OJSC Bashkirenergo
Bashkirenergo Publishes Its Q2 2012 IFRS Financial Results
OJSC Bashkirenergo / Key word(s): Half Year Results 04.09.2012 / 14:37 --------------------------------------------------------------------- Bashkirenergo Publishes Its Q2 2012 IFRS Financial Results September 4, 2012, Ufa (Russian Federation, Republic of Bashkortostan) - Bashkirenergo OJSC (MICEX, RTS: BEGY, ISIN: RU0009044242) publishes consolidated financial statements for 6M 2012 prepared in accordance with IFRS. For the purpose of complying with Russian legislation, on June 27, 2012 the Extraordinary General Meeting of Shareholders of Bashkirenergo OJSC made a decision concerning the company's reorganization in the form of a spin-off, resulting in the establishment of two companies: a generating company called Bashenergoactiv Open Joint Stock Company (Bashenergoactiv JSC) - which will obtain the shares of Bashkir Generation Company LLC, Bashkir Heat Distribution Grid LLC, and CCGT CHPP-5 LLC - and a power grid company called Bashkirian Power Grid Company Joint Stock Company (BPGC JSC). As a result of this reorganization, all of the property, rights and duties of Bashkirenergo OJSC will be transferred to Bashenergoactiv JSC and BPGC JSC in accordance with the dividing balance sheet. All organizational arrangements and corporate actions related to the company's reorganization should be executed by the end of 2012. In connection with this development and in accordance with the rules of IFRS compilation, the financial results of the generating sector for the first six months of 2012 were presented separately as a result of the discontinuing operation. KEY FINANCIAL RESULTS FOR THE FIRST SIX MONTHS OF 2012: - The revenue from continuing operations (without accounting for the results of the generating sector) for 6M 2012 declined by 4.88% compared to the similar period of the previous year, and amounted to RUB 5,672 million. The revenue for Q2 2012 amounted to RUB 2,767 million, down 0.65% QoQ. - Operating profit (without accounting for the results of the generating sector) for 6M 2012 grew 31.76% as compared to 6M 2011, reaching RUB 1,539 million. Q2 2012 operating profit increased by 27.35% YoY to RUB 908 million. - OIBDA from continuing operations (without accounting for the results of the generating sector) for 6M 2012 was RUB 2,218 million, or 26% higher than the similar figure of the previous year. The Q2 2012 OIBDA amounted to RUB 1,245 million, up 23% YoY. - Profit from continuing operations (without accounting for the results of the generating sector) for 6M 2012 grew 30% versus 6M 2011, reaching RUB 1,216 million. At the same time, profit during Q2 2012 amounted to RUB. - The OIBDA margin (without accounting for the results of the generating sector) for 6M 2012 grew from 30% to 39% YoY. - Profit and comprehensive income, representing the financial results of both the generating and grid segments for 6M 2012, decreased by 49% YoY, amounting to RUB 1,706 million. - As of June 30, 2012, the financial debt of the generating business amounted to RUB 2,268 mln. The total of the company's debt/OIBDA ratio was 0.6. KEY OPERATING RESULTS FOR THE FIRST SIX MONTHS OF 2012: - The total power generation of Bashkirenergo OJSC for 6M 2012 fell by 4% compared with the similar figure of the previous year, to 11,012 mln kWh. - The capacity factor of Bashkirenergo OJSC's power stations was 59.49% (a decrease of 2.52 p.p. compared to 6M 2011). - The heat output of the company amounted to 13,217 thousand Gcal for 6M 2012, down by 5.3% YoY. - The specific consumption of equivalent fuel for 6M 2012 decreased by 0.1 g/kWh for electricity generation to 316.6 g/kWh, and by 1 kg/Gcal for heat output to 141.8 kg/Gcal, compared to the similar period of the previous year. - The transmitted electricity losses in the transmission grids fell to 1.46% versus 1.49% for 6M 2012, while distribution grid losses were reduced from 9.47% to 8.45% YoY. Commenting on the company's results for the first six months and the second quarter of 2012, Andrey Makarov, the General Director of Bashkirenergo OJSC, noted: The first half of 2012 was a pretty tough period for the power sector, which faced a number of unfavorable factors. A postponed tariff escalation from January to June, a decrease in prices on the wholesale market, a warmer winter and early termination of the heating season in some regions brought the indicators of the sector and Bashkirenergo OJSC in particular under pressure. Nevertheless, the company