RusHydro Group (hereinafter referred to as the “Group”, ticker symbol: MOEX, LSE: HYDR; OTCQX: RSHYY) announces its condensed consolidated interim unaudited financial information prepared in accordance with International Financial Reporting Standards (IFRS) for the 1st quarter of 2014.

Key highlights for 1Q 2014:

§  Strong quarterly results on high storage levels and affluent water inflows in both pricing zones, cost control, favorable pricing environment on the wholesale electricity market;

§  1Q 2014 EBITDA – RUB 25.5 bn (+9.0%);

§  Net profit – RUB 14.3 bn (+33.6%); net profit adjusted for non-cash items – RUB 15.9 bn (+9.1%).

1Q 2014/2013 highlights (in RUB mn)

Operating results

In the 1st quarter of 2014, total electricity generation by power plants of the Group amounted to 31,120 GWh, a 0.3% decrease as compared to the same period of 2013. In the 1st quarter of 2014, hydropower (HPPs) and pumped storage power plants (PSPPs) of the Group increased electricity generation by 2.7% to 22,746 GWh, output by thermal (TPPs) and geothermal plants located in the Far East of Russia decreased by 7.6% to 9,064 GWh.

The underlying factors of the production change of the Group in January-March of 2014 were:

§  higher than average water resources in reservoirs of the hydropower plants of the Far East and Center of Russia as of the beginning of 2014;

§  water inflow to reservoirs of the Volga-Kama cascade higher than long-run average;

§  higher than normal water inflows to the Sayano-Shushenskaya and Kolymskaya hydropower plants reservoirs;

§  decrease in electricity generation by TPPs of the Far East due to warm winter temperatures and increased hydro production in the unified power system of the Far East;

§  launch of the first hydro units of the Ust’-Srednekanskaya HPP in the second half of 2013.

Events in January-March 2014

§  In February, 2014 the Board of Directors approved the investment program of the Group for 2014-2018, which provides for funding in the amount of RUB 360,868.55 mn (incl. VAT).

§  In March RusHydro secured two credit facilities in total amount of EUR 190 mn arranged by ING Bank and Crédit Agricole Corporate & Investment Bank Deutschland for modernization of Saratovskaya HPP.

§  In March the Board of Directors approved the amended Regulations on the dividend policy. The amended dividend policy provides for dividends payout of consolidated net profit of the Group calculated under IFRS.

Revenue

Revenue breakdown 1Q 2014/2013 (in RUB mn)

In the 1st quarter of 2014, total revenue of the Group increased by 6.0% to RUB 94,716 mn. The change is associated with the following factors:

§  increase in electricity generation by hydropower plants of Siberia and the Far East;

§  increase in electricity sales volumes and prices on the “day-ahead” market in the first pricing zone following indexation of fuel tariffs for industrial consumers from the 2nd half of 2013;

§  increase in capacity prices of the competitive capacity auctions for the HPP’s of the first pricing zone

§  indexation of regulated electricity and capacity tariffs from the 2nd half of 2013.

Operating expenses

Operating expenses in 1Q 2014/2013 (in RUB mn)

Total operating expenses increased by 5.9% from RUB 70,922 mn to RUB 75,071 mn.

Major factors affecting expenses:

§  growth of labor expenses as a result of indexation of salaries of core operating personnel in accordance with collective agreements;

§  increase in expenses for depreciation of fixed assets due to termination of classification of DRSK as a subsidiary acquired exclusively with a view for resale in the end of 2013;

§  increase in electricity distribution expenses due to growth of tariff for electricity distribution services;

§  fuel expenses reduction following the decrease of heat and power generation by heat and power plants, as well as switching to natural gas;

§  accrual of impairment of accounts receivable due to increase in overdue receivables of energy retail companies.

Profit

In the reporting period, EBITDA increased by 9.0% to RUB 25,491 mn compared to RUB 23,393 mn for the same period of previous year. EBITDA growth is related to increase in electricity output by hydropower plants, growth in tariffs and electricity sales volumes.

In the 1st quarter of 2014, the Group’s net profit amounted increased by 33.6% to RUB 14,294 mn compared to RUB 10,698 mn for the same period of the previous year. Adjusted net profit in the reporting period amounted to RUB 15,882 mn, a 9.1% increase as compared to the same period of the previous year. The difference between the reported and adjusted profit is attributed mainly to the following non-cash effects (before the income tax):

§  impairment of shares of OJSC INTER RAO UES in the amount of RUB 1,026 mn due to significant and prolonged decline in their market value;

§  accrual of impairment of accounts receivable in the amount of RUR 512 mn resulting from analysis of past due receivables and estimation of their collectability;

§  accrual of loss from disposal of fixed assets in the amount of RUR 129 mn.

Key indicators of RusHydro Group’s financial position

As of March 31, 2014, the Group's assets increased by RUB 16,185 mn to RUB 868,231 mn against the comparable figure as at December 31, 2013. Change in assets is primarily attributable to increase in fixed assets of the Group, decrease in fuel stores of the majority of companies of RAO Energy System of East subgroup segment, increase in cash due to opening deposit accounts, increase in accounts receivable due to power consumption growth in the 1st quarter of 2014 as compared to the 4th quarter of 2013, as well as impairment of financial assets classified as held for sale.

As at the end of the reporting period the Group's liabilities increased by RUB 2,016 mn from December 31, 2013, to RUB 257,355 mn. Change in the liabilities was mainly a result of obtaining a long-term loan from European Bank for Reconstruction and Development (EBRD) in the amount of RUB 3,530 mn in January 2014, to finance current operating, financial and investment activities of the Company, and a short-term loan secured from Gazprombank in the amount of RUB 1,500 mn, as well as payment of accounts payable to suppliers and contractors.

Events after the reporting date

In April, 2014 Sberbank CIB has arranged an 8-year loan in the amount of RUB 2,776 mn for the Group. The facility will be used to refinance current liabilities of the Company.

In May a new hydropower unit No.4 has been commissioned at the Company's Sayano-Shushenskaya hydropower plant, adding another 640 MW to 7 hydropower units in operation. Currently, the working capacity of the Sayano-Shushenskaya HPP is 5,120 MW with 8 units in operation.

In May the President of the Russian Federation, Vladimir Putin, has signed a decree on further development of JSC RusHydro allowing the Company to issue additional shares providing that the government’s ownership in the share capital of the Company should not be less than 60.5%. The amount of potential issue of additional shares will be determined after the Board of Directors approves the increase of the Company’s share capital.

In May RusHydro has signed a number of agreements on cooperation with the leading Chinese energy companies. The Company signed an agreement on strategic cooperation with PowerChina focused on development of small hydropower generation in Russia. Also RAO ES of the East, RusHydro’s subsidiary, signed an agreement on cooperation with Dongfang Electric International Corporation to develop joint projects in the Russian Far East.

On June 27, 2014, the AGM resolved to pay dividends for 2013 in the amount of RUB 0.0136 per share in total amount of RUB 5,248 mn.

The consolidated financial statements of the Group are available at: http://www.eng.rushydro.ru/investors/reports/

The presentation of the results is available at: http://www.eng.rushydro.ru/investors/presentations/results_presentations/