Sberbank: The Russia Forum 2013, 16-19 April 2013


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FY 2012 Results & Outlook for 2013

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Sberbank: The Russia Forum 2013, 16-19 April 2013

  1. 1. THE RUSSIA FORUM 2013 | 16-19 April 2013 | Moscow, RussiaIDGC OF CENTRE:FY 2012 RESULTS& OUTLOOK FOR 2013
  2. 2. Overview of the CompanyMarket Cap2, RUB bn 24,6Market Cap, USD mln 808Productive power supply3, bn kWh 57,9Revenue (IFRS), RUB bn 69,9Net income (IFRS), RUB bn 4,4Capex, RUB bn 15,8Staff, people 30 333Number of shareholders4 16 448• Transmission and distribution of power over lowand mid-voltage networks• Technological connection to 0,4-110 kV networks• Functions of a guaranteeing supplier1IDGC of Centre is a natural monopoly, its tariff rates are regulated by theFederal Tariff Service and regional regulating authorities2 in the Bryansk, Orel and Kursk regions from 01.02.2013(2) weighted average price as of 28.12.2012(3) joint operation circuit(4) as of 04.07.20121234567981011MoscowHeadquartersTHE SERVICE AREA:458 sq. km2POPULATION:13,6 mln peopleTYPES OF ACTIVITY2012 KEY INDICATORSTHE GEOGRAPHY OF ACTIVITY: 11 BRANCHES IN THE EUROPEAN PART OF RUSSIABelgorodenergoKurskenergoVoronezhenergoKostromaenergoBryanskenergoTambovenergoLipetskenergoSmolenskenergoTverenergoYarenergoOrelenergo
  3. 3. IDGC of Centre is effectively one of the largest distributiongrids in Russia in terms of assetsINDICATOR 2012Length of 0,4-110 kV overhead transmission lines (on a line)thousand km368,6Length of 35-110 kV overhead transmission linesthousand km51,8Length of 0,4-10 kV overhead transmission linesthousand km316,8Length of 0,4-110 kV cable linesthousand km11,3Capacity of substationsthousand MVA49,0Capacity of 35-110 kV substationsthousand MVA32,6Capacity of 6-10/0,4 kV transformer substationsthousand MVA16,5Number of substationsthousand pieces92,5Number of 35-110 kV substationsthousand pieces2,3Number of 6-10/0,4 kV transformer substationsthousand pieces90,2Number of installed unitsmln1,526Number of power grids districtsPieces278Characteristics of Grid Assets3365,0 366,1 368,62010 2011 2012LENGTH OF TRANSMISSION LINES0,4-110 kV (on a line), thousand km9,2 9,411,32010 2011 2012LENGTH OF CABLE LINES 0,4-110 kVthousand km46,6 47,7 49,02010 2011 2012CAPACITY OF SUBSTATIONSthousand MVA89,6 90,6 92,52010 2011 2012NUMBER OF SUBSTATIONSthousand pieces
  4. 4. • Reduction of technical and commercial losses (implementation of smart metering systems)• Implementation of asset management methodology (technical risk management)• Implementation of SAIDI (System Average Interruption Duration Index)1/ SAIFI (System AverageInterruption Frequency Index)2 indicators calculation system in accordance with international standardsQUALITY, RELIABILITY& INNOVATIONS• Increase of Company’s market share in the regions of its service area• Consolidation of grid assets (TGOs, ownerless grids)MARKETSHARE• Application of standard design solutions• Enhancement of the procurement process efficiency• Increased monitoring of contractors’ work performanceINVESTMENTACTIVITY• Governance improvement: implementation of optimized KPI system for top-management• Optimization of systems and processes in operation and maintenance activities• Development of additional energy servicesOPERATINGPERFORMANCE• Implementation of stable dividend payments policy• Implementation of a complex of measures to improve the liquidity of shares• Access to foreign trade floorsINVESTMENTAPPEAL(1) the average outage duration for each customer served(2) the average number of interruptions that a customer would experience4Strategic Priorities
