyarskenergosbyt following reduced output to customers;

• increase in revenue from electricity sales of RAO ES East subgroup segment as a result of growth of tariffs and increase in electricity output;

• increase in revenue from capacity sales following commissioning of Zelenchukskaya hybrid hydropower plant in Karachayevo-Cherkessia, sold under capacity delivery agreement;

• increase in revenue from capacity sales of PJSC RusHydro at the competitive capacity auctions (KOM) for the hydropower plants in the first and second price zones, liberalization of hydro capacity market of Siberia with the growth of share of capacity sold under KOM tariffs to 100% from May 1, 2016.

Operating expenses^[4]

Operating expenses in 2Q and 1H 2017/2016 (in RUB mn)

Comparable 2Q and 1H 2017/2016 operating expenses (in RUB mn), excl. LLC ESC Bashkortostan^[1]

Total operating expenses in the 1^st half of 2017 compared to the same period of 2016 decreased by 7.0% to RUB 147,736 mn.

RusHydro Group implements a complex of measures aimed at cost optimization, which resulted in revenue growth (+5.4%) exceeding operating expenses increase (+2.9% on comparable basis). At the same time major factors affecting expenses were:

• implementation of program aimed at improving operating and investment efficiency and reducing costs which provides for optimization of expenses related to the headquarters of PJSC RusHydro and RAO ES East subgroup, as well as other non-operating costs;

• disposal of LLC ESC Bashkortostan in the end of 2016, contributing RUB 15,231 mn to Group’s operating expenses in the 1H of 2016; divestment of the company led to reduction of expenses on purchased electricity and capacity, electricity distribution expenses and employee benefits expenses;

• increase in electricity distribution expenses (excluding LLC ESC Bashkortostan) due to tariffs increase and higher volumes of electricity transmission due to increase of useful output;

• decrease in depreciation of plant, property and equipment following changed depreciation period of modernized assets in PJSC RusHydro and disposal of LLC ESC Bashkortostan assets;

• increase in other materials expenses due to changes in activities of a number of RusHydro Group companies;

• increase in employee benefit expenses as a result of indexation of remuneration of the operating personnel in compliance with collective agreements.

Profit

In the reporting period, EBITDA increased by 7.3% to RUB 51,547 mn compared to the same period of previous year.

In the 1^st half of 2017, the Group’s net profit decreased by 12.5% to RUB 22,303 mn. Adjusted net profit in the reporting period amounted to RUB 32,298 – 8.5% increase as compared to the same period of the previous year.
The difference between the reported and adjusted profit is attributed mainly to the following non-cash effects (before income tax) and recognition of change in fair value of the derivative financial instrument:

• financial expense in the amount of RUB 6,451 mn as a result of change in fair value of non-deliverable forward contract;

• impairment of accounts receivable in the amount of RUB 2,633 mn resulting from analysis of overdue receivables and estimation of their collectability;

• impairment of property, plant and equipment in the amount of RUB 1,244 mn;

• loss on disposal of plant, property and equipment in the amount of RUB 219 mn.

Key indicators of financial position

As of June 30, 2017, the Group's assets increased by RUB 39,017 mn or 4.0% to RUB 1,022,463 mn against the comparable figure as at December 31, 2016. Change in assets is primarily attributable to:

• increase in fixed assets of the Group;

• increase in value of cash and cash equivalent;

• increase in accounts receivable.

As at the end of the reporting period the Group's liabilities decreased by RUB 8,320 mn or 2.5% to RUB 324,194 mn against the comparable figure as at December 31, 2016.

Decrease in liabilities was primarily a result of decrease in long-term debt of the Group by RUB 53,039 mn with simultaneous increase in short-term debt by RUB 16,242 mn.

Structure of the liabilities of the Group underwent significant changes:

• proceeds from the share issue were fully allocated to repayment of loans of RAO ES East subgroup;

• in accordance with conditions of non-deliverable forward contract with VTB Bank, the Group recognized liabilities under the contract in the amount of RUB 10,013 mn, recorded as a long-term derivative financial instrument at fair value through profit or loss. At June 30, 2017 the fair value of the contract was RUB 14,665 mn.

Non-deliverable forward contract for shares

In March 2017, the Company entered into a non-deliverable forward transaction for 55 bn of shares with PJSC Bank VTB (the “Bank”) for 5 years.

According to the forward contract, the forward value is determined as the purchase consideration paid by the Bank for the shares plus the accrued interest for the accounting period. The contract provides for quarterly prepayments of the forward value over its effective period. In addition, the forward value of shares and the amount of prepayment are determined excluding the amounts equivalent to dividends received by the Bank over the effective period of the forward contract.

At June 30, 2017, the liability under the forward contract is recorded as a long-term derivative financial instrument at fair value through profit or loss in the amount of RUB 14,665 mn. The fair value of the forward contract at the initial recognition of the instrument was RUB 10,013 mn and was recorded within equity as the result of the shareholder transaction. Subsequent changes in the fair value of the non-deliverable forward contract is recorded within profit or loss. Changes in the fair value of the forward in the reporting period were mainly driven by reduction of market price of RusHydro’s shares.

Fair value of the forward contract, RUB mn

Events after the reporting date

• As of July 1, 2017, management authority of PJSC Far-Eastern Energy Company (PJSC DEK), part of PJSC RAO ES Subgroup, were transferred to management company JSC ESC RusHydro. The transfer of management authority was implemented in the context of development of retail segment of RusHydro Group for 2017-2019, aimed at redefining of the retail business management model.

• On August 10, 2017 the Board of Directors re-elected Yury Trutnev, Deputy Chairman of the Government of the Russian Federation — Plenipotentiary Representative of the President in the Far Eastern Federal District, as a Chairman of the Board of Directors of PJSC RusHydro.

• In July 2017, the Resolution of the Russian Government No. 895 “On reaching basic rates (tariffs) for electric power (capacity) in the territories of the Far East Federal region (the “Far East”)” became effective, under which rates for consumers in the territories of the Far East should be reduced starting from 1 January 2017 to the basic level (RUB 4.00 / kWh). According to the Resolution of the Russian Government No. 1614-r of 28 July 2017, PJSC RusHydro was appointed as the recipient of a premium to the price for capacity provided by the Company in the price zones of the wholesale market under CCS agreements. The premium to the price for capacity is set in order to achieve the basic level of rates (tariffs) for electricity (capacity) planned for the next regulation period in the Far East constituent regions. Within the amounts defined by Resolution No. 1615-r of the Russian Government dated 28 July 2017, the Company translates the collected amounts of margin in the form of free-of-charge targeted contributions to the budgets of the respective regions. The Group companies being guaranteeing suppliers will receive compensation for the shortage of income related to the reduction of rates, through subsidies from the Far East constituent regions.