Given that the Company produces and sells electric power and capacity within the Russian Federation using the Russian rouble as the currency for payment, the indicators EBITDA and EBIT provide the most accurate assessment of performance at Unipro PJSC when volatile factors are excluded, especially exchange rate differences.
1.6.1. Revenue
The Company’s revenue in 2018 consisted of the proceeds from the sale of electric power, heat, and other commercial and non-commercial products and services.
Sales revenue in 2018 increased by 2.8% compared to 2017 and reached RUB 81.3 bln.
The year-end results for show that revenue from the sale of electric power and capacity increased to RUB 79.4 bln (+2.6%) compared with the results of the previous reference period. The growth in revenue was mainly due to an increase in revenue from the sale of capacity resulting from an increased payment received under CSA (delta CSA) for Surgutskaya GRES (increased payments started in the 2nd quarter of 2017).
79.4
RUB bln
revenue from the sale of electric power and capacity in 2018
+ 2.6%
compared with the previous year
Revenue from the sale of electric power remained virtually unchanged and amounted to RUB 46.6 bln. At the same time, the annual growth of regulated tariffs for electricity and the increase in prices in the day-ahead market compensated for the decline in electric power sales at the Company's power plants in 2018.
The percentage of revenue generated from the sale of electric power and capacity in the regulated market (not including the CSA) within the total revenue of Unipro PJSC for 2018 increased slightly by ~ 1 pp and amounted to RUB 11.9 bln (the percentage of the total revenue is 15%). However, the percentage of revenue generated from sales in the competitive sector fell by 1 pp to 83%, and its volume amounted to RUB 67.4 bln.
In the reference period, revenue from heat power sales increased by 6.8% compared with 2017 and reached RUB 1.4 bln. The growth in revenue was caused by an increase in heat power sales by 5.1% due to weather conditions, as well as an annual increase in heat power tariffs. By year-end 2018, the overall percentage of revenue generated by heat power sales within the Company’s total revenue was 1.7%.
By year-end 2018, the Company’s other income (income from commercial and non-commercial sales) increased by 19.4% to RUB 570.4 mln. This growth was due to more heat carrier medium sales and M&R fees, and RPFC system services being sold. By year-end 2018, the share of other sources of income was 0.7% of the total revenue at Unipro PJSC.
by 19.4%
increase in the Company’s other income from commercial and non-commercial sales amounting to 570,4 RUB mln
1.6.2. Costs
In 2018, fuel expenses were 57.4% of the Company’s operating expenses. In general, fuel expenses in the reference period increased by 2.7% compared to 2017 and amounted to RUB 34.6 bln (excluding the cost of fuel used for commissioning and repair work). The main reason for the increase in expenses compared to the previous year was the indexation of wholesale gas prices (by 3.4% in August 2018).
Gas procurement expenses for producing electric and heat power accounted for 92.9% of the Company’s overall fuel expenses, and the cost of coal burned was 6.5%.
Other material expenses included: structural maintenance costs for buildings, construction and equipment, M&R costs of new power units, cost of purchasing electric power and capacity, cost of raw materials and materials for operational and economic needs, transport and office equipment maintenance, and the purchase of materials for health and safety in the workplace.
By year-end 2018, other material expenses at Unipro PJSC amounted to RUB 6.9 mln (11.4% of the Company’s total costs). The increase in costs by 3% compared to 2017 was due to an increase in the cost of purchasing electric power and capacity.
Market operator service fees include the Company’s contractual payments to the System Operator, Trading System Administrator, Financial Settlements Centre.
By year-end 2018, the expenses of Unipro PJSC for the services of market operators increased slightly compared to the previous reference period and amounted to RUB 1.3 bln. The percentage of expenses for the services of market operators within the total volume of the Company’s expenses in 2018 remained at the same level as 2017 and amounted to 2.2%.
Labour costs include all costs associated with salaries, including estimated liabilities.
In 2018, the Company’s spending on salaries increased by 16% to RUB 5.7 bln, which accounted for 9.5% of the Company’s total expenses.
Contributions to non-budgetary funds include social and pension contributions to Russian state funds.
The total amount of contributions to non-budgetary funds in 2018 with estimated liabilities factored in amounted to RUB 1.4 bln (2.3% of the Company’s total costs).
Unipro PJSC is one of the largest taxpayers in Russia. Taxes and levies the Company pays include property tax, transport tax, land tax, water tax, and mineral-extraction tax, as well as levies for the use of waterbodies, environmental pollution, as well as other duties.
By year-end 2018, the Company’s tax charges increased by 39% compared to 2017 and amounted to RUB 1.7 bln. The main reason for the increase in expenses was a significant increase in property tax charges (from RUB 977 mln in 2017 to RUB 1,485 mln in 2018). This tax increase is due to the following changes:
- in the reference period, movable property reported after 1 January 2013 at a rate of 1.1% in 2018 (0% in 2017) was subject to taxation at all plants, except Shaturskaya GRES;
- the termination of regional benefits for new construction work at Berezovskaya GRES until 1 January 2018;
- the tax rate on energy grid facilities rose to 1.9% in 2018 (from 1.6% in 2017).
In 2018, taxes and levies were 2.8% of the Company’s operating expenses.
Depreciation of the Company’s fixed assets is calculated on the straight-line method over the useful life of assets.
By year-end 2018, depreciation charges at Unipro PJSC increased by 2% to RUB 6.4 bln. The increase in depreciation was due to:
- accounting for restored facilities and accrual of depreciation on these facilities;
- increase in depreciation on major repairs.
