OJSC Kubanenergo
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Analysis of the Results of Company's Financial and Economic Activities

By the results of 2014, revenues from the sales of products (services) amounted to 29,393.4 million Rubles, which is 4,510.4 million Rubles (13.3%) lower than in 2013, including revenues from electric power transmission of 28,464.2 million Rubles (2,041.1 million Rubles below the level of 2013). The decrease is due to the establishment of tariffs for electric power transmission at a level below that approved in 2013.

The net cost amounted to 29,918.8 million Rubles, which is 2,282.6 million Rubles (7.1%) below the level of 2013. Thus, the gross profit, as compared with 2013, reduced by 2,227.7 million Rubles and in 2014 amounted to "minus" 525.4 million Rubles.
Profit before tax amounts to "minus" 3,736.1 million Rubles, which is 1,226.7 million Rubles lower than in 2013.

By the results of 2014, the net profit of the Company amounted to "minus" 3,632.3 million Rubles (1,152.2 million Rubles below the level of 2013).

Financial and Economic Indicators

No.
Item No.

Indicator

2014

2013

2012

RUB thou

1

Sales proceeds
from products (services), including:

29,393,384

33,903,758

28,118,506

1.1.

from power transmission

28,464,228

30,505,345

27,194,306

1.2.

from technological connection

847,766

3,335,847

843,394

1.3.

from sales of electric power

0

0

0

1.4.

from other activities

81,390

62,566

80,806

2

Net costs of products (services)

29,918,777

32,201,425

28,119,207

3

Gross profit

–525,393

1,702,333

–701

4

Administrative expenses

0

0

0

5

Business expenses

0

0

0

6

Sale profit (loss)

–525,393

1,702,333

–701

7

Interests receivable

634,424

475,329

446,963

8

Interests payable

–1,801,081

–1,535,351

–1,462,895

9

Income from participation in other organizations

5

3

1

10

Other income, total

3,039,425

1,601,414

1,046,902

11

Other costs, total

–5,083,520

–4,753,161

–2,197,596

12

Profit (loss) before tax

–3,736,140

–2,509,433

–2,167,326

13

Income tax and other payments

103,807

29,297

265,860

14

Net profit

–3,632,333

–2,480,136

–1,901,466

15

EBITDA

–95

264,311

273,393

Income Structure

Indicator

2014

2013

2012

RUB thou

%

RUB thou

%

RUB thou

%

Sales proceeds from
products (services)

29,393,384

100

33,903,758

100

28,118,506

100

power transmission customers

28,464,228

96.8

30,505,345

90.0

27,194,306

96.7

technological connection services

847,766

2.9

3,335,847

9.8

843,394

3.0

sales of electric power

0

-

0

-

0

-

Other core products (services)

81,390

0.3

62,566

0.2

80,806

0.3

Non-core products (services)

0

-

0

-

45

0.0

The major share in the company's revenues are proceeds from the provision of power transmission services.

By the results of 2014, revenues from the sales of products (services) amounted to 29,393.4 million Rubles, which is 4,510.4 million Rubles (13.3%) lower than in 2013.

By the results of 2014, revenues from the provision of electric power transmission services amounted to 28,464.2 million Rubles (96.8% of revenues), which is 6.7% lower than at the end of 2013. In absolute terms, this decrease amounted to 2,041.1 million Rubles, which is due to the establishment of tariffs for the transmission of electric power at a level below that approved in 2013.

Revenues from technological connection services in 2014 reached 847.8 million Rubles (2.9% of total revenues), which is 74.6% lower than in 2013.

Other income of the Company amounted to 81.4 million Rubles (0.3% of total revenues), which is 30.1% higher than in 2013.

Cost Structure

Description of expenses item

2014

2013

2012

RUB thou

%

RUB thou

%

RUB thou

%

Net costs of products (services)

29,918,777

100.0

32,201,425

100.0

28,119,207

100.0

Depreciation of fixed and intangible assets

2,474,732

8.3

1,713,723

5.3

1,424,787

5.1

Power purchases for losses compensation

5,566,431

18.6

8,298,460

25.8

7,427,499

26.4

Power purchases for sale

0.0

0.0

0.0

0.0

0.0

0.0

Services of OJSC FGC UES

5,036,791

16.8

4,877,739

15.1

4,462,235

15.9

Services of distribution grid companies

7,778,157

26.0

10,024,337

31.1

9,696,190

34.5

Raw materials and supplies

840,724

2.8

766,182

2.4

636,959

2.3

Production services

558,806

1.9

579,828

1.8

404,618

1.4

Personnel costs

4,253,230

14.2

3,708,060

11.5

2,710,424

9.6

Taxes and fees

224,153

0.7

157,833

0.5

97,630

0.3

Other costs

3,185,754

10.6

2,075,263

6.4

1,258,865

4.5

 

