VTB Capital "Russia Calling: London Session May-June 2011

229 views
167 views

Published on

Y2010 Results, Y2011 Forecast

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
229
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

VTB Capital "Russia Calling: London Session May-June 2011

  1. 1. 2010 Results & 2011 ForecastVTB Capital RUSSIA CALLING: London SessionMay 31 – June 01, 2011
  2. 2. Disclaimer The information in this presentation was received from the sources which, in opinion of IDGC of Centre (“the Company”), are reliable. Nevertheless, we do not guarantee accuracy of the given information which may be short or incomplete. All opinions and estimations containing in the present material reflect our opinion at the date of publication and are subject to change without notice. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision. The information in this presentation includes forward-looking statements. These forward-looking statements include all matters that are not historical facts, statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the prospectus, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods The Company does not bear the responsibility for consequences of use of opinions containing in the present report or applications, or for incompleteness of the information. No person is under any obligation to update or keep current the information contained herein. By attending the presentation you agree to be bound by the foregoing limitations.2
  3. 3. Attractive target for investments • Transition to RAB is a vigorous driver for increase in operational efficiency and decrease in costs per unit RAB regulation • The first IDGC among others which transferred all its branches to RAB: 2009: 3 branches, 2010: 4 branches, since 01.01.2011: 4 branches • High level of iRAB - USD 3.9 billion • Capital formation rate is lower than profitability rate of invested capital • Developed and implemented KPI system Strong team • Strong financial performance - positive dynamics on all key of managers financial and operating indicators for 4 years • Transparent system of corporate management (7+ corporate governance rating on national scale) • Approved dividend policy for 2010, total dividends that are proposed to the General Meeting of Shareholders - USD 20 million • Investment history of distribution grid complex attracts high attention of analysts and investors: Prospects of growth - sector is significantly undervalued as compared to foreign peers • Decrease of fixed assets depreciation as a result of full –scale renovation is the goal of highest priority3
  4. 4. Key figures on growth track 2008-2011 FORECAST* CAGR** 2,42*** 1,84 1,13 0,55 64,0% Capitalization USD billion 2008 2009 2010 2011 2,61 1,99 1,75 1,55 Revenue 19,3% USD billion 0,36 0,49 EBITDA 0,27 0,24 27,0% USD billion 0,155 0,185 Net profit 79,9% USD billion 0,036 0,041 56,6 56,0 55,8 53,1 -0,5% Productive supply kWh bn 2008 2009 2010 2011 * - due to board of directors approved Business Plan for 2011 ** - compound annual growth rate *** - consensus forecast by analysts for the end of 20114
  5. 5. IDGC of Center map. Common information. 10 11 2010* 8IDGC of Center 2 12 Capitalization 1,57*** 4 USD billion1 Belgorodenergo2 Bryanskenergo Revenue 1,99 USD billion3 Voronezhenergo Length of lines, km 374,34 Kostromaenergo Yaroslavl thousand** Smolensk Tver5 Kurskenergo Substation capacity,6 Lipetskenergo Bryansk IDGC of Center MWA Kostroma Kursk Orel 35-110 kV 31 4047 Orelenergo Smolensk Belgorod 6-10/0,4 kV 15 1928 Smolenskenergo Tambov Voronezh Number of9 Tambovenergo personnel 30 90610 Tverenergo Number of11 Yarenergo 5 7 shareholders 17 86712 Yargorelectroset, JSC 9 6The Company is the monopolist –tariffs are regulated by State 1 3 * - on 31.12.2010 ** - on track *** - on 27.05.20115
