Annual Report 2013
Services
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Analysis of IFRS Results
THE COMPANY’S REVENUES
In 2013, in accordance with the Orders of the Russian Ministry of Energy on Transferring the Functions of a Supplier of Last Resort, IDGC of Centre was assigned with the functions of a supplier of last resort in the Bryansk, Orel, Kursk, Tver and Smolensk Regions. Thus, besides power transmission services, separate Company’s divisions rendered the services of selling electrical energy in the reporting period, including purchase of electrical energy on the wholesale market and its subsequent sale on the retail market, conclusion of power supply and power sales contracts with all consumers, including the public. Hence, the Company’s revenues for 2013 include income received from a new type of operations, i.e. revenues from reselling electrical energy and capacity.
The total Company’s revenue in the reporting period grew by 23,312.5 mln RUB, or by 33.3% versus the same indicator for 2012.
The revenues from reselling electrical energy and capacity includes a part of the revenues in the amount of 13,785.3 mln RUB which relates to power transmission services rendered under power supply contracts. Revenues of IDGC of Centre from power transmission for 12 months of 2013 excluding the new type of operations amounted to 75,181.5 mln RUB, which is 11.4% higher than in 2012. (67,486.8 mln RUB). The primary cause of the positive change was the increase of the average tariff by 141 RUB/thous. kWh.
The revenues from reselling electrical energy and capacity adjusted to the amount of revenue from power transmission services equaled 15,984.7 mln RUB.
The reporting year saw an expected decline of revenues from grid connection services by 301.8 mln RUB, or 22.1%, to 1,063.2 mln RUB.
IDGC OF CENTRE REVENUES IN 2012-2013, mln RUB and %:
| 2012 | 2013 | Change 2013/2012, % |
|||||
|---|---|---|---|---|---|---|---|
| Indicator | mln RUB | % of total | mln RUB | % of total | mln RUB | % | % of total, ppt |
| Power transmission services | 67,486.8 | 96.4 % | 61,396.2 | 65.8 % | – 6,090.6 | – 9.0 % | – 30.6 ppt |
| Revenue from reselling electrical energy and capacity | – | – | 29,770.0 | 31.9 % | 29,770.0 | 100.0 % | 31.9 ppt |
| Grid connection services | 1,365.0 | 2.0 % | 1,063.2 | 1.1 % | – 301.8 | – 22.1 % | – 0.9 ppt |
| Repair and maintenance services | 127.6 | 0.2 % | 469.8 | 0.5 % | 342.2 | 268.2 % | 0.3 ppt |
| Lease payments | 61.4 | 0.1 % | 55.1 | 0.1 % | – 6.3 | –10.3 % | – |
| Other revenues | 943.2 | 1.3 % | 542.2 | 0.6 % | –401.0 | –42.5 % | –0.7 ppt |
| Revenues, total | 69,984.0 | 100.0 % | 93,296.5 | 100.0 % | 23,312.5 | 33.3 % | – |
OPERATING EXPENSES
In 2013, IDGC of Centre expenses increased by 28,155.1 mln RUB, or 44.6% vs. 2012. The main factors that affected the growth in the Company’s expenses were:
STRUCTURE OF IDGC OF CENTRE EXPENSES IN 2013 UNDER IFRS, %:
- inclusion of a new item, i.e. Electricity Resale, (14,479.9 mln RUB) in the reports due to the fulfillment of functions of a supplier of last resort by IDGC of Centre in 5 regions;
- generation of provisions for accounts receivable (8,581.0 mln RUB). The amount of 6,197.8 mln RUB of the total amount of the allowance for devaluation of receivables recognized in 2013 refers to the devaluation of trading receivables associated with regional sales enterprises which were deprived of their status of suppliers of last resort, the fact leading to the loss of operations and to insolvency. The rest of the impairment loss refers primarily to the disputes with other regional sales enterprises.
- Power transmission occupies the major share in the structure of the Company’s expenses in 2013, which amounts to 29.8%. The new expense item, i.e. Electricity Resale accounted for 15.9% of expenses in the reporting year.
