HYDR.L Regulatory News (HYDR)

RusHydro Group announces its operating results for the 4Q and FY2017

January 31, 2017. Moscow, Russia. PJSC RusHydro (ticker symbol: MICEX-RTS, LSE: HYDR; OTCQX: RSHYY) announces operating results for the 4th quarter and full year ended December 31, 2017, of the parent company and subsidiaries of RusHydro Group reflected in consolidated financial statements.

Key highlights:

- Record operating results driven by rational utilization of increased water inflows to major reservoirs of the Volga-Kama cascade, modernization and commissioning of new power plants;

- In 2017, electricity generation by RusHydro Group and Boguchanskaya hydropower plant has set an all-time high record of 140,249 GWh;

- Total electricity generation by power plants of RusHydro Group in 4Q - 32,384 GWh (+5.5%), in 2017 - 126,961 GWh (+1.7%)[1];

- In 4Q, total production of RusHydro Group's HPPs/PSPPs - 23,118 GWh (+4.5%), in 2017 - 95,971 GWh (+1.0%);

- In 4Q, total production of RAO ES East Subgroup's power plants - 9,942 GWh (+7.7%), in 2017 - 32,824 GWh (+3.6%);

- Electricity generation by Boguchanskaya hydropower plant in 4Q 2017 -2,824 GWh (-18.2%)[2], in 2017 - 13,287 GWh (-4.9%);

- Total electricity generation by RusHydro's HPPs of the Volga-Kama cascade has reached second highest result since its inception;

- Electricity output by RusHydro Group's electricity retail companies (excl. LLC ESC Bashkortostan divested in December 2016[3]) in 4Q amounted to 5,781 GWh (-7.7%), in 2017 - 20,717 GWh (-5.5%);

- In 2017, heat output by thermal plants of RAO ES East decreased by 5% to 29,924 thousand GCal as compared to same period of 2016;

- Water inflow to the reservoirs of the hydropower plants of the Volga-Kama cascade in 1Q 2018 is expected to be higher than long-run average, to reservoirs of all other major hydropower plants of the Group it is expected to be close to the long-run average.

Installed electric capacity of RusHydro Group, MW

Installed heat capacity of RusHydro Group, Gcal

Electricity generation by the plants of RusHydro Group, GWh

The underlying factors of the production change in January-December 2017 were:

- total water inflow to reservoirs of the hydropower plants of the Volga-Kama cascade significantly higher than long-run average;

- commissioning of Yakutskaya GRES-2 in autumn of 2017 as well as Blagoveshenskaya CHP (second stage) and hybrid Zelenchukskaya HPP-PSPP gradually reaching full production capacity;

- decrease in water inflows to hydropower plants of the South of Russia, Siberia and the Far East as compared to 2016 to long-run average levels;

- growth of electricity generation by thermal power plants in the Far East on the back of decrease in water inflows to the reservoirs of the hydropower plants.

Center of Russia

As a result of early snowmelt in the first quarter of 2017 water inflow to the reservoirs in the Upper Volga was higher than normal by 2.1-3.5x times, to Gorkovskoe and Cheboksarskoe reservoirs - by 1.6-1.7x times. Total water inflow to the reservoirs of the Volga-Kama cascade was 33.2 km3 (normal level - 21.3 km3). Despite the ample water inflows, major reservoirs of the hydropower plants of the cascade have been drown down to multi-year average levels.

The 2nd quarter of 2017 saw volatile hydrology on the back of periodic rainfall floods leading to several peaks of inflows. Total inflow to reservoirs on Volga and Kama in the 2nd quarter was 162 km3, close to the long-run average of 161 km3.

Continued rainfall in the 3rd quarter resulted in water inflows reaching all-time highs. Water inflow to Gorkovskoe, Cheboksarskoe, Kamskoe and Nizhnekamskoe reservoirs was 1.3-1.7x of normal values, to Uglichskoe, Rybinskoe and Kuibyshevskoe - 2.1-3.3x of norm. In 3Q 2017, total water inflow to reservoirs in Volga and Kama was 66.0 km3 against a normal value of 37.0 km3. Monthly electricity generation by Nizhegorodskaya, Cheboksarskaya and Saratovskaya hydropower plants set an all-time record. The main drivers were favorable hydrological conditions and effective management of spring flooding as well as further flooding caused by rainfalls with optimal heads and high efficiency factor.

Precipitation in the 4th quarter helped keep high water level in the reservoirs of Volga and Kama. Water inflow to Rybinskoe and Kuybyshevskoe reservoirs was 1.8-2.0x the normal level, to Uglichskoe, Gorkovskoe, Cheboksarskoe, Kamskoe and Nizhnekamskoe - 1.2-1.5x the norm. Total inflow to reservoirs on Volga and Kama in the 4th quarter was 54.3 km3 (normal level - 36.6 km3).

