HYDR.L Regulatory News (HYDR)

RusHydro announces 1Q 2020 IFRS results

June 4, 2020. Moscow, Russia. 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 2020.

Key highlights for the first quarter of 2020:

Consolidated financial results reflected increase of electricity output on the back of increased water inflows to the majority of reservoirs of the HPPs; RUB 117,684 mn - total revenue (+7.5% y-o-y); RUB 36,613 mn - EBITDA (+23.8% y-o-y); 31.1% - EBITDA margin (+4.1 p.p. as compared to 1Q'19); 1.8% - increase of manageable cash costs; RUB 25,908 mn - net profit (+56.9%); RUB 23,431 mn - adjusted net profit (+22.4%); 1.2x - net debt/EBITDA (1.2x in 1Q'19, 1.5x - in 4Q'19).

 

1Q 2020/2019 highlights (in RUB mn)

	1Q/20	1Q/19	chg.
Revenue	117,684	109,460	7.5%
Operating expenses	88,302	86,354	2.3%
Other operating profit	303	278	9.0%
Operating profit*	29,685	23,384	26.9%
EBITDA**	36,613	29,564	23.8%
Net profit	25,908	16,512	56.9%
Net profit (adj.)***	23,431	19,146	22.4%

 

Nikolay Shulginov, Chairman of the Management Board - General Director of RusHydro commented: "RusHydro Group demonstrated solid operational and financial results in the first quarter of 2020 as a result of systematic efforts aimed at improvement of operational and financial performance, optimization of manageable operational expenses and growth of the company's core value."

Operating results

In the first quarter of 2020, electricity generation by RusHydro Group amounted to 34,371 GWh, an increase of 18.6% as compared to the first quarter of 2019. The Group's total power production including Boguchanskaya hydropower plant**** was 39,008 GWh (+19.2%). Total electricity generation by hydropower and pumped storage plants of RusHydro Group in 1Q 2020 increased by 29.6% to 24,823 GWh, total output thermal power plants in the Far East decreased by 3.0% to 9,431 GWh, while output of geothermal power plants in 1Q 2020 increased by 9.4% to 117 GWh.

Main factors affecting operating results in in January-March 2020 were:

water inflows to the reservoirs of the Volga-Kama cascade well above (1.5-6.4x) the normal level; total water inflow to the reservoirs in Siberia and the Far East 30-85% above the long-run average; water inflows to the reservoir of Chirkeyskaya HPP at the normal level; increase of electricity consumption in the Far Eastern Federal District by 4.4% (excluding leap year and air temperature factors).

Heat output by RusHydro's Group's thermal plants in the Far Eastern Federal District in the first quarter of 2020 increased by 0.6% to 12,246 GCal as compared to the corresponding period of 2019 due to lower air temperatures in the regions of presence of JSC DGK, PJSC Yakutskenergo and JSC Chukotenergo.

In the first quarter of 2020, total electricity output by RusHydro's retail companies, JSC ESC RusHydro, PJSC Krasnoyarskenergosbyt, JSC Chuvash retail company and PJSC Ryazan retail company decreased by 4% as compared to the same period in 2019 and amounted to 5,371 GWh.

 

Key events of for the period January-March 2020

In the first quarter of 2020, electricity production and capacity supply began at Zaramagskaya HPP-1 in North Ossetia. The facility is built under capacity supply agreement (DPM); On March 11, 2020, RusHydro Group has finalized divestment of its assets in Armenia to PJSC Hrazdan Power Company (HrazTES, Tashir Group). The company's financial debt decreased by RUB 4 bn following completion of the transaction.

Revenue

Revenue breakdown in 1Q 2020/2019 (in RUB mn)

	1Q/20	1Q/19	chg.
Electricity sales	76,008	70,780	7.4%
Incl. grants as per Resolution of the Russian Gov't No. 895 *****	7,555	6,071	24.4%
Heat and hot water sales	17,010	16,687	1.9%
Capacity sales	14,081	12,063	16.7%
Other sales	6,670	5,778	15.4%
Other government grants	3,915	4,152	-5.7%
Total revenue	117,684	109,460	7.5%

 

In the first quarter of 2020, total revenue of the Group increased by 7.5% to RUB 117,684 mn as compared to RUB 109,460 in the first quarter of 2019. The change is associated with the following key factors:

increase of revenue from electricity sales of PJSC RusHydro by RUB 3,689 mn following increase of electricity output by 30.9% on the back of earlier spring flooding on the Volga-Kama cascade; increase in capacity sales revenue by RUB 2,018 mn on the back of sales volume growth under capacity supply agreement (DPM) following commissioning of Zaramagskaya HPP-1 and sales volume growth of 3.1% at PJSC DEK; increase in revenue from electricity sales (including government grants*****) of RAO ES East subgroup by RUB 1,701 mn on the back of tariff and sales volume growth; increase in heat and hot water sales revenue by RUB 323 mn following tariff and production volume growth; increase in other sales revenue by RUB 892 mn is mainly driven by increase of revenue from electricity distribution services at PJSC Yakutskenergo and PJSC Magadanenergo and increase of revenue from grid connections at PJSC Yakutskenergo and JSC DRSK.