  5. 5. (1) including the State share 0,46%(2) according to the MICEX Index CommitteeRussian grids, JSC Minority shareholders50,23% 49,77%161,7%IDGC of Centre, JSC11 operatingbusiness unitsSubsidiaries - 100%Group of CompaniesYargorelektroset,JSCOne of the largest territorygrid organizations (TGO) inthe Central part of Russia.The result of M&A of its 100%stake is that under IDGC ofCentre’s control is now over90% of power grid assets inthe Yaroslavl regionEnergy ServiceCompany, JSCThe main activities are toprovide energy saving andenergy efficiency services YarESK, JSCEnergetik,JSC51%CIEET, CJSC** Centre forinnovations and energyefficient technologies100%RUSSIAN FEDERATIONBelgorodenergoBryanskenergoVoronezhenergoKostromaenergoKurskenergoLipetskenergoOrelenergoSmolenskenergoTambovenergoTverenergoYarenergoGovernance Structure & Major Shareholders5SHARE CAPITAL STRUCTURE OF IDGC OF CENTREAS OF 04.07.2012IDGC Holding, JSC* 50,23%Genhold Limited 15,4%The Bank of New York Mellon 9,8%Immenso Enterprises Limited 3,2%Energosoyuz holdings Limited 2,7%Rusenergo Fund Limited 1,5%others 17,2%FREE FLOAT225%* from 05.04.2013 – JSC Russian Grids
  6. 6. CommitteesOf the Boardof DirectorsGeneral meetingof shareholdersBoard of DirectorsAudit CommissionAuditorChairperson of the MB –Director General (CEO)Management BoardInternal control over financial andeconomic activities of the CompanyExternal control over financialand economic activities of theCompanyCommitteeon StrategyCommitteeon Audit* technological connectionSupreme governing bodyStrategic governing bodyInternal Control and AuditDepartmentCommitteeon PersonnelCommitteeon ReliabilityCommitteeon TC*12345Source: EXPERT RA rating agencyCorporate Governance & Rating6National Corporate Governance RatingConfirmed October 2012Confirmed August 2011Upgraded (7+) January 2011Confirmed July 2010Confirmed July 2009Assigned (7) September 2008Developed corporate governance practice& leading position among MRSKs
  7. 7. Source: Bloomberg, websites of grid companies, RAS/IFRS financials,calculations of IDGC of CentreMARKET CAP (28.12.12), RUB bn EV/Sales (2012) P/E (2012)Financials and Valuation Metrics of IDGC of Centre and its Peers71,52,66,17,58,413,418,419,424,673,5IDGC of NCIDGC of SouthIDGC of NWLenenergoIDGC of SiberiaIDGC of VolgaIDGC of UralIDGC of CVIDGC of CentreMOESK0,300,480,480,500,510,680,720,860,871,00IDGC of SiberiaIDGC of VolgaIDGC of NWIDGC of NCIDGC of UralIDGC of CVIDGC of CentreIDGC of SouthLenenergoMOESK0,0029,3717,0211,5011,2010,787,405,604,282,30IDGC of SouthIDGC of UralIDGC of NWIDGC of VolgaIDGC of SiberiaIDGC of CVLenenergoIDGC of CentreMOESKIDGC of NCREVENUES (2012), RUB bn EBITDA (2012), RUB bn NET INCOME (2012), RUB bn11,323,533,436,345,849,551,360,170,0118,0IDGC of NCIDGC of SouthIDGC of NWLenenergoIDGC of VolgaIDGC of SiberiaIDGC of UralIDGC of CVIDGC of CentreMOESK0,62,34,04,45,77,19,49,914,841,2IDGC of SouthIDGC of NCIDGC of NWIDGC of UralIDGC of SiberiaIDGC of VolgaIDGC of CVLenenergoIDGC of CentreMOESK-3,30,40,60,60,81,21,21,54,417,2IDGC of SouthIDGC of NWIDGC of UralIDGC of NCIDGC of SiberiaIDGC of VolgaLenenergoIDGC of CVIDGC of CentreMOESKIFRS 2012 RAS 2012