continues to work on improvements to its business efficiency. The company terminated servicing the rented heat network and other equipment located in Ufa, Sterlimak and Kumertau during the second quarter. The implementation of projects aimed at modernization and an improvement in the efficiency of the company's assets continued, as well as work on such common sector issues as the collection of debts for heat and hot water. At the same time, Bashkirenergo OJSC expended efforts to settle corporate issues related to the reorganization for the purpose of complying with legal requirements, as well as the preparation and holding of the general meetings of shareholders. The company has managed to carry out its assigned tasks. The Annual General Meeting of Shareholders took place on June 20, at which time the company's annual report was approved and new membership to the Board of Directors was elected. Also, on July 27 the Extraordinary General Meeting of Shareholders made a decision concerning the company's reorganization. Activities carried out in regards to the company's reorganization are already reflected in the IFRS report for the first six months of 2012. As a result, the financial results of the generating sector are represented separately as a discontinuing operation. RESULTS OVERVIEW In Q2 2012, the company's power plants produced 7.8% less electric power than during the similar period of the previous year due to a decrease in prices on the wholesale market and a lower inflow of water to the water storage reservoirs of the HPP. The 6M 2012 power output was 11,012.57 mln kWh, or 4% less than the similar figure for the previous year. The total power output in Russia since the beginning of 2012 was 533.4bln kWh, or 1.6% more than from January to June of 2011, and for the Urals United Power System, increased by 1.3% to total 129.9 bln kWh in H1 2012. Thus, the share of Bashkirenergo's output was 8.47% in the Urals UPS and 2.06% in Russia as a whole. Heat output in Q2 2012 was reduced by 16.3% compared to the similar period of the previous year to 3,522 Gcal. Warm weather made it possible to terminate the heating season ahead of schedule. The reduction in heat output was also conditioned by the termination of servicing for rented property by BashRES LLC, a decline in demand from a large customer, and a decline in the output of heat and hot water due to weather warmer than the previous year. The company's total heat output for H1 2012 was 13,217.75, or 5.3% less than the similar indicator of the previous year. Key Financial Performance Indicators, in mln RUR In accordance with the rules of IFRS compilation, the financial results of the generating sector for the first six months of 2012 are presented separately as the results of a discontinuing operation.Q2 Change 6 Months Change Indicator 2012 2011 % 2012 2011 % Revenue 2 767 2 785 -0.65% 5 672 5 963 -4.88% Operating expenses (1 859) (2 072) -10.28% (4 133) (4 795) -13.15% Operating Profit 908 713 27.35% 1 539 1 168 31.76% Profit before income tax 906 712 27.25% 1 536 1 165 31.85% Income tax expenses (227) (115) 97.39% (320) (229) 39.74% Profit from continuing operations 679 597 13.74% 1 216 936 29.92% Profit /(loss) from discontinuing operations (336) (8) -4 100% 490 2 396 -79.55% Profit and Comprehensive income 343 589 -41.77% 1 706 3 332 -48.80% OIBDA 1 245 1 016 22.54% 2 218 1 764 25.74% OIBDA margin 45% 36% 9 p.p. 39% 30% 9 p.p. EBIT margin 33% 26% 7 p.p. 27% 20% 7 p.p. Net margin 25% 21% 4 p.p. 21% 16% 5 p.p.Key Operating ResultsQ2 Change 6 Months Change Operating Indicators 2012 2011 % 2012 2011 % Installed electric capacity, MW 4 255 4 267 -0.3% 4 279 4 261 0.42% (average) Installed heat capacity, Gcal/h 12 454 13 275 -6.2% 12 768 13 275 -3.8% (average) Electricity generation, mln kWh 4 702 5 099 -7.8% 11 012 11 475 -4% Heat output, thousand Gcal 3 522 4 207 -16.3% 13 217 13 956 -5.3% Electric capacity factor, % 50.9 54.7 -3.8 59.49 62.01 -2.52 p.p. p.p. Specific consumption of equivalent 330.2 325.9 1.3% 316.6 316.7 0% fuel for electricity generation, g/kWh Specific consumption of equivalent 145.5 145.5 0% 141.8 142.8 -0.7% fuel for heat output, kg/Gcal Distribution grid losses, % 5.22% 6.28% -1.06 8.45% 9.47% -1.02 p.p. p.p. Transmission grid losses, % 1.43% 1.42% +0.01 1.46% 1.49% -0.03 p.p. p.p.REVENUE Revenue for Q2 2012 amounted to RUB 2,767 million, remaining nearly the same as the similar results of the previous year (down 0.65% from RUB 2,785 million). It should be noted that in the