Economics and Finance

Unipro believes it correct to take EBITDA and EBIT net of the volatile factors, i.e. the exchange differences, as the Company produces and sells electric power and capacity in the Russian Federation and uses the Russian ruble as the payment currency. These assumptions allow the most accurate assessment of the operating results of Unipro PJSC.

The Company’s revenue in 2020 consisted of the sales of electric power and capacity, heat and other works and services. As of year-end 2020, Unipro PJSC revenue fell by 5.3% as compared to 2019 and amounted to RUB 80,286 mln.

As of year-end 2020, the revenue from the sale of electric power and capacity decreased by 5.3% to RUB 78,565 mln as compared to 2019 (RUB 82,921 mln).

The share of revenue from electric power and capacity sold in the regulated market (without regard to the capacity supply agreements (CSA) increased in the total revenue of Unipro PJSC for 2020 by 5.9% and amounted to RUB 12,506 mln (the share in the total revenue is 16%). However, the share of revenue from the sales in the competitive sector fell by 1.6 p.p. to 82.3%, and amounted to RUB 66.58 mln.

The decrease in the revenue from electric power sales by 7.4% in 2020 as compared to 2019 was mainly due to a decrease in the generation of the Company’s power plants and a drop in DAM prices for the following reasons:

• quarantine restrictions caused by the COVID-19 pandemic;
• decline in oil and gas production (impact of the OPEC+ Agreement);
• high water content and high feed of hydro power plants related thereto throughout 2020;
• unusually warm weather in Q1 2020

The decrease in the revenue from the capacity supply by 2.0% in 2020 as compared to 2019 was due to CSA payments as a result of a decrease in bond yields and an adjustment of the DAM ratio used to calculate the CSA price

As of year-end 2020, the revenue from heat sales decreased by 3.3% as compared to 2019 and amounted to RUB 1,371 mln (in 2019, RUB 1,417 mln). The revenue decreased due to a 9% decrease in heat production by the company’s power plants in 2020 as compared to 2019, that is related to the weather conditions. The share of the revenue from heat sales amounted to 1.7% of the total revenue of Unipro PJSC.

As of year-end 2020, other income (revenue from the sale of other works, services) of the Company decreased by 17.2% to RUB 351 mln (from RUB 424 mln as of year-end 2019). This is due to a decrease in the income from the services of property lease to the contractors and a decrease in the income from the sale of repair and maintenance services. As of yearend 2020, the other income accounted for 0.4% of Unipro PJSC total revenue.

In 2020, fuel expenses accounted for 53.6% of the Company’s operating expenses. In general, fuel expenses in the 2020 decreased by RUB 1,889 mln (-5.5%) as compared to 2019 and amounted to RUB 32,458 mln (excluding the cost of fuel used for commissioning and recovery work). At that, the annual fuel indexing affected the increase of natural gas prices by 3.0% as compared to 2019.

Despite the rising prices for the key energy sources in Russia, the decline in the Company’s fuel expenses in 2020 as compared to 2019 was due to the following factors:

• 10.1% decline in electric power generation;
• 0.8% decline in specific fuel consumption for electric power output due to higher utilization of efficient power units (CCGT) and operation of equipment in a more efficient mode.

Gas expenses (for electric and heat power production) accounted for 93.3% of the Company’s total fuel expenses. Coal expenses (for electric and heat power production) accounted for 5.6% of the Company’s total expenses.

Other material expenses included: structural maintenance costs for buildings, construction and equipment, M&R costs of new power units, cost of procuring electric power and power, 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.

As of year-end 2020, other material expenses of Unipro PJSC amounted to RUB 10,309 mln or 17.0% of the Unipro total expenses. The increase in the expenses by 23.6% as compared to 2019 was due to higher expenses on electric power and capacity.

Market operator service fees include the Company’s contractual payments to the Grid Operator, Trading System Administrator, Center of Financial Settlements.

As of year-end 2020, Unipro PJSC expenses for the market operator service fees rose by 6.3% as compared to 2019 and amounted to RUB 1,436 mln (in 2019, RUB 1,351 mln). The share of costs for the market operator services in the total volume of the Company’s costs in 2020 increased slightly as compared to 2019 and amounted to 2.4%.

Labour costs include all costs associated with salaries, including estimated liabilities.

As of year-end 2020, the Company’s labour costs increased by 4.1% as compared to 2019 amounting to RUB 5,498 mln (RUB 5,280 mln in 2019).

The labour costs accounted for 9.1% of the Company’s total costs in 2020.

Contributions to non-budgetary funds include social and pension contributions to Russian state funds.

The total amount of contributions to non-budgetary funds in 2020 with estimated liabilities factored in amounted to RUB 1,477 mln, 2.4% of the Company’s total costs.

Unipro PJSC is one of the largest taxpayers in Russia.

Taxes and levies paid by the Company comprise property tax, transport tax, land tax, water tax, and mineral-extraction tax, as well as levies covering the use of water bodies, environmental pollution, and duties.

As of year-end 2020, the Company’s tax charges decreased by 7.0% as compared to 2019 and amounted to RUB 958 mln (in 2019, RUB 1,300 mln) which is mainly due to a decrease in fees for the use of water bodies and property tax charges. In 2020, property tax expenses were recognized in the amount of RUB 726 mln (in 2019, RUB 771 mln). In 2020, taxes and levies accounted for 1.6% of the Company’s operating expenses.

Depreciation of the Company’s fixed assets is calculated under the straight-line basis over the useful life of assets.

