En+ Group S Regulatory News (ENPL)

http://eng.enplus.ru/documents/2017/enplus-group-3q-and-9m-operational-and-financial-results.pdf 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.

**NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN, THE RUSSIAN FEDERATION, AUSTRALIA, OR TO ANY OTHER JURISDICTION WHERE TO DO SO WOULD BE UNLAWFUL**

EN+ GROUP ANNOUNCES 3Q AND 9M 2017 FINANCIAL AND OPERATIONAL RESULTS

4 December 2017 - En+ Group plc (the "Company", "En+ Group" or together with its subsidiaries "the Group"), a leading international vertically integrated aluminium and power producer with core assets located in Russia today announces its financial and operational results for the three and nine months ended 30 September 2017.

Financial highlights:

· In 9M 2017, the Group's revenue increased by 21% y-o-y to USD 8,716 million;

· Adjusted EBITDA[1] of the En+ Group grew by 43% y-o-y to USD 2,316 million in 9M 2017;

· In 9M 2017, the Group's net profit increased by 60% y-o-y to USD 898 million;

· The Group's net debt[2] as of 30 September 2017 decreased by 5% compared to 2Q 2017 to USD 13,103 million (as compared to 30 June 2017);

· On 8 November 2017, the Company successfully completed the largest IPO by a Russian company since 2012 on the London Stock Exchange, raising USD 1,500 million (excluding over-allotment option);

· In November 2017 the Group fully repaid its USD 942 million loan from the VTB Bank (PJSC) ahead of schedule;

· In October 2017, the Company's Board of Directors approved an interim dividend of USD 125 million.

Operational performance:

· In 9M 2017, the Group's electricity production increased by 2% y-o-y to 50.4[3] TWh;

· The Group's hydro power output in 9M 2017 remained almost flat y-o-y at 41.6 TWh;

· Aluminium production in 9M 2017 remained stable y-o-y and totalled 2,762 thousand tonnes, in 3Q 2017 aluminium output increased by 1% compared to 3Q 2016 and totalled 931 thousand tonnes;

· In 9M 2017, the share of value added products (VAP[4]) sales increased by 10% y-o-y to 48%, in 3Q 2017 VAP proportion of sales was 50% an increase of 1% compared to 2Q 2017;

· In 9M 2017, the Group's total alumina production increased by 3% y-o-y, totalling 5,782 thousand tonnes, in 3Q 2017 alumina production totalled 1,965 thousand tonnes an increase of 2% compared to 3Q 2016.

Maxim Sokov, CEO of En+ Group, commented:

"En+ Group has demonstrated strong financial and operating performance in the third quarter and first nine months of 2017, with both our Energy and Metals segments[5] delivering outstanding results. This growth was driven by positive trends in the global aluminium markets, our continued focus on production efficiency and supportive developments in the Russian electricity market.

"These results have enabled us to make progress towards our strategic objective of deleveraging: En+ Group's net debt declined 5%, compared to 30 June 2017.

"In November 2017, En+ Group successfully completed its IPO on the London Stock Exchange and Moscow Exchange, raising USD 1,500 million (excluding the over-allotment option). This was the largest offering by a Russian company since 2012, and the largest public offering in the metals and mining and energy segments on the London Stock Exchange so far in 2017. The Company saw demand from a wide range of international investors, who appreciated the unique business model and attractive investment case of En+ Group, in particular the full integration of its clean hydro power and aluminium operations. In line with pre-IPO commitments, the proceeds of the offering have been spent on deleveraging: in November, ahead of schedule the Group repaid in full its VTB loan totalling USD 942 million."

Consolidated financial results

Revenue

In 9M 2017, revenue increased by 21% to USD 8,716 million as compared to USD 7,203 million in 9M 2016. In 3Q 2017, the Group's revenue increased by 17% to USD 2,875 million as compared to USD 2,455 million in 3Q 2016.

The increase in 9M 2017 revenue came on the back of the increased aluminium price[6] on the London Metals Exchange ("LME") (up 23% from USD 1,569 per tonne in 9M 2016 to USD 1,924 per tonne in 9M 2017) and sales of the Energy segment (increased in 9M 2017 by 35% to USD 2,308 million, the average sale price on the whole sale market[7] increased in 9M 2017 by 15.3% y-o-y to 716 RUB/MWh compared to 621 RUB/MWh in 9m 2016 ).

EBITDA

In 9M 2017, Adjusted EBITDA of En+ Group grew by 43% to USD 2,316 million supported by operational excellence and effective cost control. Despite rouble appreciation and inflationary pressures affecting aluminium production costs, the Group's Adjusted EBITDA margin grew by 4 p.p. y-o-y to 27%. Adjusted EBITDA increased to USD 803 million in 3Q 2017, up 41% y-o-y. Adjusted EBITDA margin rose 5 p.p. y-o-y to 28% in the same period.

Net profit

In 9M 2017, the Group's net profit increased by 60% to USD 898 million as compared to USD 561 million in 9M 2016. In 3Q 2017, the Group's net profit grew by 43% to USD 350 million as compared to USD 244 million in 3Q 2016.

