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Rosseti Centre

December 28, 2015

IDGC of Centre, PJSC held a meeting of the Board of Directors, the Business Plan of the Company for 2016, including the Investment Program, was approved

December 25, 2015 a meeting of the Board of Directors was held, which approved the Company's Business Plan, including the Investment Program for 2016. The Business Plan for 2016 is formed taking into account the socio-economic development of the Russian Federation for 2016-2018, prepared by the Ministry of Economic Development of the Russian Federation. Scenario conditions of formation of the Business Plan for 2016 include the growth of the average joint operation tariff for electricity transmission of the branches of "Belgorodenergo", "Bryanskenergo", "Voronezhenergo", "Kostromaenergo", "Orelenergo", "Smolenskenergo", "Tambovenergo", "Yarenergo" by 7,5%, "Tverenergo" and "Lipetskenergo" by 11% and "Kurskenergo" by 9,5%. According to the forecast by the end of 2016 operating costs per unit of maintenance of electrical equipment in accordance with the Strategy of development of the electric grid complex of the Russian Federation should be reduced by at least 15%, adjusted for inflation to the level of 2012.

Indicators of the Business Plan of the Company for 2016:

Data in bln RUB, unless specified otherwise

Indicators

Expected performance for 2015

Plan for 2016

Change, %

Revenue (total), including:

79,8

86,2

8,0%

Revenue from electricity transmission

77,9

84,1

8,0%

Revenue from grid connection

1,1

1,3

18,2%

Other revenue

0,8

0,8

0,0%

Cost of sales

69,6

74,9

7,6%

EBITDA1

15,3

17,1

11,8%

Net profit

0,8

1,5

87,5%

Amount of electric energy transmitted2, billion kWh

54,7

55,3

1,1%

Electric energy losses, %

9,44%

9,27%

- 0,17 p.p.

Indicators

Expected performance as at 31.12.2015

Plan as at 31.12.2016

Change, %

Loans and credits

42,1

45,7

8,6%

Net debt3

41,9

45,7

9,1%

Net debt/EBITDA

2,7

2,7

0,0%

[1]EBITDA is calculated as follows: net profit + profit tax and other similar mandatory payments + interest payable + depreciation charges

[2]Joint operation productive supply without taking into account losses of TGCs

[3]Net debt is calculated as follows: long-term debt + short-term debt cash and cash equivalents financial investments

Planned revenue for electric energy transmission services within the Business Plan for 2016 is 8,0% higher than the expected performance in 2015, due to increase in the tariff for electric energy transmission services from July 1, 2016 and growth of electric energy consumption. Growth of planned revenue from grid connections is related to expected implementation of large grid connection contracts in the Voronezh and Tver regions.

Increase in cost against the expected fact in 2015 is due to growth of the main non-controllable items of expenditure: by 9,9% "Purchase of electric energy for losses", by 10,1% "Services of PJSC "FGC UES" for electric energy transmission" and by 6,9% "Services of distribution grid companies". Controllable costs will increase only by 4,5% mainly due to the item "Payroll", due to planned increase in the minimum monthly wage rate. It is also expected to significantly reduce the cost of leasing, and outsourcing.

Earnings before interest, taxes, depreciation and amortization (EBITDA) is forecast at 11,8% above the level of the expected fact in 2015 and will be 17,1 bln RUB. The main negative impact on the financial result will be due to interest rates and restoring mutual indebtedness of the Company and sales companies, deprived of the status of a supplier of last resort, in accordance with the progress of litigation to invalidate transactions to offset mutual claims and transfer of funds in the claim period (as part of the bankruptcy proceedings of the sales companies). At the end of 2016 within the Business Plan net profit of 1,5 bln RUB is projected, which is 87,5% higher than the expected fact in 2015.

Projected value of the joint operation productive supply to consumers according to the Business Plan for 2016 will be increased by 1,1% and will amount to 55,3 billion kWh. The main reason for the growth is forecast of keeping to the current level of consumption and commissioning of new grid connection facilities. The size of the planned relative value of losses is lower than the level of the expected fact in 2015 by 0,17 p.p. and is 9,27%.

The approved Business Plan for 2016 includes the Investment Program for 2016-2020, the parameters of which are approved by the Ministry of Energy of Russia. The Investment Program for 2016 includes capital investments in the amount of 13,4 bln RUB (without VAT). During the implementation of the Investment Program for 2016 it is planned to commission 803 MVA of transformer capacity and 4,200 km of overhead and cable power lines.

Indicators of the Investment Program of the Company for 2016-2020:

Indicator

UoM

Planned for 2016

Forecast for 2017

Forecast for 2018

Forecast for 2019

Forecast for 2020

Capital investment, VAT exclusive

bln RUB

13,4

13,9

14,7

15,2

16,1

Financing, VAT inclusive

bln RUB

16,2

16,4

17,4

17,9

19,0

Commissioning of Fixed Assets, VAT exclusive

bln RUB

13,7

14,2

14,9

15,6

16,0

Commissioning of capacity

MVA

803

739

854

1 049

573

km

4 200

4 394

4 773

4 438

5 819

The approved Business Plan for 2016 is in the interest of all stakeholders. It aims to improve the quality and reliability of electricity supply, maintaining financial stability, and break-even operations of the Company and provides for the preservation of dividend payments to shareholders. The adoption of the balanced Business Plan for 2016 will allow the Company to solve all tasks in spite of adverse external economic environment and unresolved legal issues of the distribution sector.

Other IR news of the Company can be found at: https://www.mrsk-1.ru/ru/investors/presentations/ir_news/






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