2.3 The financial performance13

2016 events

  • Financial results for the year 2016 are due to an increase in the output of hydropower plants by 16.6 % (comparing with 2015) and a significant optimization of operating costs
  • Revenue growth 8.2 % in 2016
  • EBITDA for 2016 – 100,341 million rubles (+36.7 %)
  • Operating expenses for 2016 grew significantly below inflation – by only 0.2 % as a result of the program to reduce transaction costs
  • Net profit for 2016 – 39,751 million rubles (+46.4 %). Adjusted for non-monetary items net profit – 66,114 million rubles (+39.6 %)
  • Weighted average earnings per share for 2016 – 0.1095 rubles (+26.6 %)

As a result of 2016, the RusHydro Group demonstrated high financial results. They reflected not only the record level of hydropower generation – almost 17 % higher than 2015, but also the consistent management efforts aimed at optimizing all managed operating costs of the Group and selling large assets that do not affect the Group’s core business.

2.3.1 Profitability indicators

EBITDA, million RUB73,24973,383100,34126,958
EBITDA margin*, %21.419.824.95.1
Net profit (loss), million RUB24 ,13127,15939,75112,592
Net margin*, % 2.5
Net profit (loss) per one share, million RUB0.06890.08650.10950.0230
Return on assets (ROA), % 1.1
Return on equity (ROE), %*4.0 4.56.3 1.8

Change in net profit, million RUB

* EBITDA margin – the indicator is calculated taking into account other operating income received by the RusHydro Group in 2015 (8.2 billion rubles) and 2016 (12.4 billion rubles) in the form of insurance compensation, income from the sale of assets and subsidiaries.

* Net profit – in 2016 the distribution of the Company’s profit following the results of 2015 was approved at the Annual General Meeting of shareholders of 2016, June 27 (Minutes of 29.06.2015, No.15). The dividend amounted to 50 % of the financial result ofPJSC RusHydrodetermined in the accounting statements according to Russian Accounting Standards and based on the Russian Government decree No.705-r, of 18.04.2016.

Factors, which influenced the Group’s net profit increase in 2016 werefinance income and state subsidies.

The Group’s net profit for the year 2016 increased by 46.4 % and amounted to 39,751 million rubles, compared with 27,159 million rubles in 2015. The Group’s profitability margin increased to 9.8 %.

EBITDA in the reporting period increased by 36.7 % and amounted to 100,341 million rubles, compared with 73,383 million rubles in 2015. The Group’s EBITDA margin also increased, amounting to 24.9 % as of the end of the year.

2.3.2 Revenue and expenses18

Revenue and Operational expense dynamics, million RUB

Revenue structure for group companies (without taking into account intra-group transactions), million RUB

Change in revenue, million RUB

Revenue structure by type of activity, million RUB

The total revenue of the Group for 2016 increased by 8.2 % compared with 2015 from 361,826 million rubles to 391,322 million rubles.
The main factors of revenue change:

  • significant increase in electricity generation by HPP of JSC RusHydro against the background of increased water inflow into a number of large reservoirs;
  • increase in free electricity prices in the «one day ahead» market in the first price zone;
  • indexation of regulated tariffs for electricity and capacity for HPPs of PJSC RusHydro;
  • increase in the price for the sale of capacity at the CCA for HPPs of the second price zone due to the completion of the liberalization of the capacity market of HPP – with the increase in the share of HPP capacity sold at CCA prices from 80 to 100 % from 01.05.2016;
  • increase in revenue from electricity sales in the «Subgroup» RAO ES EAST «segment due to the growth of the average tariff rate»;
  • an increase in government subsidies by 20.5 % to RUB 17,250 million due to compensation in the fourth quarter of 2016 of JSC DGC’s expenses for the purchase of natural gas from the Sakhalin-1 consortium in the amount of 2,080 million rubles;
  • increase in revenue from the sale of electricity through the segment «Subgroup» ESC RusHydro «due to the planned increase in prices for electricity, the growth of electricity consumption in the operations regions and regions involving a search for new customers»;
  • increase in revenue from the sale of heat, due to the growth of the average tariff rate and increase in thermal power supply from collectors.

RUB million

revenue in 2016

Change in operational expenses, million RUB

Structure of operating expenses, million RUB

As for the reporting period the operating expenses of the Group increased by 0.2 % and amounted to 315,705 million rubles, compared to 315,103 million rubles in 2015.

The main factors of operating expenses change:

  • reduction of employee compensation costs by 1.5 % due to the continued optimization of the number of personnel and incentive systems for employees and senior management;
  • reduction of the cost of purchased electricity and capacity, associated mainly with the output of large consumers serviced by ESKB LLC, to the wholesale electricity market; Reduction of expenses for purchased electricity by PJSC «Yakutskenergo» in connection with the granting of the status of a guaranteeing supplier of JSC «Vilyuiskaya HPP-3» (PJSC «AK ALROSA»); A decrease in the cost of purchased electricity by PJSC RusHydro;
  • decrease in other expenses due to a decrease in the loss on fixed assets disposal , a decrease in travel expenses, as well as in social costs;
  • lower cost of third-party services, mainly due to lower costs for subcontractors, consulting, legal and information services, repairs and maintenance;
  • increase in electricity distribution costs due to an increase in the prices for electricity transmission services, as well as increased volumes of productive power supply to consumers;
  • growth in depreciation of fixed assets and intangible assets due to commissioning of new fixed assets in PJSC RusHydro, Blagoveshchenskaya TPP JSC and Sulaksky HydroCascade JSC.

