Key financial results This section provides data in line with 2018 RusHydro Group’s IFRS consolidated statements incorporating the changes in Group’s accounting policy.
| 2017 | 2018 | 2018-2017 | |
|---|---|---|---|
| EBITDA, RUB mn | 104,180 | 109,673 | 5,493 |
| EBITDA marginThis indicator factors in other operating income generated by RusHydro Group in 2017 (RUB 0.7 bn) and in 2018 (RUB 5.5 bn) and is calculated as profits from sales and from changes in the value of financial assets at fair value through profit or loss, dividends received, and income from court rulings awarded. , % | 27.3 | 27.0 | -0.3 p.p. |
| Net income, RUB mn | 24,774 | 31,837 | 7,063 |
| Net marginThis indicator factors in other operating income generated by RusHydro Group in 2017 (RUB 0.7 bn) and in 2018 (RUB 5.5 bn) and is calculated as profits from sales and from changes in the value of financial assets at fair value through profit or loss, dividends received, and income from court rulings awarded. , % | 6.5 | 7.8 | 1.3 p.p. |
| Earnings per share (EPS), RUB | 0.0656 | 0.0739 | 0.0083 |
| Return on assets (ROA), % | 2.8 | 3.4 | 0.6 p.p. |
| Return on equity (ROE) ROE is calculated as net income to the year’s average equity. , % | 4.5 | 5.5 | 1.0 p.p. |
| Adjusted net income, RUB mn | 65,738 | 70,757 | 5,019 |
In the reporting period, EBITDA increased by 5.3% year-on-year to RUB 109,673 mn.
RusHydro Group’s net income in 2018 grew by 28.5% to RUB 31,837 mn. Adjusted net income in the reporting period totaled RUB 70,757 mn, up 7.6% compared to 2017.
The difference between the reported and adjusted figures mainly reflects key non-cash metrics, including:
- recognition of RUB 3,845 mn gain on financial assets at fair value through profit or loss (PJSC Inter RAO shares);
- recognition of RUB 24,221 mn loss from impairment of fixed assets and construction in progress, mostly connected with Ust-Srednekanskaya HPP and Vostochnaya CHPP commissioned in 2018;
- recognition of RUB 13,993 mn loss on fair value of the non-deliverable forward transaction for shares due to lower RusHydro’s share price in the reporting period;
- recognition of RUB 5,379 mn loss from impairment of receivables due to expected credit losses.
and EBITDA margin, %
Revenue
The Group’s total revenue in 2018 increased by 5.1% year-on-year to RUB 400,418 mn against RUB 380,864 mn in the previous reporting period. Key drivers of the change in revenue include:
- increase of RUB 13,220 mn in total revenue from electricity sales (including government grants) by RAO ES East Subgroup mostly due to higher prices and volumes;
- growth in RusHydro’s revenue of RUB 4,807 mn from electricity sales driven by higher output resulting from the increased water inflow in reservoirs of the Volga-Kama cascade in H1 2018 and in Siberian HPPs in H2 2018;
- growth in revenue from the sale of capacity by RUB 2,952 mn on the back of higher sales volume at PJSC DEK;
- increase of RUB 1,448 mn in ESK RusHydro Subgroup revenue from the sale of electricity driven by higher net supply and average tariffs;
- increase in revenue of RUB 1,243 mn from heat and hot water sales resulting from increased heat prices and net supply;
- growth of other revenue of RUB 4,497 mn, mainly from RAO ES East Subgroup driven by higher electricity transmission and volumes of contractual petrochemical sales to third parties.
From January 1, 2018, the Group’s revenue from offset of electricity transmission losses and Group’s expenses for electricity transmission services of grid operators under relevant contract has been reported in an aggregated form. Offset of grid losses received by the Group from grid operators shall not be deemed as separate obligations under IFRS 15, the loss offset contract shall not be an agreement with the consumer in the IFRS 15 context, therefore, these offsets cannot be recognized as revenue. The grid loss offset received by the Group’s companies for the year ended December 31, 2018 amounted to RUB 8,459 mn, including RAO ES East Subgroup – RUB 3,375 mn. [102-48]
Government grants [201-4]
In accordance with the Russian legislation, some companies of the Group received government grants to fund the costs for difference between the approved electricity and heat tariffs assumed in the economic feasibility study and the actual reduced tariffs applied to consumers, as well as the costs for fuel and purchased electricity and capacity.