  6. 6. Company structure and key shareholders State 52.69% IDGC Holding Minor shareholdres 50.23% 49.77%* Group of companies IDGC of Center, JSCBranches 100% Subsidiaries 100% Belgorodenergo Yarenergo Energetik, JSC Yargorelectroset, JSC Energy service company, JSC Bryanskenergo Tverenergo Yargoreletroset, JSC is the largest The main activity is to 51% Territory Grid Organization in provide saving energy Voronezhenergo Tambovenergo Central Federal Region. The result services of acquisition of 100% stake is YarESK, JSC that IDGC of Center now controls Kostromaenergo Smolenskenergo more than 90% of power grid assets in the Yaroslavl region. -November Kurskenergo Orelenergo 11, 2009 Energetik, JSC acquired the controlling stake of Lipetskenergo Operating YarESK, JSC, which is Business units target company for consolidation of power grid 11 branches assets in Yaroslavl region * - including State share 0.46%6
  7. 7. Share capital structure • Diversified structure of share capital • Free float is about 30% IDGC Holding, JSC 15,90% 50,23% JAMICA LIMITED THE BANK OF NEW YORK MELLON 8,40% IMMENSO ENTERPRISES LIMITED 3,20% 2,73% ENERGOSOUZ HOLDINGS LIMITED 1,45% 18,09% RUSENERGO FUND LIMITED Others * - on 12.05.20117
  8. 8. Strategic vision of the Company’s management – industry leadership… Goals of the Company Target subsystems of the management: • Growth and changes Industry • Finance leadership • Consumers • Main business processes • Management system • Personnel Challenges of the top level Growth Finance Consumers Processes Management Personnel Ensure Realize efficient and Ensure development Enhance Enhance the Ensure safe functioning and and efficient long- term effective sales of efficiency of efficiency of innovative functioning of growth of services development of management system humanshareholder business resources electricity networkcapital value complex EVA; ROE; CF ROIC Losses (%) SAIFI; SAIDI Impact of IP Staff number TSR (NPV; IRR) ... a tool to achieve - the project approach, KPI system
  9. 9. Key Company KPI on 2011 11,4% ROE provided by cash Electricity flow, % losses/supply, % 9,96% Avoiding the excess of System Average limit in accidents Interruption Frequency number 0 Index (SAIFI) * <1 Efficiency in realization System Average of investment program Interruption Duration in 2011 ≥ 95% Index (SAIDI) * <1* - for 6-11 kV feeders and higher9
  10. 10. Credit and corporate rating History of IDGC of Center credit rating History of IDGC of Center corporate rating on the national scale Standard&Poors’s Confirmed February’11 NRCG** Confirmed July ‟10 Upgraded (7+) January ’ 11 Assigned November„09 Confirmed July‟ 09 НRА* Confirmed February‟ 09 Upgraded to АА- December ‘10 Assigned September‟ 08 Confirmed October‟10 Confirmed September‟09 Upgraded (level A+) September‟08 Upgraded (level А) August„07 ... developed corporate governance practice, leading position among IDGCs * National Rating Agency ** National rating of corporate governance10
  11. 11. Stock performance and liquidity increase Liquidity increase measures 05.2008 04.2009 08.2010 09.2010 2Q2011 3Q2011 2Q2011 4Q2011Company „s Company‟s Company‟s Inclusion of Dividends payment Launch of optionshares were shares were shares were Company‟s shares in USD 20, 05 million programlisted on included in the included in quotation list A2 DR programMICEX index: RTS EU* (MICEX)(quotation list MICEX PWR Stock performanceB), RTS IDGC of Centre MICEX PWR MICEX EuroStoxx Electricity 100,0%Tickers: Dividends for 2010: 80,0% 60,0%MICEX MRKC Total (USD 20,05 40,0% million) 20,0%RTS MRKC Net profit 12.6%classic share 0,0% -20,0%RTS MRKCG Dividend yield 1,37% -40,0%stock - forecast * - RTS energy utilities