2.3.3 Assets, equity and liabilities

Asset structure and dynamics, million RUB


Liabilities structure and dynamics, million RUB

As of December 31, 2013, the Group’s assets increased by 45,309 million rub to 983,446 million rub, compared to the same indicator as of December 31, 2015. The main factors of asset change are:

  • increase in the Group’s fixed assets due to the implementation of the investment program;
  • increase in the value of cash equivalents while decreasing the value of deposits in current assets;
  • increase in the value of financial assets available for sale due to the growth of quotations;
  • decrease in the value of non-current assets due to the completion of the transaction for the sale of the dams of the Bratsk, Ust-Ilim and Irkutsk hydroelectric power plants.

The Group’s liabilities as at 31.12.2016 increased by 8,296 million rubles to 332,514 million rubles, compared to the same indicator as of December 31, 2015. The increase in liabilities was due to the placement by PJSC RusHydro in April 2016 of interest-bearing non-convertible exchange-traded bonds of the BO-PO4 series with a nominal value of 15,000 million rubles, as well as by increasing the long-term borrowings of the Sub-group RAO ES EAST.

At the same time, the liabilities decreased as a result of the buyout of bonds 01 and 02 by PJSC RusHydro with a nominal value of 14,750 million rubles, as well as due to the reduction of accounts payable to suppliers and contractors.

Assets, equity and liabilities, million RUB

 201420152016Change 2016/2015, %
Property, plant and equipment686,190744,585765,0472.75
Other fixed assets 48,54047,12469,94648.4
Current assets149,040
Total assets883,770938,137983,446
Total liabilities and equity883,770

Strategic deals of 2016

Sale of dams of the HPP of the Angarsk cascade

Pursuant to the decision of the Board of Directors of PJSC RusHydro (Minutes No. 242 of10.10.2016), on 17.10.2016, a contract for the sale of dams of the HPP of the Angarsk cascade was concluded between PJSC RusHydro and LLC «Telmamskaya HPP» (100 % subsidiary of EuroSibEnergo JSC). The state registration of the transfer of ownership of dams to LLC «Telmamskaya HPP» was carried out on 15.11.2016. The selling price of the dams was 10,950,400,000 rubles, including VAT.

The transaction was effected by PJSC RusHydro in order to:

  • get a significant source of cash,
  • improve the balance and financial results of PJSC RusHydro in order to implement the priority tasks and fulfill the orders of the Government of the Russian Federation to increase the rate of dividend yield,
  • maximize the RusHydro Group’s business value from dam management in comparison with the lease of dams.

Refinancing of debt on loans and borrowings of companies of the RAO ES EAST Holding

In order to fulfill the instructions of the President of the Russian Federation and the Government of the Russian Federation, a large-scale work was carried out to address the high debt burden of the RAO ES EAST Holding.

The Board of Directors of PJSC RusHydro (Minutes No. 244 of 23.11.2016 and No. 246 of December 27, 2016) decided to increase the company’s authorized capital, sell part of treasury shares of PJSC RusHydro, approve a new target mechanism for refinancing debts on loans and borrowings of Holding companies of RAO ES EAST, approve the transaction of the non-deliverable forward for the shares of PJSC RusHydro, and determine the terms for transferring funds to the operating companies of the RAO ES EAST Holding from RusHydro.

This mechanism is implemented by selling additional shares (40 billion shares) ofPJSC RusHydro and treasury shares of the Company, which are on the balance sheets of RusHydro’s JSC Gidroinvest and EZOP (LLC) (15 billion rubles) to VTB Bank (PJSC) with a simultaneous conclusion of a non-deliverable forward contract for RusHydro shares with VTB Bank (PJSC).

The total amount of funds for refinancing debts on loans and borrowings of companies of RAO ES EAST Holding Company received from the sale of shares of PJSC RusHydro amounted to 55 billion rubles.

The Bank of Russia carried out the state registration of the additional issue of shares of PJSC RusHydro on 07.12.2016.

On March 7, 2017 legally-binding documentation on the deal with VTB Bank (PJSC) was signed. The funds raised from the sale of PJSC RusHydro shares to Bank VTB (PJSC) amounting to 55 billion rubles were received and fully directed to pay off the debt burden of the operating companies of RAO ES EAST.

Analysis of the structure and changes in debt. Credit Ratings

The debt of the RusHydro Group for borrowed funds increased insignificantly for 2016: by 2,410 million rubles (1.2 %), while the share of short-term part of borrowed funds decreased to 20.9 % as of December 31, 2016 (and amounted to 41,757 million rubles).