- The share of expenses on electricity purchase decreased by 3.9 ppt to 9.9%, whereas the share of payroll expenses increased by 5.4 ppt to 16.8%. The share of depreciation costs shrank by 3.1 ppt to 8.7%. A significant share in the structure of expenses in the reporting year was occupied by the allowance for devaluation of receivables – 9.4%, a 8.5. ppt growth vs. 2012.
OPERATING EXPENSES OF IDGC OF CENTRE IN 2012-2013, mln RUB and %:
| 2012 | 2013 | Change 2013/2012, % |
|||||
|---|---|---|---|---|---|---|---|
| Indicator | mln RUB | % of total | mln RUB | % of total | mln RUB | % | % of total, ppt |
| Power transmission | 24,132.1 | 38.3 % | 27,179.9 | 29.8 % | 3,047.8 | 12.6 % | – 8.5 ppt |
| Power resale | – | – | 14,479.9 | 15.9 % | 14,479.9 | 100.0 % | 15.9 ppt |
| Power purchase | 8,684.1 | 13.8 % | 9,073.8 | 9.9 % | 389.7 | 4.5 % | –3.9 ppt |
| Payroll | 13,990.3 | 22.2 % | 15,364.9 | 16.8 % | 1,374.6 | 9.8 % | – 5.4 ppt |
| Allowance for devaluation of receivables | 561.2 | 0.9 % | 8,581.0 | 9.4 % | 8,019.8 | 1,429.0 % | 8.5 ppt |
| Depreciation | 7,448.4 | 11.8 % | 7,929.6 | 8.7 % | 481.2 | 6.5 % | –3.1 ppt |
| Raw materials and supplies | 2,376.6 | 3.8 % | 2,482.2 | 2.7 % | 105.6 | 4.4 % | –1.1 ppt |
| Other | 5,880.3 | 9.2 % | 6,136.8 | 6.8 % | 256.5 | 4.4 % | –2.4 ppt |
| Operating expenses, total | 63,073.0 | 100.0 % | 91,228.1 | 100.0 % | 28,155.1 | 44.6 % | – |
Power transmission
The Company’s expenses on power transmission in 2013 grew by 3,047.8 mln RUB, or 12.6% vs. the previous year. This trend is connected with an increase of expenses on the services provided by the territorial grid companies (TGC) and on the services rendered by JSC FGC UES relating to power transmission through UNPG grids.
Electricity resale
A new expense item, i.e. Electricity Resale, appeared in 2013 due to the assignment of functions of a supplier of last resort to IDGC of Centre in the Bryansk, Orel, Kursk, Tver and Smolensk Regions. Expenses on this item in 2013 amounted to 14,479.9 mln RUB.
Electricity purchase
Expenses on electricity purchases to compensate losses in the reporting year increased by 389.7 mln RUB, or 4.5% in 2013.
Depreciation
Depreciation of fixed assets grew in 2013 by 481.2 mln RUB, or 6.5% due to the implementation of the investment program and commissioning of new capacities.
Payroll expenses
Payroll expenses grew by 1,374.6 mln RUB, or 9.8%, in the reporting year, primarily, due to the fact that IDGC of Centre started to fulfill the functions of a supplier of last resort at Bryanskenergo, Kurskenergo, Orelenergo, Smolenskenergo and Tverenergo branches and also due to the employees’ payroll indexation in 2013.