  8. 8. 62,3 62,9 64,02010 2011 20125,1 5,5 4,42010 2011 2012(2) supply from the grid tocustomers and joint TGOs(1) Calculation: profit and total income for the period + income tax + interest expenses (excludinginterest on obligations under finance leases and employee benefits) + depreciationKey IFRS Indicators 2010-2012860,669,0 70,02010 2011 2012TOTAL REVENUESRUB bnREVENUES FROM ELECTRICITY DISTRIBUTIONRUB bnREVENUES FROM GRID CONNECTIONSRUB bnOTHER REVENUESRUB bnEBITDA1RUB bnNET INCOMERUB bnPRODUCTIVE SUPPLY2bn kWh22,9%13,9%1,4%22,9%13,9%1,4%57,466,0 67,52010 2011 201222,6%15,0%2,3%2,3 1,8 1,42010 2011 201243,8%-21,7% -22,2%0,9 1,3 1,12010 2011 20124,5%44,4%-15,4%12,4 14,8 14,82010 2011 201244,2%19,4%0,7%20,521,4 21,3EBITDA margin,%8,4 8,06,3Net income margin,%142,9%7,8%-20,0%56,0 56,7 57,92010 2011 20125,5%1,1% 2,1%SUPPLY TO GRIDbn kWh10,019,939,53Electricity losses,%5,3%1,1% 1,7%
  9. 9. 9EBITDA Analysis (IFRS)14,8 14,8+0,94 -0,78-0,51-0,37 +0,37 -0,23 +0,45 -0,08EBITDA 2011 Revenues Personnel cost FSK cost TGO cost Purchasedelectricity tocompensatelossesRaw materials Other opex Other income EBITDA 2012
  10. 10. Structure & Dynamics of CapexDepreciation 39,7%Income 19,1%Grid connection fees (advance payments) 2,3%Borrowings 38,4%Other 0,5%15,85RUB bnFUNDING SOURCES OF CAPEX (2012)Technical modernization and reconstruction 52%New construction 45%Other (acquisition of fixed assets) 3%15,85RUB bn12,215,2 15,852010 2011 2012CAPITAL INVESTMENTSRUB bn (VAT not included)4,16 4,638,032010 2011 2012COMMISSIONING OF CAPACITYthousand km1,051,49 1,522010 2011 2012COMMISSIONING OF CAPACITYthousand MVACAPEX AREAS (2012)10
  11. 11. Source: S&P, National Rating Agency,calculations of the CompanyCredit Portfolio & Credit Ratings11National GridIDGC of CentreAaaAa1Aa2Aa3A1A2A3Baa1Baa2Baa3Ba1Ba2Ba3B1B2B3B- B B+ BB- BB BB+ BBB- BBB BBB+ A- A A+ AA- AA AA+ AAAUtilities –domestic peersS&P Moody’sFGC UES BBB Baa3Russian Grids - Ba1RusHydro BB+ Ba1Mosenergo ВВ -IDGC of Centre BB -MOESK ВВ Ba2IDGC of Volga - Ba2IDGC of CV - Ba2IDGC of Urals - Ba2Lenenergo (OS - Ba2MOESKIDGC of VolgaIDGC of CVIDGC of UralMosenergoLenenergo (OS)Russian GridsRusHydroREN FGC UESUtilities –foreign peersS&P Moody’sNational Grid (UK) A- -Red Electrica (Spain) BBB Baa2REN (Portugal) BB+ Ba1Tata Power (India) BB- B1Capex SA (Argentina) B- -Manila Electric(Philippines)B- -Red ElectricaCapex SAManila ElectricTata PowerRating of IDGC of CentreBB/stable confirms:• high level of reliability• stable financial position in the long-term• good liquidity situation ensured bylong-term partnership with majorRussian banksSource: BloombergS&P Rating (Long-term Foreign Currency)Moody’s(Long-termForeignCurrency)12,4 14,8 14,814,718,625,52010 2011 2012EBITDA, RUB bn Net debt, RUB bnNET DEBT/EBITDA(IFRS)1,2 1,31,7STRUCTURE OF CREDIT PORTFOLIO (31.12.2012)AVERAGE RATE8,7%SberbankVTBRosbankAlfa-bank56%18%17%9%
  12. 12. 2012 2013 2014 2015 2016 2017Required gross revenue (RGR) from joint operations, RUB mln 71 287 78 358 85 431 93 648 102 724 111 452Opex, RUB mln 15 537 16 330 16 786 17 403 17 957 18 559Non-controllable expenses, RUB mln 45 284 49 510 54 286 59 312 65 130 71 520Return + Income + Smoothing + RGR adjustment1, RUB mln 10 466 12 518 14 359 16 933 19 637 21 373Productive supply, mln kWh 55 532 55 483 55 628 56 408 57 200 57 971Average one-rate tariff, cop./kWh 128,4 141,2 153,6 166,0 179,6 192,3Tariff growth, % 1,4% 10,0% 8,7% 8,1% 8,2% 7,1%Own RGR, RUB mln 35 096 38 912 42 602 46 783 51 270 55 047EBIT, RUB mln 8 290,65 9 045,19 10 911,59 13 070,90 15 914,81 17 175,73(1) RGR structure by branches, which are regulated by the