published IFRS report, the revenue represents the results of the grid segment, while the results of the generating segment are accounted for in the separate line, 'Profit from the discontinuing operation'. OPERATING EXPENSES The structure of operating expenses in the Q2 2012 IFRS report do not include power generating activity due to the fact that the results of this segment are accounted for in the separate line, 'Profit from the discontinuing operation'. Staff costs, the largest item of fixed costs (37% of total operating expenses), rose 1% to 1,540 mln RUR against the first six months of 2011. Subsequent to the deconsolidation of the guaranteeing supplier (retail company) ESKB LLC in 2011, BashRES LLC and BSK LLC (the subsidiaries of Bashkirenergo OJSC) do not account for normative losses in their operating expenses in such an amount, as the guaranteeing supplier ESKB LLC does not include them in its sales amounts for the purpose of complying with wholesale market rules. Due to this fact, the compensation of losses to a guaranteeing supplier, representing a major item of expenses, was reduced by 28% YoY, and amounted to RUB 1,093 million. The total operating expenses for 6M 2012 decreased by 13.8% YoY to RUB 4,133 million, supporting a 31.76% growth in operating profit YoY to RUB 1,539 million. PROFIT FROM DISCONTINUING OPERATION Profit from the discontinuing operation, representing the results of power generation for 6M 2012, was RUB 490 million. Losses, amounting to RUB 336 million for Q2 2012, were caused by price cutting on the wholesale market for electricity and power, on the back of high prices for energy carriers, a decline in heat output related to the higher temperature of the outside air, and by customers' weak payment disciplines. FINANCIAL POSITION As of the balance sheet date, the total assets of Bashkirenergo OJSC amounted to RUB 69,590 million, increasing by 7% from the beginning of the year. Power generating assets were recorded in a separate line, 'Assets from discontinuing operation', which influenced the structure of assets in the H1 2012 IFRS report. The share of non-current assets comprised 26% of the total assets and amounted to RUB 18,267 million, while the share of current assets was 74%, or RUB 51,323 million. Capital and reserves as of June 30, 2012 comprise 83% of the total equity and liabilities, amounting to RUB 57,420 million. The liabilities of the discontinuing operation became the largest liability, along with deferred tax liabilities and trade and other payables, comprising 12%, 1.3% and 1% of capital and liabilities, respectively. CAPITAL EXPENDITURE The investment program of H1 2012 amounted to RUB 1,433 million. Bashkir Electricity Distribution Grid LLC (BashRES LLL - a subsidiary of Bashkirenergo OJSC) commissioned a new 110 kV Sipaylovo-Ishimskaya cable line in Ufa city in Q2 2012. The line was constructed by applying cable with insulation made of cross-linked polyethylene (CLP), and has a total two-way length of 4,926 meters. The new line lies at a safe depth underground. The investment value of the Sipaylovo-Ishimskaya cable line construction amounted to RUB 340 mln. Bashkirenergo OJSC started reconstruction of equipment at the largest boiler house in Ufa city, BH-1. During the course of modernization, the present pipeline, with a diameter of 700 mm, will be replaced by a modern pipeline with a diameter of 800 mm. Isolation valves, a mud filter and other equipment necessary for the operation of the modernized pipeline will also be replaced. The estimated cost for the pipeline's diameter enlargement is RUB 7 million. Replacement of the 110 kV oil break switches with electro gas at the substations of the Bashkir grid company continues as part of the program of modernization of BSK OJSC's switching equipment, scheduled until 2016. By the end of 2012, a total of 15 oil break switchers will be replaced by five electro gas switchers at five substations. It is planned to install 189 switchers of 6/10kV, 26 switchers of 35kV and 47 switchers of 110kV at the facilities of BashRES LLC this year. The construction of CCGT CHPP-5, with a capacity of 440 MW and 290 Gcal/h, remains one of the largest projects. The expected term for putting CHPP-5 into operation is during 2014. EVENTS AFTER THE REPORTING DATE The Extraordinary General Meeting of Shareholders of Bashkirenergo OJSC took place on June 27, 2012. A decision was adopted at the meeting concerning the company's reorganization in the form of a spin-off resulting