Increase in water inflow along with efficient usage of water resources in 2017 helped the Upper Volga cascade (Uglichskaya, Rybinskaya and Horobrovskaya hydropower plants) achieve record production. Electricity production at Rybinskaya hydropower plant, in particular, reached an all-time high production record of 1,576 GWh (the previous record of 1,487 GWh was set in 1953).

Total electricity generation by RusHydro's hydropower plants of the Volga-Kama cascade along with Zagorskaya pumped storage plant in the 4th quarter of 2017 amounted to 10,780 GWh, an increase of 27.7% over the same period of 2016. In 2017, generation reached 46,982 GWh, which is 19.3% higher than in the same period of 2016.

In the beginning of 2018, the water reserves at the hydropower plants of the cascade were 35% higher than long-run-average and 51% higher than last year. On January 1, 2018, the available capacity of the Volga-Kama cascade's reservoirs was 75.1 km3 (normal level - 58.3 km3).

South of Russia and North Caucasus

In the 1st half of 2017, hydropower plants in the North Caucasus operated in hydrological conditions close to normal water inflows.

At the beginning of spring flooding, the Chirkeyskoe reservoir was drawn down to the lowest level in the last 21 years, followed by gradual filling up of the reservoir. However, due to low water inflows the reservoir was not filled to the normal level.

Rivers of Baksan and Cherek in Republic of Kabardino-Balkaria went through a difficult spring flooding. Ample and frequent rainfalls in the mountains resulted in emergency situations in three regions of the republic. Flooding caused by ample rainfalls brought significant volumes of debris to reservoirs that caused periodic downtime of Baksanskaya, Aushigerskaya, Zaragizhskaya and Kashkhatau hydropower plants.

Due to favorable hydrological conditions, the Kuban reservoir was filled 5 days earlier than planned. The total amount - 474.8 mn m3 - should be dispensed through May 2018 by all water users, including 10 HPPs of Kuban' Cascade.

In the 4th quarter of 2017, inflows to Chirkeyskaya HPP reservoir on Sulak River, the main regulating reservoir of the United Energy System of the South of Russia, was 30% below the long-run average. As of January 1, 2018, the reservoir level stood at 338 m, against the long-run average of 345 m.

The electricity generation by the hydropower plants of the South of Russia and North Caucasus in 4th quarter of 2017 decreased by 19.1% to 1,121 GWh, in 2017 decreased by 17.2% to 6,826 GWh.

Siberia

In the 1st quarter of 2017, water inflows to Novosibirskoe and Sayano-Shushenskoye reservoirs were 30-45% higher than normal, inflow to Baikal was 70% of the normal. Inflows to other Siberian reservoirs was close to normal. Unlike Boguchanskoye and Sayano-Shushenskoye reservoirs, Novosibirskoye reservoir saw beginning of the spring flood already in the end of the 1st quarter. The spring flood development was relatively calm, but rain-driven floods in combination with the spring flood caused to waves of elevated inflows. Overall flood volume totaled 30.1 km3, 6% higher than the long-run average, but comparable to the 2016 level.

Sayano-Shushesnkoye reservoir, after the planned draw-down of the reservoir to the minimum admissible level of 500 meters, entered regime of filling-up in order to accumulate the water resources required for operations in winter. During the year the maximum reservoir level of 538.58 m was reached in mid-September - the highest level of the reservoir in the last 11 years.

Water inflows to Novosibirskoe and Sayano-Shushenskaya hydropower plants reservoirs in the 3rd and 4th quarters were close to normal. The Angara cascade, like in the previous year, went through low water period. Boguchankskaya hydropower plant was working in accordance with instructions of the Yenisei Basin Directorate in order to provide sufficient levels of water to allow navigation in the Lower Angara.

The Boguchanskaya hydropower plant in 2017 generated 13,287 GWh, a 4.9% decrease as compared to the previous year.

Total electricity generation by RusHydro's Siberian hydropower plants in the 4th quarter of 2017 decreased by 4.3% to 6,728 GWh, in 2017 - decreased by 13.1% to 25,380 GWh.

Far East

Given hydrological conditions dominating the rivers of the Far East during 2016/2017 autumn/winter period, and elevated water reserves in Zeyskoye reservoir in the beginning of the year, Far Eastern hydropower plants were operating in accordance with regimes, established by Amur Basin Directorate. These regimes provided for the necessary draw-down of reservoirs to pre-flood levels and ensured reliable and safe operation of the facilities as well as accumulation of inflows during the 2017 flood period.