In 2018, depreciation accruals were 10.7% of the Company’s operating expenses.
Other costs include expenses on communication and data transmission services, IT services, staff training, utility services, security, insurance, and other administrative and managerial expenses.
By year-end 2018, other costs at Unipro PJSC increased by 7% to RUB 2.2 bln (3.7% in the Company’s operating expenses structure). The increase in other expenses compared to 2017 was mainly due to an increase in consulting and legal expenses, as well as the cost of renting office space.
1.6.3. Salient facts affecting financial performance
The key event which affected the Company’s financial performance in 2016–2018 was the fire that broke out in the boiler room of Power Unit No. 3 at Berezovskaya GRES on 1 February 2016. After the accident, 800 MW Power Unit No. 3 was withdrawn to have unscheduled emergency maintenance performed.
By year-end 2018, there were extraordinary expenses which included the disposal of damaged fixed assets amounting to RUB 372 mln (RUB 5.8 bln in 2017, RUB 6.4 bln in 2016) and the liquidation of the fixed assets amounting to RUB 8 mln (RUB 1.4 bln in 2017, RUB 2.1 bln in 2016). In May 2017, Unipro PJSC received its last indemnity insurance payment of RUB 20.4 bln (the first one of RUB 5.7 bln was obtained in 2016).
1.6.4. EBITDA
Unipro PJSC profits before interest, taxes and depreciation in 2018 was RUB 28.8 bln, which is 32% lower than in 2017 (in 2017, EBITDA amounted to RUB 42.5 bln). The 2018 EBIDTA margin remains high at 35.5%.
If the emergency expenses associated with the accident in Power Unit No. 3 at Berezovskaya GRES are excluded, EBITDA for 2018 would have remained at the same level as the previous year and amounted to RUB 29.2 bln.
1.6.5. EBIT
The profit Unipro PJSC made before paying interest and taxes in 2018 amounted to RUB 22.4 bln, which is 38% lower than the figure for 2017. The 2018 EBIT margin is 27.6%.
If the emergency expenses associated with the accident in Power Unit No. 3 at Berezovskaya GRES in 2018 are excluded, the figure would have amounted to RUB 22.8 bln, which is 0.8% lower than the previous year.
1.6.6. Net profit
In 2018, the Company’s net profit amounted to RUB 18.9 bln, which is 37% lower than the net profit in 2017.
The net profit margin of Unipro PJSC was 23% (38% in 2017).
1.6.7. Taxation and contributions to state and non-budgetary funds
1.6.8. Significant changes in assets profile
In 2018, Unipro PJSC significantly increased investment in implementing its activities. This is evidenced by an increase of RUB 6.8 bln (+5%) in assets compared to the previous year. The value of the assets at Unipro PJSC at the end of 2018 amounted to RUB 138.9 bln. There were no significant changes in the asset balance structure.
Non-current assets are 85% of assets at Unipro PJSC. The main increment of balance sheet assets is RUB +6.5 bln (96% of the cumulative increase), mainly due to the following:
- an increase in construction work in progress, which is connected to the repair and reconstruction work being carried out at Power Unit No. 3, as well as with the construction of a new fuel receiving station at Berezovskaya GRES (details);
- an increase in other non-current assets as major repairs completed are reported (mainly due to the overhaul of Power Unit No. 8 at Surgutskaya GRES-2);
- reporting restoration of facilities among fixed assets. The Company decided to perform an assessment of the asset liquidation obligation, since the activities of Unipro PJSC are related to the use of natural assets (land, wells, quarries).
The negative trend in long-term financial investments is related to the transfer of a loan from a subsidiary company, Unipro Engineering LLC, to short-term investments, given that the loan had a term of less than one year on 31 December 2018.
In 2018, the current assets of Unipro PJSC had a total value which had increased by RUB 0.3 bln (+1%) to RUB 21.5 bln. Current assets were 15% of total assets at the end of 2018. The structure of current assets for the period under review changed as follows:
- the share of reserves increased from 19% to 37%, which was mainly due to the recognition of materials suitable for further use following a major overhaul and the partial liquidation of fixed assets at Surgutskaya GRES-2 and Shaturskaya GRES;
- the share of cash increased from 14% to 22% mainly due to the repayment of previously issued loans in 2018. The largest share is taken up by bank deposits;
- the share of accounts receivable fell from 48% to 36%. The decrease in accounts receivable is due to an overpayment of income tax in 2017, which was credited in 2018;
- the share of financial investments dropped from 18% to 5% due to the repayment of an intercompany loan to Uniper SE in 2018.
1.6.9. Significant changes in the liabilities profile
There were no major changes in the structure of liabilities at Unipro PJSC in 2018. The total value of liabilities for the period under review increased, mainly due to:
- the total value of the “Capital and Reserves” section rose by RUB 5 bln to RUB 125 bln (+4%). The growth was driven by the profit for 2018 after the payment of dividends amounting to RUB 14 bln;
- an increase of RUB 1.1 bln in short-term liabilities due to changes in for taxes and fees payable (VAT calculations).
1.6.10. Liquidity and Equity Capital
Financial stability at Unipro PJSC is ensured by the positive value of the Company’s working capital, the absence of borrowed funds, as well as the high share in the Company’s own capital, ensuring financial independence and an absence of significant financial risks. Balance liquidity is currently positive.
The significant increase of capital expenditures in 2018 is mainly related to electric and heat power generation, as well as upgrades to the existing generating assets within the framework of the approved Investment Programme. The Investment Programme is planned to be implemented through equity funds. In respect of equipment modernisation projects, debt financing may be raised.