As of year-end 2020, Unipro PJSC depreciation accruals increased by 5.3% to RUB 6,585 mln (in 2019, RUB 6,254 mln). The growth of depreciation accruals is due to the following: starting from 2020, the Company recognizes in its reporting the depreciation accruals for the office premises lease in accordance with Federal Accounting Standard 25/2018 (as of year-end 2020, those accruals amounted to RUB 189 mln).

In 2020, the Company’s depreciation charges accounted for 10.9% 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.

As of year-end 2020, other costs of Unipro PJSC decreased by 18.3% to RUB 1,787 mln (in 2019, RUB 2,187 mln). The decrease in other costs is due to restrictions on the spending of funds as part of the efforts taken to maintain the Company’s liquidity. In 2020, the Company’s other costs accounted for 3.0% of the total operating expenses.

As of year-end 2020, Unipro PJSC earnings before interest, taxes, depreciation, and amortization amounted to RUB 25,772 mln, that is by 12.0% lower than in 2019 (RUB 29,215 mln). The decrease in 2020 EBITDA was mainly due to a decrease in marginal profit, i.e., a decrease in the revenue from electric power sales that resulted from a decrease in the generation and a drop in DAM prices, as well as a decrease in the revenue from the CSA.

The 2020 EBITDA margin remains high at 32.0%.

As of year-end 2020, Unipro PJSC earnings before interests and taxes amounted to RUB 19,137 mln, that is by 16.7% lower than in 2019 (RUB 22,961 mln). The 2020 EBIT dynamics is due to the same factors as the EBITDA dynamics.

The 2019 EBIT margin is 23.8%.

In 2020, the Company’s net profit amounted to RUB 15,040 mln, which is 19.7% below the net profit figures for 2019. In 2019, Unipro PJSC net profit amounted to RUB 18,729 mln.

As of year-end 2020, Unipro PJSC net profit margin was equal to 18.7% (against 22.1% in 2019).

In 2020, the assets of Unipro PJSC increased by 0.5% and amounted to RUB 147.1 bln. This increase is caused by the following changes:

• The non-current assets of the Company as of the date of the report for 2020 grew by 4.2% to RUB 132.1 bln from RUB 126.8 bln as of 01 January 2020. The Company is building new facilities and is reconstructing the existing ones. The increase in the non-current assets in 2020 vs. 2019 is mostly caused by the 11.5% growth of assets in the Construction in Progress line – up to RUB 57.8 bln vs. RUB 51.8 bln as of 01 January 2020. The significant growth in the Construction in Progress line is caused by the increase in capital construction on the project for repair and refurbishment at Power Unit No. 3 of Berezovskaya GRES and construction of the new Fuel Receiving Station (FRS). After FRS commissioning, coal will be supplied continuously to the three units of Berezovskaya GRES at once. All the production processes at the new FRS will be fully automated and, once it is commissioned, integrated with the new fuel supply process control system at Berezovskaya GRES.

The Other Non-Current Assets line shows regular heavy expenses for capital repairs of power units that arise at certain long time intervals, expenses that are to be written off in the future with a write-off period of more than 12 months after the reporting date and rights to use assets in accordance with Federal Accounting Standard 25/2018. The assets in the Other Non-Current Assets line grew in 2020 as compared to 2019 by 23.4% up to RUB 5.1 bln from RUB 4.2 bln as of 01 January 2020 that was due to the recognition of capitalized repairs and rights to use assets under the signed office premises lease agreements;

• The current assets of the Company as of 31 December 2020 decreased by 23.3% – to RUB 15.0 bln from RUB 19.5 bln as of 01 January 2020. The current assets decreased mainly due to: a decrease in inventories by 22.6% to RUB 6.1 bln from RUB 7.9 bln as of 01 January 2020 which resulted from the completion of repair and reconstruction at power unit No. 3 of Berezovskaya GRES and a decrease in the stock of spare parts and components used for the repair; reduction of current assets in the Cash and Cash Equivalents line by 96.7% – to RUB 0.1 bln from RUB 3.0 bln as of 01 January 2020, which is related by dividend payment in 2020 and implementation of the Company’s investment programme, including the project of Repair and Reconstruction at Power Unit No. 3 of Berezovskaya GRES.

At the same time, as of 31 December 2020 the accounts receivable of Unipro PJSC increased by 3.7% to RUB 7.9 bln from RUB 7.6 bln as of 01 January 2020, which was mainly due to an increase in shortterm receivables from buyers and customers and an increase in long-term receivables as a result of entry into an agreement for restructuring of electric power supply debt.

In 2020, the liabilities of Unipro PJSC increased by 0.5% and amounted to RUB 147.1 bln. The structure of liabilities changed due the following reasons:

• As of the date of the report for 2020, the Company’s capital and reserves increased by 0.9% – up to RUB 129.6 bln from RUB 128.5 bln as of 01 January 2020; this growth was caused by an increase in the retained earnings by RUB 1.1 bln resulting from the net profit in the reporting year;
• As of the date of the report for 2020, the Company’s long-term liabilities increased by 5.7% to RUB 8.5 bln from RUB 8.1 bln as of 01 January 2020 that was due to an increase in other liabilities that resulted from the recognition of liabilities for the office premises lease;
• most changes in the Company’s liabilities structure in 2020 vs. 2019 are related to the decrease in the short-term liabilities by 8.2% – to RUB 9.0 bln from RUB 9.8 bln as of 01 January 2020. The decrease in the short-term liabilities was caused by the repayment of the loan extended by the Uniper Group in the amount of RUB 2.5 bln. However, as of the reporting date of 2020, the payables increased by 24.1% to RUB 6.8 bln from RUB 5.5 bln as of 01 January 2020 resulting from the increase in the taxes and levies payable as well as the increase in the payables to suppliers.