In the flood period of 2017, water inflows to reservoirs in the Far East were close to normal (inflows to some reservoirs was 5-10% higher than normal). Nevertheless, lower than normal water inflow to Zeyskoe reservoir (by ca. 10%) during spring flooding did not allow to fill up the reservoir to a normal level of 315.0 m by the start of autumn, which resulted in constraints in output of Zeyskaya HPPs.

As of late August Bureyskaya hydropower plant experienced an increased water inflow due to ample rainfalls. During the flood season, beginning with mid-April, the facility has accumulated 10.22 km3 of water to secure safe operation in autumn/winter period.

In the 4th quarter of 2017 inflows to reservoir of Kolymskaya HPP was 2.6x higher, than normal, while inflow to Zeyskoye reservoir was close to normal.

Total electricity generated by hydro and geothermal power plants of the Far East in the 4th quarter of 2017 decreased by 17.1% to 3,782 GWh, in 2017 - decreased by 8.9% against the same period of previous year to 15,904 GWh.

In the 4th quarter of 2017, generating assets of RAO ES East Subgroup increased production by 7.7%to 9,942 GWh compared to the 4th quarter of 2016; production in the 2017 increased by 3.6% against 2016 and totalled 32,824 GWh.

JSC Far East Generating Company (DGK), which increased production in 2017 by 5.2% to 24,758 GWh (75% of the total), mainly due to decrease in output from hydropower plants.

Electricity consumption in the United Power System of the East in 2017 increased by 0.2% against 2016 and totaled 33,237 GWh.

Electricity production by vertically-integrated power companies in isolated zones of the Far East in 2017 decreased by 0.5% against 2016.

In 2017, heat output by thermal plants of RAO ES East Subgroup decreased by 5.0% as compared to 2016 to 29,924 thousand GCal due to higher air temperatures, as well as shorter heating periods in a number of large towns of the region.

Heat output by thermal plants of RAO ES of the East Subgroup, thousand GCal 

Armenia

Electricity generation by the Sevan-Hrazdan cascade of hydropower plants in Armenia in 2017 increased by 14.9% to 466 GWh. The power generation by the plants of the cascade is dependent on water inflows of the Hrazdan river and water discharge from Sevan Lake.

Electricity retail

In December 2016, RusHydro Group completed sale of 100% of LLC Power Retail Company of Bashkortostan (LLC ESCB) to Inter RAO Group. Excluding LLC ESCB, total electricity output by RusHydro's retail companies - Krasnoyarskenergosbyt, Chuvash retail company, Ryazan retail company and ESC RusHydro - in the 4th quarter of 2017 amounted to 5,781 GWh, a 7.7% decrease against 4th quarter of 2016, output for full 2017- 20,717 GWh (-5,5%).

The decrease in output in 2017 was driven by a number of consumers switching to wholesale electricity purchases, additional calendar day in 2016 due to leap year and higher air temperatures.

Electricity output by RusHydro Group's retail companies, GWh 

Water inflows forecast

According to the forecast of the Hydrometeorology Center of Russia, the following dynamics of water inflows to the major reservoirs is expected in the 1st quarter of 2018:

- Total water inflows to reservoirs on Volga and Kama are expected to increase by 1.2-2.3 in the range of 30.3-36.3 km3 (as compared to the average of 21.3 km3);

- Inflows to reservoir of Chirkeyskaya HPP are expected close to long-run average.  

- Inflows to major reservoirs in Siberia are expected at normal levels or higher by 10%-20%;

- Inflows to reservoirs in the Far East are expected close to long-run average.

About RusHydro

RusHydro Group is one of Russia's largest generating companies. RusHydro is the leading producer of renewable energy in Russia with over 70 generating facilities in Russia and abroad. The company also manages a number of R&D, engineering and electricity retail companies. Group's thermal assets are operated by subsidiary - RAO Energy System of East in the Far East of Russia. Total electricity generation capacity of the Group is 39.1 GW, heat capacity - 16.2 thousand GCal/h.

Russian Federation owns 60.6% in RusHydro, the rest is held by other institutional and individual shareholders (over 360,000). The company's stock is traded on Moscow Exchange (MOEX), and included in MSCI EM и MSCI Russia indexes. Company's GDRs in the IOB section of LSE, ADRs - in OTCQX.

For more information:

Investor Relations Department

Tel. +7 (800) 333 8000 ext. 1607, 1319, 1304

ir@rushydro.ru

The information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of RusHydro. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially from these statements. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to RusHydro and its operations.