Cost Structure

Cost Structure

Expenses Dynamics

Production and sales costs

RUB mln

growth rate, %

2014/2012

2014/2013

2012

28,119.2

106.4

92.9

2013

32,201.4

2014

29,918.8

By the results of 2014, expenses for power purchased for loss compensation amounted to 5,566.4 million Rubles (18.6% of total expenditures). In absolute terms, the drop against the results of 2013 amounted to 2,732.0 mln. Rubles and was due to lower average prices for the purchase of power losses.

The cost of services of OJSC FGC UES totaled 5,036.8 million Rubles (16.8% of total costs). In absolute terms, the growth against the results of 2013 amounted to 159.1 million Rubles and was due to the indexation of the tariff. In addition, in 2014, payments for the services OJSC FGC UES were calculated based on the declared capacity, as well as in 2013.

By the results of 2014, the cost of services of distribution grid companies amounted to 7,778.2 million Rubles (26.0 % of total expenditures). As compared with the last year, the cost reduction amounted to 2,246.2 million Rubles. This cost reduction was due to a decrease in the average tariff for electric power transmission services via the grids of territorial grid companies (TGC).

Personnel costs in 2014 amounted to 4,253.2 million Rubles (14.2% of total expenditures), which is 14.7% higher than at the end of 2013. The increased costs for this item were due to:

  • increased number of personnel in connection with the implementation of measures under joint Order of OJSC UES FGC and OJSC Kubanenergo No.544/465 of 12.09.2012, On Measures to Improve the Reliability of Power Grid Facilities of the Black Sea Coast of the Krasnodar Territory;
  • increased motivation of personnel involved in the maintenance and repair of the distribution grid and organization of the operational staff in the Sochi Energy District around the clock;
  • issuance of one-time bonuses to personnel engaged in the certification of electric grid equipment of the Company and identification of unrecorded power consumption by certificates of non-agreementual and non-metered electricity consumption.

Depreciation of fixed and intangible assets increased, as compared with 2013, by 761.0 mln. Rubles due to the commissioning of fixed assets of the electric grid complex of the Sochi Energy District as part of the preparation for the XXII Olympic Winter Games and XI Paralympic Winter Games 2014 in Sochi under the approved investment program of the Company.

Costs of Production, mln RUB

Costs of Production, mln RUB

Analysis of the Company Financial Status and Activity Results

Indicator/Year

As of 31.12.2012

As of 31.12.2013

As of 31.12.2014

Liquidity Ratio

Absolute liquidity ratio

0.21

0.95

0.44

Quick assets ratio

0.42

1.38

0.77

Current liquidity ratio

0.52

1.54

0.81

Financial Stability Ratio

Equity/assets ratio

0.39

0.52

0.48

Total debt/EBITDA ratio

22.13

23.85

32.27

Current assets coverage ratio

–0.93

0.35

-0.24

Profitability Ratio

Return on equity (ROE), %

–14.2

–9.95

–11.55

Return on total assets (ROTA) from revenue before taxes, %

–4.42

–4.67

–5.92

EBITDA profitability, %

2.56

2.18

1.84

Efficiency Ratio

Growth rate correlation of the accounts receivable and accounts payable

0.77

1.13

0.82

Correlation of the total accounts receivable and accounts payable

0.38

0.42

0.33

Correlation of quickly available accounts receivable and accounts payable

0.21

0.54

0.47

By the results of 2014, the liquidity ratio dropped. The above dynamics is due to a decrease in the amount of cash in connection with the payments for the construction of Olympic facilities, as well as a decrease in the level of accounts receivable and inventory. In addition, reduced liquidity ratios were due to an increase, as compared to the previous period, in the amount of short-term debt capital due to the transfer of long-term loan amounts with maturity as of 31.12.2014, amounting to less than 12 months.

The equity-assets ratio decreased by 0.04 as compared to 2013 and as of 31.12.2014, amounted to 0.48. The increase in the total debt to EBITDA ratio is due to a decrease in EBITDA as a result of deterioration of financial results.

The equity ratio decreased, as compared to the same period in 2013, due to the decrease in the balance of funds in the accounts of the Company and reduction of accounts receivable.

The returns on assets and equity by the results of 2014 are negative due to the presence of a net loss.

Efficiency ratios showed a negative trend in the reporting year. There was a reduction in both accounts receivable and accounts payable; however, the upward rate of receivables was lower, which determined the dynamics of the efficiency ratios.