  12. 12. Key stock market figures : 2nd place on capitalization among the IDGCs Capitalization of distribution grid companies as of Market multiples on IDGCs and foreign 31.12.10 and of 31.03.11, USD billion (MICEX) companies-analogues *3,0 2,60 2,57 16,00 2,5 14,00 13,52,0 1,86 1,25 1,84 12,00 1,5 10,1 1 1,11 1,12 1,05 1,11 10,00 0,90 0,96 0,94 1,0 0,90 0,79 0,83 0,71 0,61 8,00 6,8 0,5 0,29 0,56 0,24 0,170,15 6,00 5,0 0,5 4,90,0 IDGC of North-West 4,00 3,4 MOESK IDGC of Ural IDGC of Siberia IDGC of South IDGC of Volga IDGC of Center and Volga IDGC of Center Lenenergo IDGC of North Caucasus 2,00 0,9 0,8 1,1 0,00 EV/S 2011 EV/EBITDA P/E 2011 EV/RAB Region 2011 МРСК Центра Cap. on 31.12.10 Капитализация на 31.12.10, млрд. руб. Cap. on 31.03.11 Капитализация на 31.03.11, млрд. руб. IDGC of Center Медиана по российским аналогам Average on Russian companies ** Average on emerging countries Медиана по развивающимся аналогам * Calculations of the Company, data of investment banks covering the activities of IDGCs ** Foreign peers: Eletropaulo, Compania General de Electricidad, Aksu Enerji ve Ticaret, etc.)12
  13. 13. Management of loan portfolio – absence of short-term credits and loans…Structure of capitalUSD million 31.12.2009 31.12.2010 Chng. Decrease of averageEquity 1 363,37 1 507,63 10,58% interest rate on credits inLong-term liabilities 354,66 490,08 38,18% 2010 by 3,12%Short-term liabilities 13,23 0,00 -100% 10,99%Accounts payable 218,05 221,55 1,61%Other 69,26 114,83 60,19% 8,63% 8,58% 7,88% 7,87% 7% 17% Sberbank Rosbank 48% Alfabank Gazprombank 31.03.10 30.06.10 31.09.10 31.12.10 31.03.11 27%13
  14. 14. Debt position – low indicator of Net debt/EBITDA EBITDA vs. Net Profit, USD million USD billion Ratio Net Debt/EBITDA 600 1,80 1,60 Net debt/ 500 Year EBITDA Net Profit Net Debt EBITDA 1,40 400 1,202007 267 77 240 0,90 1,00 3002008 272 35 374 1,38 0,80 200 0,602009 231 42 339 1,41 0,402010 261 155 485 1,32 100 0,202011F* 490 185 828 1,83 0 0,00 2007 2008 2009 2010 2011П Low ratio of NET DEBT/EBITDA allows to attract additional funding (with the ratio limit approved by the Board of Directors = 3) EBITDA Net Profit Net debt/EBITDA * - due to approved Business Plan on 201114
  15. 15. Expected CAPEX for 2011-2016 will amount to about USD 6,4 billion Commissioning Uses of CAPEX in 2011 Development, Year 9,2% 100% USD million* USD million MWA km 57 4,9 % 1,2% 2011 623 600 1 371 5 663 7,4% 30 8 2012 812 749 1 478 5 227 1104 1082 1 587 8 487 46 2013 7,8% 2014 1235 1250 2 632 8 299 48 31,3% 623 2015 1314 1387 2 149 9 346 2016 1318 1283 1 388 8 520 195 38,2% Financing sources on 2011 238 2% 1% Borrowed sources USD million - Replacement of the main power equipment Tariff sources - New construction(substations, overhead и cable lines) 50% - Developing/Modernization of accounting systems 47% Payments for connection - ASMD systems, connection, IT services - Modernization and reconstruction Others - Acquisition of power grid systems - Others15
  16. 16. Consolidation of power grid assets • Providing monopoly on power grid services market in the regions of presence; Target/ • Long-term target program for the consolidation of power grid assets have Program been developed and approved (power grid assets consolidation plan for 2011 - 2015) • Company consolidates the assets primarily in 3 ways: acquisition of power grid property rent, purchase of shares of power grid Methods and companies; advantages • The basic advantages of consolidation are: implementation of a of consolidation unified technical policy, the development of a unified scheme of long- term development of power grids, improving the reliability of electricity supply to consumers of all categories, increasing of power grid capacity • It is planned in 2011 to consolidate municipal power grid assets of Plans on Voronezh region, to acquire the property of LRUC, SRUE*, to consolidate 2011-2015 the assets in Orel and Tver regions; • Program provides working with more than 5 thousand owners * - Lipetsk Region Utilities Company, State Region Unitary Enterprise16