method of long-term tariff indexation is given incomparable form, i.e. depreciation, capex from profit are reflected in the line “Return + Income + Smoothing+ RGR adjustment”* as of 01.01.2013 8 branches ofIDGC of Centre are regulated by theRAB method, and 3 branches -Tverenergo, Bryanskenergo andLipetskenergo – are regulated bythe long-term RGR indexation** 2012, 2013 – approved by REC,2014-2017 – the calculation ismade based on the approved long-term prospects of development andexpert estimate of IDGC of Centre1222,4 23,7 25,9 28,0 30,1 32,548,9 54,7 59,5 65,672,679,02012 2013 2014 2015 2016 2017Indexation RABREQUIRED GROSS REVENUE FROM JOINT OPERATIONSRUB bn111,22126,60 128,372010 2011 201221,2%13,8%1,4%Tariff RegulationAVERAGE JOINT TARIFFcop./kWh
  13. 13. 2012 2013 2014 2015 2016 2017809CALCULATION OF RETURN AND INCOME NOT RECEIVEDRUB mln• Possible return of monetary funds according to the FTS decision on the pre-trialconsideration of dispute with the regulator in the Tver region – RUB 4,2 bn• Capital base remains in the full volume• Tverenergo will not receive about RUB 8,0 bn in the case of transition to RAB(recovery of invested capital – RUB 5,5 bn, return on invested capital – RUB 2,5 bn)• There is still a possibility to switch to RAB from the next long-term period of regulationor during the next period provided cancellation of strict limitation of the tariff growthwithout any losses in the recovery of invested capital and return on invested capital8098098098098092018664662518429340251162895 5192 451Recovery of invested capitalReturn on invested capital* - at a date of transition** - the base of invested capital as of 01.01.2012 is calculated interms of reduction of the invested capital size as of 01.01.2009,adjustments of the invested capital size for construction in progress,disposal of fixed assets, input of new investments in 2009-2011 andreceived return on invested capital in 2009-201113Long-Term Indexation vs. RABAnalysis of the tariff projections of Tverenergo by the two regulation methods showedthat it is advisable to perform tariff regulation for electricity transmission in 2012-1017by the long-term method of indexation:REDUCTION OF THE SIZE AND BASE OF INVESTED CAPITALRUB bn14,46,9Size of invested capitalas of 01.01.2009*Invested capitaladjusted▼ -52%14,45,5Residualinvested capitalas of 01.01.2011**Residualinvested capitalas of 01.01.2012▼ -62%
  14. 14. Valuation MetricsCurrent(IFRS)MRKCRussianpeersForeignpeersP/E 5,6 11,1 13,4EV/EBITDA 3,4 3,5 5,8EV/Sales 0,7 0,6 0,9Dynamics of Quotes, Trade Volumes & Milestones of 2012-201314Start of Trades21 May 2008Quotation ListMICEX А-1TickersMICEX-RTS MRKCBloomberg MRKC RXReuters MRKC.MMCalculation of IndicesShares in the indexcalculation baseMICEX PWRMICEX SC050100150200-80%-70%-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%дек.11янв.12фев.12мар.12апр.12май.12июн.12июл.12авг.12сен.12окт.12ноя.12дек.12янв.13фев.13мар.13Объем торгов, млн шт. МРСК Центра Индекс ММВБ STOXX 600 Utilities Index Индекс ММВБ-ЭнергетикаPreliminary resultsfor 2011 andoutlook for 2012were releasedManagementof the Companyparticipated inthe RussiaForum 2012Release of2011 RASfinancialsMinistry of EconomicDevelopment wants tooblige SDCs of state-owned companies togive 25% of profits todividendsRelease of2011 IFRSfinancialsVladimir Putin asked theministers to go on withcontaining utility tariffsFTS approvedlong-termparameters ofRAB-regulationfor the branch ofIDGC of Centre -BelgorodenergoAGMSapproveddividends