For 9M2017, revenue of the Lenenergo Group grew by 9.5% and totaled RUB 44,153 mln. EBITDA grew by 19.0% and totaled RUB 19,374 mln. Net profit for the reporting period was RUB 6,726 mln (9M2017: RUB 5,402 mln).

Note:
EBITDA is calculated as profit before tax + depreciation of property, plant and equipment and amortization of intangible assets + finance expenses - finance income.
Net debt is calculated as long-term and short-term borrowings - cash and cash equivalents - short-term investments.
ROE is calculated using net profit for the past 12 months.

Revenue and financial result

Group’s revenue

Sales revenue following 9M2017 was RUB 44,153 mln, +9.5% y-o-y (9M2016: RUB 40,329 mln).

·         Growth of revenue from electricity transmission services for 9M2017 y-o-y (9M2016) is explained by the increase in tariff rates in 2017 against the year 2016, inclusion of consumers of the ex-responsibility area of JSC SPb ES in the amount of the productive supply, and productive supply growth in respect of the group “Population” in the Leningrad Region.

·         Growth of revenue from technological connection for 9M2017 y-o-y (9M2016) is explained by performance of the obligations to the applicants, which were accumulated before 01.01.2017.

·         Fall in revenue from other activity for 9M2017 vs 9M2016 by 30.8% is due to the reduction in incomes under compensation contracts by 87.7%.

Group’s operating expenses

Operating expenses of the Group for the reporting period were RUB 34,544 mln, +3.7% y-o-y (9M2016). 

Comments concerning the dynamics of the most essential cost items:

·         Depreciation of property, plant and equipment

Growth of the property, plant and equipment depreciation costs by 22.0% was due to the increase in their book value as a result of the property, plant and equipment commissioning in 2016 in the amount of RUB 20,643 mln.

·         Payroll and payroll taxes

Labor remuneration expenses grew 16.4% due to the actions held to index official salaries in accordance with the Collective Agreement of PJSC Lenenergo, as well as due to leveling the official salaries of the production personnel in the branches within the framework of implementation of the actions aimed to optimize business processes of the Group PJSC Lenenergo.

·         Depreciation of intangible assets

Reduction in costs for the depreciation of intangible assets by 80.4% was due to the reduction in the depreciation of the intangible assets “Income-baring contracts”, which were recognized in the consolidated statements regarding such companies as JSC SPb ES and JSC PES at the time of their acquisition. The major part of the income-bearing contracts was depreciated in 2016.

·         Provision / (provision reversal) for receivables impairment and write-off

Fall in the expenses for the creation of the provision for receivables impairment and write-off by 72.2% is explained mainly by the decrease in the amount of the doubtful receivables requiring the creation of the provision.

·         Provisions for court proceedings and claims

Fall in expenses for court proceedings and claims by 39.9% is due to the reversal of the earlier created provision regarding the litigations settled in favor of the Group.

·         Expenses in the form of fines, penalty fees, forfeits

Increase in the expenses in the form of fines, penalty fees, forfeits by 397.9% was mainly due to the recognition, in 2017, of the fine in the amount of RUB 303 mln, as agreed with Russia’s Ministry of Energy. 

Group’s operating profit

Operating profit of the Group for 9M2017 was RUB 9,609 mln, + 37.2% y-o-y (9M2016). 

Group’s net profit

Following 9M2017, the Group received the net profit in the amount of RUB 6,726 mln (9M2016: RUB 5,402 mln). The positive dynamics of the 9M2017 financial result, besides the increase in the revenue for electricity transmission net of technological losses by 9.7%, was materially influenced by the growth of technological connection revenue by RUB 1,513 mln (35.1%).

EBITDA

EBITDA for 9M2017 was RUB 19,374 mln, + 19.0% y-o-y (9M2016: RUB 16,274 mln).

Calculation of EBITDA, RUB mln

EBITDA margin for 9M2017 grew by 3.5 percentage points and totaled 43.9%. The indicator dynamics is explained by higher rates of the EBITDA growth against the Group’s revenue growth. 

Credit portfolio and debt position

Credit portfolio in the form of short-term and long-term credits and loans of the company as at the end of the reporting period totaled RUB 32,567 mln, -5.7% against the similar indicator as at the end of 2016.

The reduction in the debt concerning the main debt amount against the year beginning is explained by the Group’s lower need for borrowed funds and early repayment of the current debt due to the positive cash flow on the operating activities for 9M2017.

The debt on interest fell due to the decrease in the interest rate on the exchange-traded bonds of series BO-05 following the results of the completion of offers on 23.01.2017 and 19.07.2017, as well as the work performed during 9M2017 related with the optimization of the credit portfolio and minimization of the expenses for the debt servicing in the form of refinancing the credits with higher interest rate using the credits with lower interest rate.

Net debt following 9M2017 was RUB 23,597 mln, -2.1% against the similar indicator as at the end of 2016. The reduction in the net debt was due to the fall in the debt on credits.

Net debt/EBITDA (for 12 months) as at the end of the reporting period was 0.87 against 1.01 as at 31.12.2016.

Investments

Capex amount for 9M2017 was RUB 11,829 mln, +54.6% y-o-y (9M2016: RUB 7,650 mln).

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