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Unified Energy System

December 27, 2007

RAO UES releases IFRS consolidated financial statements of RAO UES Group for H1 2007

Moscow. 27 December 2007. RAO "UES of Russia" has released the consolidated interim financial statements of RAO UES Group* for the first half of 2007 prepared in accordance with the International Financial Reporting Standards (IFRS).

Consolidated Interim Balance Sheet as of 30 June 2007

The Group's total assets increased over the first six months ended 30 June 2007 by RUB797.1 million to RUB2,340.5 billion. Of that amount, the Group's capital assets amounted to RUB1,954.6 billion, up RUB695.6 billion, while its current assets reached RUB385.9 billion, which represents an increase of RUB106.4 billion from the beginning of the year.

As at 30 June 2007, the property, plant and equipment of RAO UES Group stood at RUB1,813.9 billion, an increase of RUB596.3 billion from RUB1,217.5 billion at the beginning of the year. The rise in the book value of PP&E was due to revaluation** of these assets as a result of a change in IFRS accounting policies as well as due to the increased capital expenditures in the construction of new and modernization of the existing grid and generating capacity.

As at 30 June 2007, the Group's accounts receivable totalled RUB169.5 billion, up RUB35.2 billion from the beginning of the reporting period. The receivables were mostly influenced by an increase in trade receivables as well as the seasonal growth in advances to suppliers and repair and maintenance contractors.

The Group's accounts payable in H1 totalled RUB136.2 billion, up RUB24.1 billion. Long-term and short term borrowings totalled RUB222 billion, an increase of RUB12.3 billion from the beginning of the year. The majority of the increase was due the Group's entities bond loans to finance construction and modernization of electric power capacity.

In H1 RAO UES Group improved current liquidity ratio: as at 30 June 2007 current assets exceeded current liabilities by RUB102.3 billion. This is mostly due to the increase in cash assets by RUB70.1 billion raised, in particular, as a result of disposal by RAO UES of stocks in a number of energy retail companies, generating companies (including WGC-5, Yuzhnokuzbasskaya TPP and Zapadno-Sibirskaya CHPP) as well as bond loans and additional emission placements by Group's entities.

Consolidated Statement of Operations for H1 2007

The Group's revenues in H1 2007 amounted to RUB503.4 billion (excluding gain from sale/placements of shares of Group's entities (gain from asset sale)***), an increase of RUB57.3 billion compared to the same period of last year. Overall, the increase in the Group's revenues during the reporting period was due to the increase in revenues from sales and transmission of electricity.

The Group's operating expenses grew RUB56.6 billion to RUB450 billion. The operating expenses were most significantly affected by expenses of Group's entities on electricity purchases, amortization as a result of asset revaluation, and expenses on transmission of electricity and heat through the grids not owned by RAO UES entities.

EBITDA, which was calculated excluding gain from sale/placements of shares of Group's entities (gain from asset sale), during the reporting period totalled RUB96 billion, up RUB12.5 billion. EBITDA totalled RUB145.5 billion including gain from asset sale.

Compared to H1 2006, the Group's H1 2006 operating profit was up RUB51.1 billion, or twofold, to RUB103.8 billion. This is mostly due to sale of shares in RAO UES subsidiaries. Profit before tax amounted to RUB93.5 billion, up RUB47 billion or the same twofold.

In January-June 2007, the Group reported a net income of RUB18.7 billion, which represents a decrease of RUB8.4 billion compared to H1 2006. This was chiefly due to an additional deferred tax on profit from accomplished and planned sales of shares in WGCs/TGCs held by RAO UES and entitled to the State (the so-called State's Stake). These funds will be allocated to finance investment programmes of the Federal Grid Company and HydroWGC.

Consolidated Interim Cash Flow Statement for H1 2007

The net cash flow from operations in H1 2007 totalled RUB47.2 billion, up 40.4%. Net cash flow from financial activities amounted to RUB72.8 billion, up 5.3-fold, mostly due to placement of additional shares in the Federal Grid Company and WGC-5 as well as bond loans by Group's entities.

The reporting period kept a continued upward trend in the Group's fixed asset investments. The Group allocated RUB99.3 billion for investment, up RUB49.7 billion. The increase was mostly seen in the Federal Grid Company (by RUB12.3 billion), Moscow Regional Electricity Distribution Company (by RUB14 billion), Far East generation Company (by RUB4.3 billion), TGC-1 (by RUB4.4 billion), WGC-5 (by RUB2.1 billion), Bureyskaya HPP (by RUB1.2 billion).

The financial statements were audited by ZAO "PricewaterhouseCoopers Audit", approved as the Group's external auditors by the AGM of RAO "UES of Russia".


* RAO UES Group consists of RAO "UES of Russia" and its subsidiaries and dependent companies. The Group's IFRS financial statements have been prepared since 1997.

** Before 1 January 2007, according to RAO UES IFRS accounting policies, the Group stated property, plant and equipment at a depreciated cost less impairment. Starting from 1 January 2007 the Group states property, plant and equipment at a revalued cost. This suggests appraisal of assets at fair value determined by independent appraisers Ernst & Young and Deloitte.

*** Gain from sale of Group's entities amounting RUB49.6 billion resulted from stated profit from sale of stocks in seven energy retail companies, Yuzhnokuzbasskaya TPP, Zapadno-Sibirskaya CHPP as well as from placement of additional shares in WGC-3 and Mosenergo. In the IFRS financial statements the gain given was calculated as a spread between the price the stocks were sold at and the Group's share in asset value under IFRS.

 

 

 

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