Capital expenditures

In 9M 2017, the Group's capital expenditures were in line with its investment programme and amounted to USD 650 million.

The Energy segment's capital expenditures stood at USD 103 million in 9M 2017 (up 16% y-o-y, but almost flat in rouble terms). A strategic priority of the CAPEX plan for the Group's Energy segment is the hydro power plant ("HPP") modernisation programme.

As part of its HPP modernisation programme, the Group installed the following upgrades in 9M 2017:

· One runner at Bratsk HPP, the final of 12 runners to be replaced at the HPP;

· One runner at Ust-Ilimsk HPP, the third of a planned four runners to be replaced at the HPP. The installation of the fourth runner is expected to take place in 2018.

· Two runners at Krasnoyarsk HPP. These were produced in August 2017 and delivered to the HPP. New runners are expected to be commissioned by 2019. Additionally, all of the HPP's 12 hydro power generating units were already replaced as part of the modernisation programme, while all equipment in open switchgears was also modernised;

· In addition, the Group approved the replacement of three hydro power generating units at Irkutsk HPP, with a total budget of RUB 2.6 billion. The units are expected to be commissioned in 2022.

Metals segment CAPEX amounted to USD 547 million in 9M 2017 (up 34% y-o-y). The segment continued its investment in the following key projects as per its strategic priorities. For example:

· Bauxite self-sufficiency (Dian-Dian in Guinea);

· Expansion of alumina capacities expansion (Friguia relaunch in Guinea);

· Carbon materials self-sufficiency (Volgograd calcined coke and anode plant and Taishet anode plant);

· Growth in production of value added products (modernisation of Hertwich line at the Khakas smelter).

Dividends

The En+ Group follows a dividend policy[8] to pay on at least a semi-annual basis dividends which will be equal to the sum of:

· 75% of Free Cash Flow of the Energy segment, subject to a minimum of USD 250 million per annum; and

· 100% of dividends received from UC RUSAL[9].

In 2017, up to the date of this announcement, the En+ Group paid interim dividends in respect of 2017 totalling USD 201 million. The amount of dividend payments received within the same period by En+ Group from UC RUSAL totalled USD 144 million.

In October 2017, En+ Group's Board of Directors approved further interim dividends of USD 125 million (or USD 0.21875 per share and Global Depository Receipt). The dividend will be paid out to shareholders in USD on 20 December 2017. Following this payment, the overall dividend payments in respect of 2017, made by the Company in 2017 will amount to USD 326 million.

Deleveraging

En+ Group continued to optimise its debt portfolio in Q3 2017. The Group's net debt was down from USD 13,811 million at the end of 2Q 2017 to USD 13,103 million at the end of 3Q 2017.

In November 2017, after the reporting date, the Group fully repaid the loan provided to it by VTB Bank (PJSC) in the aggregate principal amount of USD 942 million prior to its specified maturity date.

In 3Q 2017, Fitch Ratings Ltd upgraded the Long-Term Issuer Default Rating ("IDR") of UC RUSAL to "BB-" with a Stable Outlook and a Short-Term IDR to "B".

In 3Q 2017, UC RUSAL extended its debt maturity profile to 2024 by reaching new agreements with Sberbank.

Energy segment 3Q and 9M 2017 results

· In 9M 2017, revenue increased by 35% to USD 2,308 million;

· Adjusted EBITDA grew by 52% to USD 829 million in 9M 2017;

· In 9M 2017, Adjusted EBITDA margin gained 4 p.p. y-o-y to 36%;

· In 9M 2017, net profit reached USD 160 million;

· In 9M 2017, total power generation grew to 50.4[10] TWh (up 2% y-o-y);

Energy segment key operational highlights

In 9M 2017, En+ Group's Energy segment revenue increased by 35% totalling USD 2,308 million compared to USD 1,711 million in 9M 2016. This revenue growth was underpinned by the liberalisation of the HPP capacity market in the second pricing zone of the wholesale electricity market, and the new power supply contract with UC RUSAL signed in late 2016[11].

In 9M 2017, Adjusted EBITDA increased by 52% to USD 829 million as compared to USD 545 million in 9M 2016. In 9M 2017, the segment's net profit grew to USD 160 million compared to USD 27 million in 9M 2016.

In 9M 2017, En+ Group power plants generated 50.4 TWh of electric energy (up 2% y-o-y).

Green hydro power output in 9M 2017 was 41.6 TWh (almost flat y-o-y).

In 9M 2017, Krasnoyarsk HPP's total power generation grew 5% to 14,7 TWh (up approximately 5% compared to long term annual value) on the back of more favorable hydrological conditions following the unusually low water levels in 2015-2016. These favorable conditions contributed to the recovery of waters inflows to the Krasnoyarsk HPP's reservoirs on the Yenisei River[12].