  17. 17. Transition to RAB Date of Branch Total value IRAB, transition of invested USD million capital USD million 12,0 Belgorodenergo 1 723 678from 01.01.2009 Lipetskenergo 876 341 10,0 3,8 Tverenergo 1 881 489 8,0 Kurskenergo 1 018 357from 01.01.2010 6,0 Yarenergo 714 297 4,0 7,6 Bryanskenergo 651 195 1,4from 01.11.2010 Orelenergo 701 208 2,0 2,6 Kostromaenergo 560 249 0,0 Tambovenergo 611 181 Full value of Residual value of invested capital invested capitalfrom 01.01.2011 Voronezhenergo 1 250 415 RAB branches before 01.01.2011 Smolenskenergo 1 215 451 RAB branches after 01.01.2011 Yargorelectroset* 130 71 Approved iRAB on all branches – All 11 329 3 932 USD 3,9 billion* *Including Yargorelectroset 100% stake is owned by IDGC of Center
  18. 18. RAB figures for 2011  In 2011 branches adopted the 5-years regulation period (also the RAB on 01.01.11**, possibility of transiting some branches to 7-years regulation period is Branch USD million considered); Belgorodenergo 746  Return on invested capital– 35 years (for the new IC), 10-12 years (for the old IC); Lipetskenergo 417  OPEX optimization (x-factor 1% annually in accordance with the Tverenergo 406 resolution of FTS, additional goal on 2011 for management is OPEX Kurskenergo 355 reducing for at least 1%) Yarenergo 300 RAB rate of return 2009 2010 2011 2012 2013 2014 2015 Bryanskenergo 186 Return on “old” IC Orelenergo 199 before January 2010 6% 9% 12% 12% 11% - - since January 2010 - 6% 9% 12% 11% 11% - Kostromaenergo 249 since August 2010 - 6% 6% 9% 11% 11% - Tambovenergo 181 since January 2011 - - 6% 9% 11% 11% 11% Return on “new” IC Voronezhenergo 415 before January 2010 12% 12% 12% 12% 11% - - Smolenskenergo 451 since January 2010 - 12% 12% 12% 11% 11% - since August 2010 to Yargorelectroset* 71 January 2011 - 12% 12% 12% 11% 11% - since January 2011 - - 12% 12% 11% 11% 11% Total: 3 977 * - 100% subsidiary of IDGC of Center **- including investments , return and retirement18
  19. 19. Losses and SAIDI dynamics Losses dynamics, Chng, 2006-11F (%)Year kW. (th) % p.p. 10,35% 10,11% 10,01% 9,96% 9,52% 9,40%2006 6,238 10,352007 5,932 9,52 (0,83)2008 5,875 9,40 (0,12)2009 5,977 10,11 0,71 2006 2007 2008 2009 2010 2011П2010 6, 233 10,01 (0,10) % hour Losses vs SAIDI* 10,20 14,002011П 6,178 9,96 (0,04) 12,00 9,70 12,31 11,27 10,00 9,20 9,95 8,00 Losses reduction – priority target for 8,70 8,55 6,81 6,00 management 4,78 8,20 4,00 Renovation program and modern account systems 2010 2011 2012 2013 2014 2015 implementation will allow to reduce losses by 1% and Снижение сред. длительности отключений SAIDI reduction, hours SAIDI by 7,53 hours by 2015. (SAIDI), час. Снижение потерь, % Losses reduction, % * System Average Interruption Duration Index19
  20. 20. Required Gross Revenue structure*** and structure of operating expenditures USD billion RGR structure*** Income 2 468 on cap. Non-controllable costs– 4,5 Return 4,6 16,6 385 USD 1 407 billion 11 on cap. 5,2 10 1 9 Smoothing 503 7,3 8 352 1 918 -187 2 13,4 7,4 7 416 6 7,9 3 2011 год (Forecast) FGC 12,0 Productive 5 services 4 supply, billion 9,4 304 kWh 53,7 11,8 TGO services 184 Average tariff, 4,60 Losses Belgorodenergo (1) Lipetskenergo (2) 511 cents/kWh purchase Tverenergo (3) Voronezhenergo (4) Others Yarenergo (5) Kurskenergo (6) Smolenskenergo (7) Bryanskenergo (8) Tariff growth 17% Kostromaenergo (9) Tambovenergo (10) Revenue OPEX Controllable Orelenergo (11) incl. TGCs* costs* - RGR due to tariff campaign in 2010, exc. corrections on Kurskenergo 2011** - Due to tariff campaign in 2010*** - exc. YAGES20
  21. 21. Costs structure in 2010-2011F Costs structure of electricity Costs structure of electricity transmission, 2010, (%) transmission, 2011F, (%) UNEG services Controllable costs, 31 684 Losses USD million 65 Losses UNEG purchase purchase services 18 22 286 19 23TGO 19services TGO 21 302 services 41 37 Controllable costs Company plans to optimize Personnel Other Materials, Services Total controllable costs in costs costs costs energy (operat.) structure of operating activities by 4% in 201121
