Main results of the reporting period

mln rub, unless otherwise specified

Notes:
EBITDA Indicator was calculated by the formula: pre-tax profit + depreciation of fixed assets and intangible assets + financial expenses - financial income.,
Connected capacity Indicator was calculated on the basis of technological process, without oscillation.

"Profit of the Company by the results of 2018, was more than 10,5 bln rub. Revenue from electric power transmission increased by 13%. Financial position of the Company is stable sound - debt burden is declining, Debt/EBITDA Ration is at the comfortable level 1,0§ç".

- Polinov Aleksey Aleksandrovich,
Deputy General Director
of Economy and Finance of Lenenergo PJSC

Key events in 2018:

- On 12 January, General Director of Lenenergo PJSC Andrey Ryumin took office;

- On 5 February, the Lenenergo PJSC extraordinary General Shareholders' Meeting was held, at which new Company's Board of Directors was elected;

- On 8 June, the Lenenergo PJSC Annual General Shareholders' Meeting was held, at which new Company's Board of Directors and Audit Commission members were elected, payment of dividends for 2017 amounted to 2,4 bln rub was approved;

- In July Lenenergo PJSC provided electric power supply for objects, involved in activities of World Cup; Thanks to the coordinated interaction of the grid company, it managed to ensure the system reliability of the power system during the Championship;

- On 21 December, Lenenergo PJSC launched the first in Leningrad Region automated electric grid area, founded at the base of Vsevolozhsk PGD.

Explanations for operating results

Increase in productive electric power supply in 2018 by 3.0%, compared with 2017, resulted from:

¡ö      increase in electric power consumption over all groups of consumers,including large industrial enterprises and population;

¡ö      inclusion of consumers of former area of operations of SPb ES JSC in the volume of productive electric power supply from April 1, 2017.

Loss enhancement by 0.4 p.p. was due to implementation of Energy loss saving program, which includes measures for modernization of electric power accounting system, identifying electric power consumption without accounting and contracts.

Explanations for financial results

Revenue of Lenenergo Group PJSC amounted to 77,990 mln rub, among them:

Revenue from electric power transmission services amounted to 66,807 mln rub, which is 13.0% (7,897 mln rub) higher than that of the previous year, in particular by:

¡ö      increase in tariff rates taking into account implementation in 2018 by Committee on Tariffs and Pricing Policy of Leningrad Region and Committee on Tariffs of Saint-Petersburg of return "smoothing" mechanism of its own required gross proceeds of Lenenergo PJSC (summarily for two regions - 5,390 mln rub);

¡ö      inclusion of consumers of former area of operations of SPb ES JSC in the volume of productive electric power supply from April 1, 2017.

Revenue from technological connection services amounted to 7,975 mln rub, which is 47.3% (7,151 mln rub) lower than that of the previous year. Decrease in revenue is connected with the abnormally high amount of proceeds from technological connection services for 2017, which were significantly higher than annual averages for the last 5 years (on average of 6-7 bln rub per year). The growth of this indicator in 2017 was due to large amount of completed contracts on technological connection under the program on execution of previously accrued liabilities, which began in 2016, including by implementing State support program of Lenenergo PJSC.

Operating expenses of Lenenergo Group PJSC for the reporting period amounted to 61,565 mln rub, which is 4.6% lower than that of the previous year, in particular by:

¡ö      reduction of expenses on depreciation by 7.8% as a result of recognised cost reduction of fixed assets of the Group as at June 30, 2018 in the amount of 34,596 mln rub;

¡ö      no decrease in fair value of fixed assets in 2018.

Operating profit of Lenenergo Group PJSC over reporting period amounted to 16,171 mln rub, which is 29.5% higher than that of the previous year, in particular by:

¡ö      reduction of operating expenses by 4.6%;

¡ö      reduction of other net expenses by 58.8% is mainly due to the increase in income from revealed non-contractual consumption and income under compensation contracts.

Net profit of Lenenergo Group PJSC over reporting period amounted to 10,600 mln rub, which is 36.7% higher than that of the previous year, in particular by:

¡ö      increase in revenue from electric power transmission by 13.0%;

¡ö      reduction of operating expenses by 4.6%;

¡ö      reduction of financial expenses in terms of interest expenses on credits and loans by 16.3%.

EBITDA of Lenenergo Group PJSC over reporting period amounted to 28,113 mln rub, which is 10.5% higher than the same indicator of the previous period. Increase in EBITDA, compared to the same period in 2017, was mainly influenced by the growth of revenue from the provision of transmission services, reduction of other net expenses; reduction of operating expenses, including losses from depreciation.

EBITDA margin of Lenenergo Group PJSC was 36.1%, which is 3,3 p.p. higher than the same indicator of the previous period. Increase of the indicator is connected with increase in operating profit by 29.5%.

Investments

mln rub, unless otherwise specified

Amount of capital investments over the reporting period was 20,722 mln rub (26.5% lower than the indicator of the same period), amount of input over the reporting period was 23,265 mln rub, which is 19.2% lower than the indicator of the same period in 2017 (28,783 mln rub).

Decrease in these indicators in the reporting period was due to decrease in the amount of capital investments in technological connection activities.

Main balance sheet items

mln rub, unless otherwise specified

Notes:
Net debt was calculated according to the formula: long-term and short-term credits and loans - cash and cash equivalents ¨C short-term investments;
ROE was calculated according to the formula: (Net income (for 4 quarters)/Equity)*100

As at December 31, 2018, the assets of Lenenergo Group PJSC amounted to 205,823 mln rub, which is 12.3% lower than the same indicator at the end of 2017. Substantial change in assets was mainly due to the recognition of price reduction of fixed assets of the Group as at June 30, 2018 in the amount of 34,596 mln rub.

Return on equity (ROE) of Lenenergo Group PJSC amounted to 8.1%, which is 2.9 p.p. higher than the same indicator of the previous period. Increase of the indicator was connected with increase in net profit compared to 2017.

Loan portfolio of Lenenergo Group PJSC in the form of short-term and long-term credits and loans of the Company at the end of the reporting period amounted to 34,538 mln rub, which is 6.5% lower than the same indicator at the beginning of the year.

Amount of the principal debt decreased by 2,403 mln rub. Reduction of indebtedness of Lenenergo Group PJSC on the amount of principal debt, in comparison with to the beginning of the year, was due to the formation of positive net cash flow for operating activities.

At the same time, amount of the net debt of Lenenergo Group PJSC over 12 months of 2018 was 28,180 mln rub, which is 15.9% lower than at the beginning of the year.

As at December 31, 2018, net debt/EBITDA of Lenenergo Group PJSC amounted to 1.0x against 1.3x as at the end of 2017. Dynamics of the indicator is due to a significant decrease in the net debt of the Group during concomitant increase in EBITDA.

Financial reports can be found on the Company's website: https://www.lenenergo.ru/shareholders/fin_reports/

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