in the establishment of two companies: a generating company called Bashenergoactiv Open Joint Stock Company (Bashenergoactiv JSC), and a power grid company called Bashkirian Power Grid Company Joint Stock Company (BPGC JSC). As a result of this reorganization, all of the property, rights and duties of Bashkirenergo OJSC will be transferred to Bashenergoactiv JSC and BPGC JSC in accordance with the dividing balance sheet. OUTLOOKS UNTIL THE END OF 2012 A readjustment of tariffs started from July 1, 2012. The Federal Tariff Service stipulated a 6% growth in tariffs for the population (or a 3% yearly average) and 15% for other consumers (or a 7.5% yearly average). This rise in tariffs should support power sector indicators in H2 2012. It is expected that revenue will decline in 2012 against target indicators due to the retirement of property rented by BashRTS LLC, as well as to changes in the regulations governing the wholesale market. At the same time, this should positively impact the profitability of the company's generating business. BASHKIRENERGO OJSC AND SUBSIDARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF JUNE 30, 2012 AND DECEMBER 31, 2011 (UNAUDITED) in millions of Russian rubles30 June 31 December 2012 2011 ASSETS Non-current assets Fixed assets 18,124 52,213 Advances paid for acquisition of property 95 1,332 Inventories - 156 Trade and other receivables 1 9 Other non-current assets 47 59 18,267 53,769 Current assets Inventories 311 1,300 Trade and other receivables 1,845 3,531 Advances paid and prepaid expenses 1,452 270 Investments - 2,006 Income tax prepaid 770 244 VAT recoverable and other taxes prepaid 229 960 Cash and cash equivalents 555 2,953 Assets on discontinuing operation 46,161 - 51,323 11,264 TOTAL ASSETS 69,590 65,033 EQUITY AND LIABILITIES Capital and reserves Share capital 1,093 1,093 Shares brought back from shareholders (282) (282) Retained earnings 56,609 54,902 Equity attributable to owners of the parent company 57,420 55,713 Non-controlling interests - - TOTAL EQUITY 57,420 55,713 Non-current liabilities Loans and borrowings - 2,265 Employee benefit obligations 240 625 Deferred tax liabilities 1,016 918 Other non-current liabilities 305 241 1,561 4,049 Current liabilities Loans and borrowings - 3 Trade and other payables 884 2,312 Advances received from customers 745 1,036 Accrued expenses and provisions 309 847 Income tax payable - 29 Other taxes payable 460 1,044 Liabilities on discontinuing operation 8,211 - 10,609 5,271 TOTAL LIABILITIES 12,170 9,320 TOTAL EQUITY AND LIABILITIES 69,590 65,033BASHKIRENERGO OJSC AND SUBSIDARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FIRST SIX MONTHS AND SECOND QUARTER ENDING JUNE 30, 2012 AND 2011 (UNAUDITED) in millions of Russian rublesQ2 Six Months 30 June 30 June 30 June 30 June 2012 2011 2012 2011 Revenue Electricity and capacity 2,689 2,679 5,520 5,783 Heat energy - - - - Other revenue 78 106 152 180 2,767 2,785 5,672 5,963 Operating expenses Staff costs (749) (742) (1,540) (1,522) Compensation of losses to quarantining supplier (277) (446) (1,093) (1,552) Depreciation (337) (303) (679) (596) Repair and maintenance of equipment and grid (198) (274) (334) (504) Materials and spare parts (47) (65) (91) (124) Fuel (24) (28) (45) (51) Purchase of electricity and heat (6) (11) (41) (39) Taxes, other than income tax (8) (7) (17) (13) Rent (9) (6) (16) (14) Change in provision for tax and legal contingencies (7) (1) 19 3 Change in provision for doubtful debts (50) (1) (50) (2) Charity - (64) - (159) Loss on disposal of property, plant and equipment (9) (1) (9) (1) Other operating expenses (138) (123) (237) (221) (1,859) (2,072) (4,133) (4,795) Operating profit 908 713 1,539 1,168 Finance income 3 2 7 4 Finance cost (5) (3) (10) (7) Profit before income tax 906 712 1,536 1,165 Income tax (227) (115) (320) (229) Profit from continuing operations 679 597 1,216 936 Profit/(loss) from discontinuing operations (336) (8) 490 2,396 TOTAL PROFIT AND COMPREHENSIVE INCOME FOR THE PERIOD 343 589 1,706 3,332 Attributable to: Owners of the parent company 343 589 1,706 3,332 Non-controlling interests - - - - EARNINGS PER SHARE FROM CONTINUING AND DISCONTINUING OPERATIONS Basic and diluted earnings per share (in rubles) 0.31 0.52 1.60 3.10 EARNINGS PER SHARE FROM CONTINUING OPERATIONS Basic and diluted earnings per share (in rubles) 0.63 0.53 1.13 0.78BASHKIRENERGO OJSC AND SUBSIDARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FIRST SIX MONTHS ENDING JUNE 30, 2012 AND 2011 (UNAUDITED) in millions of Russian rubles30 June 30 June 2012 2011 OPERATING ACTIVITIES Profit before income tax 2,235 4,195 Adjustments for: Depreciation 1,815 1,735 Change in provision for tax and legal contingencies 50 (82) Change in provision for unused vacations and bonuses 14 (219) Loss/(income) on disposal of property, plant and equipment 16 (72) Change in allowance for doubtful receivables 214 44 Finance losses 193 32 Finance income (180) (1) Other adjustments (80) 2 Operating cash flow before movements in working capital 4,277 5,634 Change in inventories (504) (439) Change in trade and other receivables (1,511) (1,477) Change in advances paid and prepaid expenses 110 (184) Change in taxes receivable, other than income tax (174) (619) Change in trade and other payables (42) 2,165 Change in advances received from customers 200 (248) Change in taxes payable, other than income tax (85) 220 Net cash provided by operations 2,253 5,052 Income tax paid (45) (1,244) Interest paid (79) (20) Net cash generated from operating activities 2,147 3,788 INVESTING ACTIVITIES Purchase of property, plant and equipment (1,433) (3,735) Proceeds from disposal of property, plant and equipment 8 278 Disposal of Special Purpose Entities - (158) Purchase of investments (2,089) (32) Proceeds from disposal of investments 2,012 34 Interest on deposits 180 (1) Net cash used in investing activities (1,322) (3,614) FINANCING ACTIVITIES Dividends paid - (1,075) Buy-back of ordinary shares - - Proceeds from loans and borrowings - 6,149 Principal repayments on loans and borrowings - (3,876) Net cash received from (used in) financing activities - 1,198 Net increase/(decrease) in cash and cash equivalents 826 1,372 Cash and cash equivalents at beginning of the period 2,953 569 Cash and cash equivalents classified as disposal group (3,224) (666) Cash and cash equivalents at end of the period 555 1,275Bashkirenergo OJSC is a major regional utility company in Russia, ranked number five in terms of installed electric capacity and number seven in terms of installed heat capacity among Russian territorial generating companies. In terms of the amount of heat output, Bashkirenergo OJSC ranks among the 10 major heat-producing companies in the world. Bashkirenergo OJSC holds a dominating position in the electricity and heat market of the Republic of Bashkortostan, which is one of the top-ten developed regions in Russia. Bashkirenergo OJSC owns companies that produce electricity and heat, as well as conduct their transmission to consumers. The installed electric capacity is 4,295 MW, while the installed heat capacity is 13,141 Gcal/h. Contacts: Head of Corporate Communications Bashkirenergo OJSC Luiza Lesnaya Tel: + 7 (347) 269-42-28 + 7 (985) 160-97-76 lesnaya@bashkirenergo.ru Statements contained in this press release may contain forward-looking information that reflects management's current view and estimates of future economic circumstances, industry conditions, company performance, and financial results. Any statements, expectations, capabilities, plans and assumptions contained in this press release that do not describe historical facts, such as statements regarding the declaration or payment of dividends, the direction of future operations, the implementation of principal operating and financing strategies and capital expenditure plans, and factors or trends affecting the financial condition, liquidity or results of operations are forward-looking statements and involve a number of risks and uncertainties. There is no guarantee that these results will actually occur. The statements are based upon many assumptions and factors, including general economic and market conditions, industry conditions and operating factors. Any changes in such assumptions or factors could cause the actual results to differ materially from current expectations. End of Corporate News --------------------------------------------------------------------- 04.09.2012 Dissemination of a Corporate News, transmitted by EquityStory.RS, LLC - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. EquityStory.RS, LLC's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: OJSC Bashkirenergo Kommsomolskaya st,126 450096 Ufa Russia Phone: + 7 (347) 269-43-59 E-mail: secr@iap.bashkirenergo.ru Internet: www.bashkirenergo.ru ISIN: RU0009044242 End of News EquityStory.RS, LLC News-Service --------------------------------------------------------------------- 184121 04.09.2012
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