The volume of net debt of the Group (the difference between the total amount of debt on short-term and long-term borrowed funds and the total amount of cash and equivalents) as of December 31, 2016 amounted to 132,449 million rubles (a decrease for 2016 amounted to 16,919 million rubles). Taking into account the significant growth in the Group’s operating profit for 2016, the level of the debt burden of the RusHydro Group (including the amount of the guarantee of PJSC RusHydro for the obligations of PJSC Boguchanskaya HPP) decreased: the indicator «Financial debt / EBITDA» fell to 2.3 as of December 31, 2016 against 3.1 as of December 31, 2015, which confirms the strengthening of the Group’s stable financial position.

More than 90 % of RusHydro’s consolidated financial debt (including guarantees for obligations of Boguchanskaya HPP under the loan of Vnesheconombank) was denominated in Russian rubles as of December 31, 2016, which makes the Group’s currency risk non-significant regarding the financial debt. At the same time, more than 32 % of the total volume of loan debts are liabilities to large Russian banks with state participation.
As of 31.12.2016, the available balance of the sample under the current loan agreements of the Group of companies amounted to more than 97,353 million rubles, which is much higher than the demand for short-term refinancing of the debt and significantly reduces financial risks.

Taking into account the insignificant increase in the financial debt following the results of 2016, the interest on borrowed funds paid by the Group increased by 773 million rubles (+4 %), amounting to 20,271 million rubles.

Targeted capital structure

Within the framework of the Long-term development program of the RusHydro Group for the period up to 2020 (inclusively), approved by the decision of the Board of Directors of PJSC RusHydro (Minutes No. 244 of November 23, 2016), it is envisaged that the debt to equity ratio (Financial leverage ratio) shall be maintained at a level not exceeding 1.5 to ensure the necessary level of financial stability.

Long-Short-term debt structure, %

Short-term debt structure, %

The Group’s short-term debt as of December 31, 2016 amounted to 41,757 million rubles. Reduction of short-term debt by 20,457 million RUB is mainly due to refinancing of short-term borrowings through the attraction of long-term loans with a more comfortable repayment schedule. As a result, the short-term portion of long-term loans accounts for 61.7 % of the short-term debt of the RusHydro Group, including placed bonds of PJSC RusHydro (series 09) in the amount of 10 billion rubles, 34.8 % form short-term loans and 3.5 % – other short-term loans.

The Group’s long-term debt for 2016 increased by 22,867 million RUB (16.9 %) to 158,046 million RUB, mainly due to the procurement of long-term borrowings to finance the Group’s investment activities and the refinancing of debt due for redemption. As of December 31, 2016, 67.1 % of the long-term debt accounted for credits and loans, 31.8 % for the ruble-denominated bonds placed by the Group and 1.1 % for other long-term borrowed sources of financing.

Credit ratings (at the end of 2016)

Rating AgencyFitch RatingsStandard & Poor'sMoody's
The credit rating on the National scaleАА(rus)*ruАА-**
Уровень кредитного The credit rating on the International scale (in foreign currency)ВВ+ВВBa2
Outlook on the credit ratingNegativePositiveStable
Outlook revision date in 201620.05.201619.12.201627.04.2016

2.3.4 Cash flow

Net cash flow from the Group’s operating activities in 2016 increased by 1,573 million rubles (2 %) amounting to 71,373 million rubles.

The net funds outflow to finance investment activities, on the contrary, decreased by 23,463 million rubles (48 %), amounting to 24,918 million rubles. During 2016, the Group worked to implement a major investment program, increasing financing of capital expenditures by 8,813 million rubles (10 %) to 101,835 million rubles.
For financial activities, the Group recorded a net outflow of cash in the reporting period of 26,837 million rubles against the backdrop of an increase in the amount of repaid borrowings compared to the previous year and an increase in the amount of dividends paid to shareholders of PJSC RusHydro.

Despite worsening macroeconomic conditions, in 2016 the Group avoided significant exchange rate losses due to a significant share of ruble loans in the overall debt structure. At the same time, the negative exchange rate differences on the Group’s cash balances in 2016 amounted to 289 million rubles, against the positive exchange rate differences of the previous year in the amount of 796 million rubles.

Against this backdrop, the Group increased its cash balances to 67,354 million rubles by the end of the year, which is 19,329 million rubles (40 %) higher than at the beginning of the year.

Cash flow, million RUB

 201420152016Change 2016-2015
Net cash generated by operating activities57,92669,80071,3731,573
Net cash used in investment activities(60,433)(48,381)(24,918)-23,463
Net cash generated by (used in) financing activities1,091(8,584)(26,837)18,253
Foreign exchange gain (loss) on cash balances1,338796(289)-1,085
Decrease in cash and cash equivalents(78)13,63119,3295,698
Cash and cash equivalents at the end of the year34,39448,02567,35419,329