for2011 in theamount ofRUB 422 mlnHY 2012 IFRSfinancialsreleaseThe Moscow ArbitrationCourt satisfied the claimof NLMK to IDGC ofCentre at RUB 5.1 bnMICEX SEincluded sharesof the Companyinto quotationlist A-1Interfax reported, citing a sourceclose to the BD of IDGC Holding,there is a shortlist of IDGCs (IDGC ofCentre, IDGC of Centre and Volga,IDGC of Volga) that are possiblecandidates for the first privatizationMln pcsS&P upgraded thecredit rating of theCompany toBB/B/ruAA, outlookstableThe SupremeArbitration Courttook a decisionon the case ofIDGC of UralRelease of 2012RAS financialsRelease of 2012IFRS financialsVolume of trades, mln pcs IDGC of Centre MICEX MICEX - PWRDec11Jan12Feb12Mar12Apr12May12Jun12Jul12Aug12Sep12Oct12Nov12Dec12Jan13Feb13Mar13
  15. 15. Head of IRTatiana MiroshnichenkoTel: 8 495 747 9292, ext. 31-81Cell: (8) 915 075 1238ir@mrsk-1.ruThis 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 of IDGC of Centre, nor shall it or any part of it northe 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 includeall matters that are not historical facts, statements regarding the intentions of IDGC of Centre, beliefs or current expectations concerning its results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in whichIDGC of Centre 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 oncircumstances that may or may not occur in the future. IDGC of Centre cautions you that forward looking statements are not guarantees of future performance and that the actual results of operations, financial condition and liquidity of IDGC of Centreas well as 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 Companys results ofoperations, 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 indicativeof results or developments in future periods. In addition to the official information on the activity of IDGC of Centre, this presentation contains information obtained from third parties. This information has been obtained from sources which, accordingto IDGC of Centre, are reliable. Nevertheless, we do not guarantee the accuracy of this information, which may be abbreviated or incomplete. All opinions and estimates contained in this material reflect our view on the day of publication and aresubject to change without notice. IDGC of Centre shall not be liable for the consequences of use of the views or statements, or incomplete Information contained in this presentation. IDGC of Centre undertakes no obligation to revise or confirm theforward-looking statements and assessments, as well as to update information contained in this presentation. Despite the fact that prior to 31.03.2008 IDGC of Centre was not an operating company, this presentation contains the consolidated data onall Distribution Grid Companies of the service area of IDGC of Centre, including for the period up to 31.03.2008. The information about the financial and operational data on the Company was received as the sum of the corresponding indicators of 11Distribution Grid Companies, which were consolidated with IDGC of Centre. Despite the fact that in 2006 and 2007 under the control of IDGC of Centre (at that time IDGC of Centre and Northern Caucasus) there were more than 11 companies, forcorrect comparison of the information for these periods the information is shown for 11 Distribution Grid Companies in the current configuration.IDGC of Centre, JSC4, 2nd Yamskaya St,127018 MoscowRussiaTel: (8) 495 747
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