  22. 22. Program of OPEX optimization on 2011 Costs reduction, Activities on OPEX optimization % USD million Tax base optimization due to the law 9,3 33,5% Involvement of debt at a minimum interest rate 7,7 27,8% Personnel optimization and reducing payroll fund 7,3 26,3% Optimization of reserves for doubtful receivables within tax accounts 2,5 8,8% Realization of non-core assets 0,6 2,3% Transport services optimization 0,4 1,4% Total: 27,9 100,0% Costs reduction as a result of activities* on 2011-2015, USD million 160  Company also develop the activities for reaching the 140 operating efficiency within optimizing the technical 120 policy and reducing risks; 100 Cumulative costs  As a result of all these activities the Company plans to 80 reduction reduce specific costs by USD 0,06 thousand/1 cu** by 60 44 Costs reduction per 2015, to reduce losses by 1% by 2015 and reduce SAIDI 40 28 28 30 30 year by 7,53 h.; 20  Realization of these activities will allow to increase 0 energy efficiency, reliability of energy supply, to 2011 2012 2013 2014 2015 optimize operating costs within RAB transition/ * - inc. activities on OPEX optimization due to inner sources only * * - reduction in specific costs (OPEX) снижение удельных затрат (OPEX) per 1 cu volume of repair and maintenance22
  23. 23. THANK YOU FOR YOUR ATTENTION IR specialists will give you any additional information: ir@mrsk-1.ru IDGC of Center 4/2, Glukharev per., Moscow, Russia, 129090 T: +7 495 747 9292 F: +7 495 747 9292 www.mrsk-1.ru Tickers: MICEX: MRKC RTS: MRKC, MRKCG23
  24. 24. Tariffs on electricity transmission 2010-2011 Average tariffs on electricity transmission Average tariffs on electricity transmission services exc. services, cents/kWh costs of neighbor TGOs, cents/kWh Branch 2010*г. 2011*г. Branch 2010 г. 2011 г. Belgorodenergo 3,30 4,27 Belgorodenergo 3,26 4,22 Bryanskenergo 4,30 5,29 Bryanskenergo 2,76 3,39 Voronezhenergo 3,37 4,61 Voronezhenergo 2,36 3,12 Kostromaenergo 4,30 5,37 Kostromaenergo 4,16 5,14 Kurskenergo 3,25 4,15 Kurskenergo 2,17 3,19 Lipetskenergo 3,65 4,59 Lipetskenergo 3,02 3,82 Orelenergo 4,63 5,74 Orelenergo 3,56 4,51 Smolenskenergo 4,08 5,22 Smolenskenergo 3,88 4,92 Tambovenergo 3,57 4,39 Tambovenergo 2,34 2,99 Tverenergo 5,07 7,15 Tverenergo 3,97 5,12 Yarenergo 2,84 4,07 Yarenergo 1,99 3,06 * Tariffs include costs of neighbor Territorial Grid Organizations and include preliminary corrections on Kurskenergo in 201124
  25. 25. Tariffs on connection services 2011 Average tariffs (on 20.04.11) on connection services, USD/kWh 2010 г. 2011 г.*, Branch tariff exc.VAT tariff exc. VAT Belgorodenergo 18,63 21,17 Bryanskenergo 294,01 102,35 Voronezhenergo 594,04 361,42 Kostromaenergo 328,91 223,46 Kurskenergo 321,63 92,56 Lipetskenergo 243,44 224,45 Orelenergo 296,38 113,09 Smolenskenergo 184,98 3,03 Tambovenergo 100,31 107,31 Tverenergo 338,12 361,73 Yarenergo 339,84 344,33 Average 242,06 159,89 * Tambovenergo, Tverenergo filled the tariff applications for setting tariffs on connection services (expected to be approved). Tambovenergo – current tariff on connection services valid to 01.06.201125
  26. 26. Assets characteristics on 31.12.2010 Capacity Line length SS 35-110 kV, TS 6-35/0,4 kV, AL 35-110 kV, Grid 0,4-10 kV, MWA MWA km km IDGC of Center 31 403,9 15 191,8 51 801,9 322 478,8 Belgorodenergo 2 684,3 2 907,5 4 212,9 38 970,9 Bryanskenergo 2 296,8 735,5 3 514,2 21 935,4 Voronezhenergo 4 555,2 1 610,3 6 798,3 43 948,1 Kostromaenergo 1 707,0 1 436,4 4 304,5 20 813,6 Kurskenergo 3 335,1 1 481,4 4 719,7 29 693,1 Lipetskenergo 2 665,0 1 035,7 3 836,6 23 680,8 Orelenergo 1 707,5 797,9 3 082,2 24 712,6 Smolenskenergo 3 071,6 1 792,8 6 321,5 33 667,9 Tambovenergo 2 471,1 935,7 4 951,3 22 966,5 Tverenergo 3 966,9 1 478,1 6 925,8 39 217,8 Yarenergo 2 943,4 980,5 3 134,9 22 872,126

×