Annual Report 2013

Power Transmission

IDGC of Centre operates in 11 regions of Central Russia, providing power to the public, commercial enterprises, agricultural enterprises, and transport. The Company is the leader in the power transmission market (83.4%); the Company’s share on this market together with its subsidiary JSC Yargorelektroset amounts to 84.3%.

Joint operation tariffs for power supply in all 11 regions of operation were introduced in 2008. Under this system, uniform joint operation tariffs are set for consumers (suppliers of last resort, utilities, and consumers with “direct contracts”) in each region.

IDGC of Centre branches in all regions share the function of joint operation owner and collect centralized payments for power transmission from all consumers at the unified rates regardless of which grid is actually used to deliver power to the consumers. The Company branches in each region conduct mutual settlements with TGC for the power actually supplied in TGC grids based on separate tariffs set with the specific TGC.

This system provides us information both on the amount of electricity supplied by IDGC of Centre directly (in other words, for the end consumers or for the joint operation grid) and on the amount of electricity supplied within the service area of the Company’s branches. This, in turn, makes it possible for us to precisely evaluate the Company’s market share.

57.8 bln kWh

Net power supply in 2013

55.2 bln kWh

“Joint operation” supply in 2013

The amount of electric power supplied to the grid of IDGC of Centre in 2013 equaled 63.6 bln kWh. Meanwhile, the Company transmitted 57.8 bln kWh of energy to its consumers and neighboring territorial grid companies (net electricity supply). Power losses from the grid equaled 5.8 bln kWh (9.16%) of the amount of power supplied to the grid.

The reduction in the amount of net electricity supply in the reporting year vs. 2012 is primarily connected with the termination of the last mile contracts in 2013, as a result of which certain major consumers started to receive power transmission services directly from JSC FGC UES.

The volume of “joint operation” services rendered by the Company in 2013 amounted to 55.2 bln kWh with a 0.2% growth vs. 2012.

POWER TRANSMISSION SERVICES IN NATURAL TERMS, bln kWh:

Indicator 2011 2012 2013 Change 2013/2012
bln kWh%
Power supply to the grid 62.9 64.0 63.6 – 0.4 – 0.6
Net power supply (amount of electricity supplied within the service area of the Company’s branches) 56.7 57.9 57.8 –0.1 –0.2
Power losses 6.2 6.1 5.8 – 0.3 – 4.9
Amount of electricity transmitted through the points of delivery to end customers (“joint operation” supply) 54.1 55.1 55.2 0.1 0.2

The Central Federal District of Russia, where the Company operates, is an economically promising and growing region.

The amount of services grew primarily due to the increased energy consumption in the most economically developed regions of IDGC of Centre operation: +1.9% in the Kursk Region, +1.0% in the Belgorod Region and +1.3% in the Tver Region. The principal growth in the amount of services rendered was stipulated by the increased consumption of the metallurgical and chemical industry, agricultural enterprises, and by the growth in energy consumption of the small and medium-size businesses.

POWER TRANSMISSION SERVICES RENDERED ON THE “JOINT OPERATION” BASIS BY BRANCHES OF IDGC OF CENTRE IN 2013,bln kWh / %:

Increasing of energy consumption in the most economically developed regions



+1.9%

Kursk region

+1.0%

Belgorod region

+1.3%

Tver region

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ENERGY CONSUMPTION FROM IDGC OF CENTRE GRIDS FOR TEN BIGGEST CONSUMERS IN 2013, bln kWh:

No Branch name Consumer Power use, bln kWh Share in net supply, %
Net power supply for 2013 57.8100
1 Belgorodenergo Oskol Electrometallurgical Works 3.3 5.7
2 Lipetskenergo Novolipetsk Metallurgical Works 2.9 5.0
3 Kurskenergo Mikhailovsky Mining and Metal Works 2.4 4.2
4 Voronezhenergo Voronezh Municipal Power Grid 1.5 2.6
5 Belgorodenergo Stoilensky Mining and Metal Works 1.3 2.2
6 Tverenergo Tvergorelektro 1.2 2.1
7 Yarenergo Svavneft-Yaroslavnefteorgsintez 1.1 1.9
8 Lipetskenergo Lipetsk City Power Company 1.1 1.9
9 Yarenergo Yaroslavl Gorelektroset 1.1 1.9
10 Voronezhenergo South-Eastern Railways (branch of JSC RZD) 1 1.7
Total for 10 biggest consumers 16.929.2

STRUCTURE OF POWER GRID OUTPUT IN 2013 BY VOLTAGE LEVELS, %:

STRUCTURE OF POWER GRID OUTPUT IN 2013 BY CONSUMER GROUPS, %:

As IDGC of Centre took on the functions of a supplier of last resort in 2013, it is incorrect to compare Company revenues received in the reporting year from power transmission services with the revenues received in 2011-2012. This is stipulated by the fact that a certain part of revenues from power transmission is included in the income from power sales in the accounts.

