Economy and Finance > Financial Results Analysis

Revenue and net cost dynamics analysis for the Company for 2010-2012

The Company's revenue in the reporting period was the combined income from the following types of activities:

  • service rendering on electric energy transmission;
  • technological connection to electric grids;
  • production and sale of DPP electric energy in Arkhenergo and Komienergo branches (DPP property complex of JSC Komienergo was implemented in the 4th quarter of 2010);
  • maintenance and repair of electricity supply network facilities;
  • other services in the core and non-core activities.

The main consumers of electric energy transmission services rendered by the Company are the selling companies formed during the reorganization of JSC RAO UES of Russia.

Actual revenue change dynamics for 2010-2012 by branches according to the activities, RUB million

Types of activity 2010 2011 2012
 
Arkhenergo total 3,903 4,652 3,996
Electricity transmission revenue 3,636 4,219 3,690
TC revenue 68 247 66
Revenue from other activities 199 186 240
 
Vologdaenergo total 4,832 5,969 6,552
Electricity transmission revenue 4,741 5,692 6,180
TC revenue 48 215 321
Revenue from other activities 42 61 51
 
Karelenergo total 3,571 3,740 3,671
Electricity transmission revenue 3,519 3,686 3,309
TC revenue 36 33 344
Revenue from other activities 16 21 19
 
Kolenergo total 3,594 4,659 4,498
Electricity transmission revenue 3,506 4,550 4,321
TC revenue 59 77 150
Revenue from other activities 29 32 27
 
Komienergo total 5,455 6,031 6,535
Electricity transmission revenue 4,906 5,776 6,020
TC revenue 264 196 456
Revenue from other activities 285 59 58
 
Novgorodenergo total 2,646 2,801 3,024
Electricity transmission revenue 2,553 2,723 2,970
TC revenue 60 42 17
Revenue from other activities 33 36 37
 
Pskovenergo total 2,667 2,998 2,893
Electricity transmission revenue 2,485 2,840 2,786
TC revenue 132 75 58
Revenue from other activities 51 83 49
 
IDGC of the North-West total 26,669 30,849 31,169
Electricity transmission revenue 25,346 29,486 29,276
TC revenue 668 884 1,412
Revenue from other activities 655 479 481

The total revenue of JSC IDGC of the North-West for 2012 amounted to RUB 31,169 million, which is RUB 320 million, or 1%, higher than the 2011 level. In addition:

  • revenue from electricity transmission decreased by RUB 210 million, or 1%;
  • revenue from technological connection services grew by RUB 528 million, or 60%, which was caused by the growth of industrial consumption in the regions and, as consequence, increase in the number of applicants;
  • revenue from other activities increased by RUB 2 million.

The decrease in revenues from electricity transmission services as of 2012 compared to 2011 is non-uniform for the regions of the JSC IDGC of the North-West responsibility area. The highest increase in revenues from electricity transmission was observed in Vologdaenergo branch, mainly, due to the increase of the average tariff. The most significant decrease in revenue from electricity transmission was observed in Arkhenergo branch (mainly, due to the decrease of the average tariff).

The structure of actual revenue for 2012 was as follows: the biggest share is presented by revenues from electricity transmission in the amount of RUB 29,276 million, or 93.9%; revenue from technological connection amounted to RUB 1,412 million, or 4.5%; revenue from other activities was RUB 481 million, or 1.5% .

Data on the actual net cost for 2010-2012 by the branches of JSC IDGC of the North-West, RUB million

Branch/IDGC Indicators 2010 2011 2012
Arkhenergo Total net cost 3,639 4,270 4,430
Purchased power for loss compensation 1,012 899 969
Raw and other materials 316 349 377
Production works and services 116 578 388
Electricity transmission services by the UNPG facilities 510 520 524
Labor costs with deductions 1,083 1,296 1,331
Other expenses 603 628 841
Vologdaenergo Total net cost 4,438 4,917 5,252
Purchased power for loss compensation 615 505 577
Raw and other materials 250 323 394
Raw and other materials 118 174 224
Electricity transmission services by the UNPG facilities 1,473 1,665 1,705
Labor costs with deductions 1,109 1,337 1,352
Other expenses 872 913 999
Karelenergo Total net cost 3,139 3,228 3,219
Purchased power for loss compensation 449 342 280
Raw and other materials 129 152 175
Production works and services 218 90 64
Electricity transmission services by the UNPG facilities 1,305 1,412 1,398
Labor costs with deductions 668 785 834
Other expenses 371 447 467
Kolenergo Total net cost 4,182 4,726 4,242
Purchased power for loss compensation 339 208 115
Raw and other materials 89 111 125
Production works and services 892 913 425
Electricity transmission services by the UNPG facilities 1,715 2,124 2,178
Labor costs with deductions 701 812 838
Other expenses 446 558 561
Komienergo Total net cost 5,101 5,325 5,587
Purchased power for loss compensation 906 859 898
Raw and other materials 314 258 266
Production works and services 370 364 388
Electricity transmission services by the UNPG facilities 1,077 1,185 1,282
Labor costs with deductions 1,560 1,753 1,815
Other expenses 874 906 938
Novgorodenergo Total net cost 2,379 2,634 2,665
Purchased power for loss compensation 482 447 431
Raw and other materials 108 128 135
Production works and services 116 122 150
Electricity transmission services by the UNPG facilities 606 757 752
Labor costs with deductions 483 575 577
Other expenses 584 605 620
Pskovenergo Total net cost 2,266 2,680 2,734
Purchased power for loss compensation 374 386 359
Raw and other materials 172 218 213
Production works and services 183 215 212
Electricity transmission services by the UNPG facilities 410 514 532
Labor costs with deductions 730 893 923
Other expenses 396 454 495
IDGC of the North-West Total net cost 25,145 27,781 28,129
Purchased power for loss compensation 4,177 3,646 3,629
Raw and other materials 1,376 1,540 1,684
Production works and services 2,013 2,455 1,853
Electricity transmission services by the UNPG facilities 7,096 8,177 8,371
Labor costs with deductions 6,335 7,452 7,671
Other expenses 4,146 4,511 4,921

