Revenue of PJSC Lenenergo for 6M2018 grew by 6.9% compared to the same period of the last year and totalled RUB 36,359 mln. EBITDA increased by 8.3% in the reporting period to RUB 14,508 mln. Net profit for 6M2018 was RUB 5,239 mln (6M2017: RUB 4,827 mln).

Note:
EBITDA is calculated as profit before income taõ + depreciation of property, plant and equipment and amortisation of intangible assets + finance expenses - finance income
Net debt is calculated as non-current and current loans and borrowings - cash and cash equivalents - short-term investments
ROE is calculated as (Net profit (for four quarters)/Equity)*100 

Financial results

Revenue of the Group

Sales revenue of the Company for 6M2018 amounted to RUB 36,359 mln; the growth was 6.9% compared to the same period of 2017.

Revenue from electricity transmission services

The growth of revenue from electricity transmission services for 6M2018 versus 6M2017 is explained by increased tariff rates in 2018 and the inclusion of consumers of the former zone of activity of JSC SPEG in productive supply.

Revenue from technological connection services

The drop in revenue from technological connection services for 6M2018 relative to 6M2017 by 41.8% is due to the fact that in 1H 2017 the works were completed, and the issuance of acts of technological connection was carried out upon the readiness of the energy receiving devices of applicants under the obligations performed by PJSC Lenenergo in Q4 2016 within the program of fulfilment of accumulated obligations.

At the same time, in 1H 2018, the obligations under the current contracts were fulfilled in accordance with the planned terms of their closure.

Revenue from other activities

Revenue from other activities for 6M2018 compared to 6M2017 decreased due to a drop in the volume of electrical installation and design service. 

Operating expenses of the Group

Operating expenses of the Group for the reporting period amounted to RUB 28,850 mln, which is 4.6% higher than for 6M2017.

RUB mln, unless otherwise stated

Comments on the dynamics of the key cost items:

·         Electricity transmission services

The growth of expenses by 14.5% is due to an increase in the average tariff for electricity transmission in 1H 2018.

·         Electricity to compensate for losses

The growth of expenses by 6.4% is due to an increase in the average tariff for losses compensation in 1H 2018.

·         Repair and maintenance services

The reduction in expenses by 9.6% is due to the growth in 1H 2018 of the share of repair executed by the economic method and the decreased volume of services provided by third-party contractors.

·         Purchased electricity and heat power for own needs

The growth of expenses by 32.4% is due to the growth of consumption and an increase in the average tariffs in 1H 2018.

·         Taxes and fees other than income tax

The reduction in expenses by 25.8% is due to the reflection in 1H 2018 of the recognised property tax benefit for 2016.

·         Consulting, legal and audit services

The growth of expenses by 52.9% is due to the increase in expenses for the organisation of functioning and development of the UES provided to the Group by its parent company – PJSC Rosseti.

Other material expenses

The growth of expenses by 90.5% is mainly due to the reclassification to this item of material expenses for capital repairs by the economic method from the item ‘repair and maintenance services’.

Rent

The growth of expenses by 48.5% is due to the rent of additional premises for the staff in the framework of executing measures to transfer the operational maintenance function and the personnel of JSC PEG and JSC SPEG to PJSC Lenenergo.

Financial result of the Group

The Group's operating profit for 6M2018 amounted to RUB 7,966 mln, which is 15.0% higher than for 6M2017.

For 6M2018, the Group received a net profit of RUB 5,239 mln, which is 8.5% higher than in the same period of 2017. The positive dynamics of the financial result was influenced by an increase in revenue from electricity transmission services by 14.8%.

EBITDA

EBITDA for 6M2018 amounted to RUB 14,508 mln and increased by RUB 1,113 mln, or 8.3% compared to the same period of 2017. The increase in EBITDA compared to the same period of 2017 was mainly influenced by the growth of the Company's sales profit (net of depreciation) and the improvement in the balance of other income and expenses.

RUB mln, unless otherwise stated

 Assets

As at 30 June 2018, assets of PJSC Lenenergo amounted to RUB 197,665 mln, which is 14.7% lower than at the end of 2017. A significant change of assets of PJSC Lenenergo was associated with the revaluation of fixed assets. In the first half of 2018, the Group conducted the evaluation of property, plant and equipment under the income approach using the discounted cash flow method.

The loss from revaluation of property, plant and equipment caused the decrease in the value of property, plant and equipment of the Group, and the reduction of the pre-formed provision in the section ‘Equity’ of the statement of financial position. The revaluation of property, plant and equipment did not affect cash flows and net profit for the reporting period.

Loan portfolio and debt position

The loan portfolio in the form of current and non-current loans and borrowings of the Company at the end of the reporting period amounted to RUB 30,927 mln, which is lower than at the beginning of the year by 16.2%. The debt on the principal amount decreased by RUB 6,000 mln, while the interest debt increased by RUB 2 mln.

The decrease in principal debt relative to the beginning of the year is due to the repayment of previously received loans.

Interest debt decreased due to the payment of coupon income on exchange-traded bonds of series BO-05, and due to work carried out in 1H 2018 to optimise the loan portfolio and minimise debt servicing costs in the form of refinancing of the loans with a high interest rate by the loans with a lower rate.

Net debt for 6M2018 amounted to RUB 24,527 mln, which is 26.8% lower than at the beginning of 2017. The decrease in net debt was due to a reduction in the loan portfolio, and due to cash inflow from operating activities.

As at 30 June 2018, Net debt/EBITDA was 0.92 x versus 1.32 x at the end of 2017. The dynamics of the indicator is due to a decrease in net debt, and an increase in EBITDA reduced to the annual level.

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