In 2018, the Group received RUB 41,648 mn in government grants (2017: RUB 32,745 mn). The grants were provided to companies in the following regions: the Kamchatka Territory, the Republic of Sakha (Yakutia), Magadan Region, Chukotka Autonomous Area and other regions of the Russian Far East.
The total grants received by the Group’s guaranteed suppliers under Russian Government Decree No. 895 On the establishment of base rates (tariffs) for electricity (capacity) in the Far Eastern Federal District grew to RUB 26,300 mn in 2018, a 52.4% increase from the previous year due to tariff adjustment started in H2 2017.
Operating costs
Total operating costs of the Group incurred from day-to-day operations increased by 5.1% to RUB 314,850 mn with revenue up 5.1% in 2018 year-on-year. This is mainly driven by:
- a rise in fuel costs due to increased electricity and heat generation by JSC DGK’s stations, a higher price of coal and higher purchase prices of petroleum products at PJSC Kamchatskenergo in H2 2018;
- an increase in labor costs due to indexation of rates and salaries according to the effective collective bargaining agreements;
- a rise in costs for third party services as a result of growing repair and maintenance expenses, primarily at PJSC Yakutskenergo and PJSC Sakhalinenergo, and costs for other third-party services at JSC LCM due to increased use of third party services in coal production;
- an increase in costs depreciation and amortization caused by an uplift in PP&E costs as a result of the launch of new facilities (namely Yakutskaya GRES-2 with off-site infrastructure commissioned in 2017 and through 2018) and refurbishment and upgrade of PP&E at RusHydro’s branches;
- higher costs for taxes (excluding income tax) due to an increase in property tax rate for grid assets and higher costs for property tax due to the launch of Yakutskaya GRES-2 and the off-site infrastructure;
- a rise in costs for purchased electricity and capacity due to growing expenses at JSC RAO ES East Subgroup in the wake of transition to a new settlement system at PJSC Kamchatskenergo;
- a rise in costs for petroleum products purchased for resale due to an increase in volumes to be supplied to external buyers under petroleum product sales contracts;
- an increase in other expenses as a result of changes in loss from write-off or other disposal of PP&E and assets under construction.
Direct economic value generated and distributed [201-1]
| Metrics, RUB mn | 2017 | 2018 |
|---|---|---|
| Economic value generated | 383,534 | 402,123 |
| Operating profit after impairment loss on receivables | 342,162 | 353,391 |
| Government grants | 32,745 | 41,648 |
| Interest income and dividends received | 9,575 | 8,879 |
| (Losses)/gains from sale of assets | (948) | (1,795) |
| Economic value distributed | 300,789 | 316,509 |
| Operating costs | 190,539 | 201,270 |
| Salaries, allowances and other benefits | 74,390 | 75,876 |
| Payments to capital providers | 10,430 | 11,908 |
| Payments to government | 23,666 | 26,098 |
| Investments in communities | 1,764 | 1,357 |
| Economic value retained | 82,745 | 85,614 |
Assets, equity and liabilities
As at December 31, 2018, the Group’s assets grew by 6.9% (RUB 60,228 mn) to RUB 931,931 mn year-on-year. The change is mainly driven by:
- an increase in PP&E costs (due to the implementation of the Group’s investment program);
- an increase in other current assets due to a larger share of funds placed on deposits with maturities of over 90 days;
- an increase in advance payments made to Far Eastern distribution company mainly by DRSK for grid connection.
As at December 31, 2018, the Group’s liabilities grew by 14.4% (RUB 43,617 mn) to RUB 345,712 mn year-on-year. The Group’s liabilities changed as follows: non-current liabilities rose by RUB 74,787 mn due to an increase in long-term borrowings, while current liabilities declined by RUB 31,170 mn mainly due to a reduction in short-term borrowings and current portion of long-term borrowings.
Fair value of the non-deliverable forward for the Group’s shares recognized in accordance with the terms of the transaction with VTB Bank (PJSC) increased from RUB 20,716 mn (as at December 31, 2017) to RUB 31,896 mn (as at December 31, 2018). The change in fair value of the non-deliverable forward is mainly attributable to movements in RusHydro’s share prices in 2018.