Total actual net cost for 2012 amounted to RUB 28,129 million, which is more than the 2011 level by RUB 349 million, or 1.3%. The greatest increase of expenses is noted in the following items:

  • electric energy transmission services by UNPG objects — RUB 194 million, or 2.4%. The most significant reason for the deviation was the inclusion by Komienergo branch in the net power flow with JSC FGC UES of new energy facilities of JSC Vorkutaugol (CJSC Vorgashorskaya Mine 2) — OV-119, OV-120, which were not included in the calculation of the net power flow in 2011. For instance, the balanced energy supply from the JSC FGC UES network in 2012 was 2,131.2 million kW/h, which is 3.3% higher than the 2011 indicator (2,063.1 million kW/h);
  • labor costs with social deductions — RUB 219 million, or 2.9%, which is caused by the following factors: economic effect of tariff rates (official salaries) indexation on the actual CPI (Consumer Price Index) pursuant to the terms of the Industry Tariff Agreement in the electric power industry (average annual 4.2%) and the corresponding growth of social deductions, as well the growth of the tariff ratio in general according to the legislation and the growth in the personnel number in branches and the average tariff coefficient of employees on the basis of the results of a scheduled assessment/attestation;
  • the increase in actual expenses relating to "Other Production Services" compared to 2011 was due to energy inspection of the Company's facilities carried out in 2012, which amounted to RUB 58,162 thousand
  • raw and other materials — RUB 145 million, or 9.4%, due to the increase in expenses on materials for repair operations carried out at the Company's own cost by RUB 62 million, or 10.2% and the growth of the cost of DPP materials and fuel;
  • depreciation deductions — RUB 310 million, or 11.6%; the increase in expesnes was due to the increased commissioning of fixed assets compared to 2011;
  • the increase in actual expenses relating to "Other Expenses" in 2012 compared to 2011 was due to the creation of the reserve for estimated liabilities for payment for power loss and electricity transmission services through networks of TGOs.

The data above reflects the outstripping growth rate of payment costs for electric energy transmission services of UNPG facilities compared to other expenses of the Company.

By types of activity the actual net cost of 2012 has the following structure:

  • net cost of electric energy transmission — RUB 27,664 million, or 98.3%;
  • net cost of technological connection services — RUB 104 million, or 0.4%;
  • net cost of other activity — RUB 361 million, or 1,3%.

Total growth of actual net cost at year-end 2012 against the last year level amounted to 1.3%, while the revenue grew by 1%.

Profit dynamics for 2010-2012, RUB million

Indicator 2010 2011 2012
Gross profit 1,524 3,067 3,040
Profit on sales 724 2,218 2,112
Profit before tax -348 960 423
Net profit -807 408 62

Analysis of fulfillment of the Company's business plan for 2012

The adjusted business plan of the Company for 2012 was approved by the Board of Directors on October 26, 2012 (Minutes No.113/11).

The deviation of actual results of the Company's activities from the target values are reflected in the table above.