IDGC OF CENTRE PAYROLL EXPENSES IN 2012-2013, mln RUB and %:
| 2012 | 2013 | Change 2013/2012 | ||||
|---|---|---|---|---|---|---|
| Indicator | mln RUB |
% of total Company expenses | mln RUB |
% of total Company expenses | mln RUB | % |
| Wages | 9,589.7 | 15.2 % | 10,301.0 | 11.3 % | 711.3 | 7.4 % |
| Provisions to State Pension Fund | 2,191.2 | 3.4 % | 2,298.5 | 2.5 % | 107.3 | 4.9 % |
| Revaluation of other long-term payments | 0.4 | 0.0 % | 0.2 | 0.0 % | –0.2 | –5.0 % |
| Insurance premiums | 607.8 | 1.0 % | 685.7 | 0.7 % | 77.9 | 12.8 % |
| Financial aid to workers and pensioners | 487.3 | 0.8 % | 145.0 | 0.1 % | –342.3 | –70.2 % |
| Labor costs of current period | 79.6 | 0.1 % | 88.7 | 0.1 % | 9.1 | 11.4 % |
| Carry-over vacation time | 365.3 | 0.6 % | 1,164.8 | 1.3 % | 799.5 | 218.9 % |
| Management bonus reserve | 286.4 | 0.5 % | 178.7 | 0.2 % | –107.7 | –37.6 % |
| Labor costs of previous periods | (65.9) | –0.1 % | (0.1) | 0.0 % | 65.8 | –99.8 % |
| Other payroll costs | 448.5 | 0.7 % | 502.4 | 0.6 % | 53.8 | 12.0 % |
| Payroll expenses, total | 13,990.3 | 22.2 % | 15,364.9 | 16.8 % | 1,374.6 | 9.8 % |
The regular personnel list for production and nonproduction areas of business in 2013 amounted to 31,963 people (31,177 people in 2012).
Other expenses
| 2012 | 2013 | Change 2013/2012 | ||||
|---|---|---|---|---|---|---|
| Indicator | mln RUB |
% of total Company expenses | mln RUB |
% of total Company expenses | mln RUB | % |
| Lease payments | 582.1 | 0.9 % | 689.8 | 0.8 % | 107.7 | 18.5 % |
| Taxes, except for income tax | 377.4 | 0.6 % | 667.2 | 0.7 % | 289.8 | 76.8 % |
| Installation, repair and maintenance services | 534.7 | 0.8 % | 580.4 | 0.6 % | 45.7 | 8.5 % |
| Power for utility needs | 399.3 | 0.6 % | 358.2 | 0.4 % | –41.1 | –10.3 % |
| Private security services | 278.2 | 0.4 % | 305.4 | 0.3 % | 27.2 | 9.8 % |
| Information services | 261.9 | 0.4 % | 261.7 | 0.3 % | –0.2 | –0.1 % |
| Insurance | 126.0 | 0.2 % | 131.5 | 0.1 % | 5.5 | 4.4 % |
| Consulting, legal and auditing services | 90.5 | 0.1 % | 129.6 | 0.1 % | 39.1 | 43.2 % |
| Telecommunication services | 50.2 | 0.1 % | 52.2 | 0.1 % | 2 | 4.0 % |
| Recognized contingencies | 467.8 | 0.7 % | 26.7 | 0.0 % | –441.1 | –94.3 % |
| Transport costs | 67.0 | 0.1 % | 14.8 | 0.0 % | –52.2 | –77.9 % |
| Special purpose and membership fees | 1.5 | 0.0 % | 6.1 | 0.0 % | 4.6 | 306.7 % |
| Bad debt charge off | 15.7 | 0.0 % | 3.7 | 0.0 % | –12.0 | –76.4 % |
| Other expenses | 2,628.0 | 4.2 % | 2,909.6 | 3.2 % | 281.6 | 10.7 % |
| Other expenses, total | 5,880.3 | 9.2 % | 6,136.8 | 6.8 % | 256.5 | 4.4 % % |
EBITDA
EBITDA in 2013 amounted to 11,325.0 mln RUB. The reduction of EBITDA by 3,903.8 mln RUB, or 25.6% vs. 2012 is stipulated by the generation of provisions for bad debt relating to the power transmission services of the sales companies deprived of the status of suppliers of last resort. Adjusted EBITDA amounted to 19,687.1 mln RUB in the reporting year, which is 26.3% higher than in 2012 (15,589.6 mln RUB). The difference between the reported and adjusted figures is explained by the fact of taking into account the following non-monetary operations: generation of the allowance for devaluation of receivables and adjustment of the deferred income tax.
PROFIT
The Company’s profit in 2013 amounted to 266.2 mln RUB. A 94.2% reduction of profit vs. 2012 is primarily stipulated by the necessity of generating an allowance for devaluation of receivables in the amount of 8,581.0 mln RUB relating to the power transmission services of the power sales companies deprived of a status of suppliers of last resort.