In order to adjust the comparison, below we have stated two figures for 2013 – the first one calculated under the RAS reports and the second in relative numbers.

REVENUES FROM POWER TRANSMISSION SERVICES IN 2011-2013, bln RUB:

Indicator 2011 2012 2013
(Rep.)
Change, 2013/2012, % 2013
(Rel.).
Change, 2013/2012, %
Revenues from power transmission 65.7 67.5 61.4 – 9 75.2 11.4

STRUCTURE OF REVENUE FROM POWER TRANSMISSION SERVICES IN 2011-2013, RUB bln and %:

Indicator 2011 2012 2013 (Rel.) Change,
2013/2012, %
Revenues from power transmission 65.7 67.5 75.2 11.4
Of which:
Company own revenue 54.5 55.8 62.7 12.4
Share of Company own revenue, % 82.9 82.6 83.4 0.8 ppt
Revenue of the other TGC 11.2 11.7 12.4 6.2

+11.4%

Growth of the actual revenue in 2013

83.4%

The share of specific revenue in 2013

The actual revenue of the Company from power transmission in 2013 grew by 11.4% vs. 2012.

The primary reason for the positive dynamics is the increase of the average tariff by 141 RUB/thous. kWh, which led to an increase of the Company’s revenues by 7.8 bln RUB. An insignificant increase in the cost of capacity losses accounted for in the equilibrium prices on electrical energy was revealed, the fact resulting in the reduction of revenues by 0.2 bln RUB, however, taking into account the growth in net power supply by 0.07 bln kWh, the total revenue growth amounted to 7.7 bln RUB.

The share of specific revenue of IDGC of Centre (i.e. for the “joint operation” services) in 2013 increased as well, the figure coming to 83.4% (62.7 bln RUB). The increase of own revenues by 12.4% vs. 2012 is connected with the growth in consumption volumes.

NET PROFIT FROM POWER TRANSMISSION IN 2011 – 2013, bln RUB:

Indicator 2011 2012 2013 Change, 2013/2012, %
Net profit from power transmission services 3.7 2.4 – 1.0 –41.7

In 2013, IDGC of Centre incurred losses from power transmission in the amount of 1 bln RUB. The primary reason for this negative financial result is the creation of a bad debt provision relating to the transmission of electrical energy of the power sales companies deprived of the status of a supplier of last resort.

The cost of IDGC of Centre power transmission services in 2013 (in relative conditions) amounted to 63.3 bln RUB and exceeded the figure of 2012 by 10.4%. The cost of core operations grew due to the following factors:

+20.0%

  • Growth of depreciation payments after commissioning a significant amount of facilities comprising fixed assets under the IDGC of Centre investment program implementation in 2013.

+19.6%

  • Growth of power purchase price acquired in order to compensate for the losses in the Company’s grids.

+10.4%

  • Growth of tariffs on power transmission services under the Unified National Power System (UNPS) rendered by JSC FGC UES.

+6.2%

  • The growth of individual tariffs for the territorial grid companies on the operation territory of the IDGC of Centre branches led to a 6.2% increase in payments for the power transmission on third-party grids.

COST DYNAMICS OF POWER TRANSMISSION IN 2011-2013, mln RUB:

2011 2012 2013 (Rep.) Change, 2013/2012, % 2013 (Rep.) Change, 2013/2012, %
Cost of core operations 54 912 57,315 62,949 10 % 63,283 10 %
Non-controllable costs 37,987 39,576 44,560 13 % 44,560 13 %
Loss compensation expenses 8,717 8,251 9,865 20 % 9,865 20 %
JSC FGC UES services 12,835 13,340 14,730 10 % 14,730 10 %
TGC services 11,223 11,713 12,443 6 % 12,443 6 %
Depreciation of fixed assets and intangible assets 5,212 6,271 7,523 20 % 7,523 20 %
Controllable costs 16,925 17,740 18,389 4 % 18,723 6 %
Tangible expenses 2,325 2,402 2,456 2 % 2,456 2 %
Production services 884 905 775 – 14 % 775 – 14 %
Personnel expenses (payroll, insurance payments, payments to the national pension fund) 10,355 11,153 11,993 8 % 11,993 8 %
Other expenses 3,362 3,280 3,165 – 3 % 3,499 7 %

For details on operating and financial indicators relating to power transmission, please see Appendix No. 2 to the Annual Report or corporate website.