Analysis of fulfillment of the Company's plan for 2012

Indicator 2012, RUB million Deviation
target actual absolute, RUB million relative, %
Total revenue 31,104 31,169 65 0.2
Electricity transmission revenue 29,308 29,276 -32 0
TC revenue 1,298 1,412 114 9
Revenue from other activities 498 481 -18 -4
Total net cost 28,064 28,129 65 0
Purchased power for loss compensation 3,649 3,629 -21 -1
Raw and other materials 1,640 1,684 44 3
Production works and services 1,072 1,034 -38 -4
Services of JSC FGC UES 8,456 8,371 -85 -1
Services of distribution grid companies 1,011 819 -192 -19
Labor costs with deductions 7,351 7,671 320 4
Other expenses 4,885 4,921 36 1
Total gross profit 3,041 3,040 0 0
Commercial expenses 31 29 -2 -7
Management expenses 926 900 -26 -3
Profit (loss) on sales 2,084 2,112 28 1
Interest receivable 19 24 5 26
Interest payable 729 498 -232 -32
Income from participation in other organizations 84 85 0 0
Balance of other income and expenses -1,088 -1,300 -212 19
Profit (loss) before tax 370 423 53 14
Income tax and other similar payments 356 361 5 1
Net profit (loss) 13 62 48 364

As seen from the above data, the actual total revenue as of the end of 2012 was higher than the target value by RUB 65 million, or by 0.2%, including:

  • electricity transmission revenue is less than the target value by RUB 32 million, or by 0.1%;
  • technological connection revenue increased by RUB 114 million, or by 8.8%;
  • revenue from other activities is less than the target value by RUB 18 million, or by 3.5%.

The main reasons for the decrease in the actual value of revenue from electricity transmission compared to the target value are:

  • decrease in the actual average tariffs for electricity transmission services;
  • increase in the load loss.

The decrease in the Company's average tariff against the target value was due to the decrease in the average tariff in Vologdaenergo, Kolenergo and Komienergo branches, the share of which in the total net supply is 61%.

The decrease in the average tariff in Vologdaenergo branch was due to the change in the net supply structure: increase in the net supply compared to the target value on the high-voltage side — 106.1% with low tariffs and decrease in the net supply on the low-voltage side — 99.9%. The net supply structure of Vologdaenergo branch is as follows: high voltage — 85.1%, medium voltage 1 — 3.9%, medium voltage 2 — 5.9%, low voltage — 5.1%.

The decrease in the average tariff in Kolenergo branch compared to the target value was due to the reduction of the paid capacity in the 4th quarter of 2012 (change in the capacity to energy ratio in the average tariff when applying two-rate tariffs).

In Komienergo branch the decrease in the average tariff resulted also from the increase in consumption of electric energy compared to the target value while the target capacity of consumers who pay using a two-rate tariff on the high-voltage and medium-voltage-2 side remained unchanged.

The increase in the revenue from technological connection services in the amount of RUB 114 million compared to the target value (108.8%) was mainly due to early fulfillment of a range of agreements.

The failure to achieve the target value for sales of other products of core activities and non-core products was due to the decrease in revenue in Komienergo branch compared to the target value which resulted from the exclusion in 2012 of services of withdrawal of two energy objects of CJSC Yamalgazinvest by RUB 37,516 thousand (exclusive of VAT) and from the delay in financing of these objects by JSC Gazprom. The above decrease in revenues from sale of other products was compensated by overachievement of target values on other branches of the Company.

The total net cost in JSC IDGC of the North-West as of the end of 2012 was RUB 28,129 million, which is higher than the target value by RUB 65 million, or 0.2%.

As seen from the table, the following expenses were substantially lower than the target values:

  • purchased power for loss compensation by RUB 29 million, or 8,7%;
  • services of electricity transmission through UNPG facilities by RUB 85 million, or 1%;
  • services of electricity transmission by distribution grid companies by RUB 192 million, or 19.0%.

The increase in "Labor costs with deductions" by RUB 320 million (by 4.4%) in the net costs was due to the creation of the provision for payment of annual remuneration to the Company's personnel based on the results of 2012 in the amount of RUB 293 million.

The growth of expenses on "Raw and other materials" by RUB 44 million (by 2.7%) compared to the target value is explained by: increased fuel consumption at Mezenskaya DPP (Arkhenergo branch) due to the idle running in the course of replacement of two diesel generators in the 3rd quarter of 2012 and the above-target electricity supply in December 2012; excess expenditure of materials in Novgorodenergo branch used for performance of unscheduled works for replacement of the transformer at SS Valdai 110-35-10 kV and technical maintenance of the systems of control and technological management with replacement of routers, accumulator batteries, modules of telemechanic devices and multiplexor units; above-target write-off of materials for performance of rescue and recovery operations in Arkhenergo and Novgorodenergo branches in order to carry out repair works using own resources in Kolenergo and Komienergo branches; expenses relating to elimination of the consequences of ice storm in December 2012 in Pskovenergo branch in the amount of 11.7 million.

The following expenses account for the largest share in the cost structure: expenses on JSC FGC UES services — 30%, purchased power for loss compensation — 13%, labor costs with deductions — 28%./p>

The main reason for deviation of balance of other income and expenses from the target value was the creation of the provisions for doubtful debt.

The net profit of JSC IDGC of the North-West in the reporting year was RUB 62 million with the target value of RUB 13 million.