However, water inflows to Lake Baikal remained substantially below normal levels. In response, the Federal Water Resources Agency set the dam water flow levels for the Irkutsk HPP close to the minimal level during 3Q 2017. This resulted in the Group's Angara cascade HPPs (Irkutsk, Bratsk and Ust-Ilimsk HPPs) decreasing their power generation in 9M 2017 by 0.4 TWh y-o-y to 26.9 TWh (down 20% compared to long term average annual output).

In 9M 2017, the Abakan Solar Power Plant generated 5.5 million kWh (up 2% y-o-y).

In 9M 2017, in order to partially compensate for lower HPP output power generation at the Group's combined heat and power plants ("CHPs") increased 7% y-o-y to 8.8 TWh.

In 9M 2017, heat generation amounted to 17.5 million Gcal (almost flat y-o-y).

Electricity production and consumption by the Siberian integrated energy system

According to the System Operator of the United Power System, in 9M 2017, the Siberian integrated energy system (the Company's key region of operations) produced 147.5 TWh of electricity (down 1.6% y-o-y), while HPP output totalled 71 TWh (down 4.4% y-o-y). Electricity consumption at Siberian integrated energy system stood at 150 TWh (almost flat y-o-y).

Projected water inflows into reservoirs

The Hydrometeorological Centre of Russia forecasts water inflows into the main reservoirs of En+ Group's generating assets in 4Q 2017 as follows:

· Angara cascade: water inflows into Lake Baikal are expected to drop below normal (283 cu m per sec) to 0-200 cubic metres per second. In 4Q 2016, the useful water inflow was 133 cubic metres per second. Lateral inflows into the Bratsk Reservoir are expected to reach 410-490 cubic metres per second, while the normal level is 488 cubic metres per second. In 4Q 2016, the average monthly lateral inflows were 452 cubic metres per second;

· The Krasnoyarsk Reservoir: water inflows are expected to exceed the normal level of ca. 600 cubic metres per second, reaching 830-1,000 cubic metres per second.

Metals segment 3Q and 9M 2017 results

· Revenue in 9M 2017 increased by 21% y-o-y to USD 7,224 million;

· Adjusted EBITDA in 9M 2017 increased by 42% y-o-y to USD 1,534 million;

· Net profit in 9M 2017 increased by 46% y-o-y to USD 782 million;

· In 9M 17 the average aluminium realised price[13] increased by 20% y-o-y to USD 2,051 per tonne.

Metals segment key operational highlights

The recovery in the LME aluminium price in 9M 2017 by 22.6% to an average of USD1,924 per tonne as compared to USD1,569 per tonne in 9M 2016 as well as the 2.0% increase in volumes of primary aluminium and alloys sold by 2.0% between the same periods resulted in the growth of revenue of the Metals segment in 9M 2017 by 21.3% to USD 7,224 million as compared to USD 5,956 million in 9M 2016.

In 9M 2017, the Metals segment's Adjusted EBITDA increased by 42% to USD 1,534 million y-o-y, compared to USD 1,077 million in the same period of 2016.

The Metals segment achieved a net profit of USD 782 million for 9M 2017, as compared to USD 534 million for the same period of 2016.

In 3Q 2017, UC RUSAL reduced its net debt to USD 7,592 million as at 30 September 2017. As part of its commitment to ongoing deleveraging, UC RUSAL has directed part of its strong 3Q 2017 cash flow to the repayment of debt facilities and has accumulated significant cash balances for future debt reductions.

In 9M 2017, the average aluminium realised price increased by 19.9% y-o-y to USD 2,051 per tonne, due to positive pricing dynamics on the LME.

In 9M 2017, aluminium production totalled 2,762 thousand tonnes - flat y-o-y. In 3Q 2017 aluminium production was up by 1.2% compared to 3Q 2016 reaching 931 thousand tonnes, with Siberian smelters representing 94% of total aluminium output. The total production dynamics remained largely stable, with the capаcity utilisation rate standing at 95%.

In 9M 2017, total alumina production increased by 3.5% y-o-y, totalling 5,782 thousand tonnes. The continued increase in capacity at Russia-based refineries following the completion of upgrades earlier in 2017, as well as production growth at the Aughinish refinery as a result of the improved quality of purchased bauxites, were the key drivers of the y-o-y production increase.

In 3Q 2017, nepheline output increased by 1.2% compared to 3Q 2016 to 1,125 thousand tonnes, while consolidated bauxites output decreased by 11.3%, totalling 2,742 thousand tonnes. UC RUSAL covered the consumption needs of its alumina refineries in relevant feedstock using the available inventory at its operations at Achinsk, Bogoslovsk, Urals and Windalco and additional bauxite purchased elsewhere.

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For further information, please visit http://enplus.ru or contact:

About En+ Group plc

En+ Group is a leading international vertically integrated aluminium and hydro power producer. The Company combines power plants with a total installed capacity of 19.7 GW (including 15.1 GW of hydro power assets), and 3.9 mtpa of annual aluminium production capacity (through a controlling stake in UC RUSAL plc, the world's largest aluminium producer outside of China in 2016) which is the major consumer of En+ Group's hydroelectricity.

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This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth or strategies. Forward-looking statements speak only as of the date they are made.