 

Operating expenses******

 

Operating expenses in 1Q 2020/2019 (in RUB mn)

	1Q/20	1Q/19	chg.
Fuel expenses	22,709	23,684	-4.1%
Employee benefit expenses	19,618	19,189	2.2%
Third parties expenses and other *******	19,241	17,923	7.3%
Purchased electricity and capacity	13,407	13,860	-3.3%
Depreciation	7,027	6,384	10.1%
Taxes other than on income	3,280	2,765	18.6%
Other materials	1,779	1,557	14.3%
Water usage expenses	1.241	992	25.1%
TOTAL	88,302	86,354	2.3%

 

Total operating expenses in the first quarter of 2020 compared to the same period last year increased by 2.3% to RUB 88,302 mn due to the following factors:

increase in depreciation expense by RUB 643 mn following commissioning of Sakhalinskaya GRES-2, commissioning of Zaramagskaya HPP-1, commissioning of Nizhne-Bureyskaya HPP and modernization at PJSC RusHydro's facilities; increase in third parties services and other expenses by RUB 1,318 mn mostly as a result of third parties services expense growth of RUB 522 mn following technical support and implementation of new software as well as increase of coal production for own need by third parties; increase in taxes other than on income by RUB 515 mn as a result of property tax increase following commissioning of Sakhalinskaya GRES-2, Nizhne-Bureyskaya HPP and Zaramagskaya HPP-1; increase of water usage expenses by RUB 249 mn following HPP production growth; decrease in fuel expenses mainly in JSC DGK by 975 mn following decrease of electricity output and decrease of reference fuel consumption and price.

 

Profit

The Group's net profit increased by 56.9% to RUB 25,908 mn. Adjusted net profit in the reporting period amounted to RUB 23,431 - an increase of 22.4% as compared to the same period last year.

The difference between the reported and adjusted profit is attributed mainly to the recognition of change in fair value of the derivative financial instrument as a result of change in fair value of non-deliverable forward contract following increase of market price of PJSC RusHydro's shares in the reporting period as well as recognition of impairment of financial assets resulting from measuring expected credit losses of accounts recievables

 

In the first quarter of 2020, EBITDA increased by 23.8% to RUB 36,613 mn compared to the same period of 2019.

Key indicators of financial position

As of March 31, 2020, the Group's assets increased by RUB 27,036 mn or 2.9% to RUB 952,155 mn against the comparable figure as at December 31, 2019 following increase in accounts receivable and increase in property, plant & equipment (following execution of the Group's investment program).

As at the end of the reporting period, the Group's liabilities increased insignificantly - by RUB 743 mn or 0.2% to RUB 355,987 mn as compared to December 31, 2019.

 

Events after the reporting date

On May 28, 2020, PJSC RusHydro announced open subscription of additional share issue (state registration number 1-01-55038-E-043D dated August 27, 2018) for construction of two 110 kV Pevek-Bilibino high-voltage overhead power lines.

 

The full financial statements are available on the Company's website at: http://www.eng.rushydro.ru/investors/reports

 

* Operating profit is calculated as the difference between revenue, other operating profit and operating expenses.

** EBITDA is calculated as operating profit/loss excluding depreciation of property, plant and equipment, amortization of intangible assets, impairment of property, plant and equipment, impairment of financial assets, profit / loss on disposal of property, plant and equipment and other non-cash items of operating income and expenses.

*** Net profit is adjusted for the effects of recognition of financial income/expense arising from the change in fair value of non-deliverable forward contract, impairment of fixed assets, impairment of financial assets, profit / loss on disposal of property, plant and equipment, as well as other operating non-cash income.

***\* The Boguchanskaya hydropower plant is part of the Boguchanskiy Energy and Metals Complex (BEMO), a joint venture (JV) between RusHydro and UC RUSAL, and is not part of RusHydro Group. According to RusHydro's shareholding in the JV (50%), the results of the plant are reported in the official financial statements in "Share of results of associates and jointly controlled entities". Operations of the HPP have been put into the press-release for general reference.

*****In July 2017, the Resolution of the Russian Government No. 895 "On reaching basic rates (tariffs) for electric power (capacity) in the territories of the Far East Federal region (the "Far East")" became effective, under which rates for consumers in the territories of the Far East should be reduced starting from 1 January 2017 to the basic level of RUB 4.00 / kWh, from 1 January 2018 to RUB 4.30 / kWh, from 1 January 2019 to RUB 4.69 / kWh, from 1 January 2020 to TUB 5 / kWh. According to the Resolution of the Russian Government No. 1614-r of 28 July 2017, PJSC RusHydro was appointed as the recipient of a premium to the price for capacity provided by the Company in the price zones of the wholesale market under CCS agreements. The premium to the price for capacity is set in order to achieve the basic level of rates (tariffs) for electricity (capacity) planned for the next regulation period in the Far East constituent regions. Within the amounts defined by Resolution No. 1615-r of the Russian Government dated 28 July 2017, the Company translates the collected amounts of margin in the form of free-of-charge targeted contributions to the budgets of the respective regions. The Group companies being guaranteeing suppliers will receive compensation for the shortage of income related to the reduction of rates, through subsidies from the Far East constituent regions.

******Here and hereinafter the operating expenses do not include impairment loss.

*******includes grid company services

 

 

About RusHydro

RusHydro Group is the leading producer of renewable energy in Russia. It is Russia's largest generating company and is the fourth in the world with over 400 generating facilities. The Group's total electricity generation capacity including Boguchanskaya HPP is 39.5 GW.

 

For more information:

Investor Relations Department

Tel. +7 (495) 122 0555 ext. 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. One can identify forward-looking statements by terms such as "expect," "believe," "anticipate," "plan", "aim", "target", "forecast", "project", "should", "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 and political conditions, our competitive environment, risks associated with operating in Russia and rapid technological and market changes in our industries, as well as many other risks specifically related to RusHydro and its operations.