JSC ”MOESK” announces about approval of business plan and year-based Company KPI adjustments by the Board of directors and approval of adjusted 2012 investment program by the Ministry of Energy

JSC “MOESK” Board of Directors decided to approve the adjusted business plan for 2012 taking as the basis the principle parameters of the business plan for 2013-2016 as well as adjusted 2012-2017 investment program. Also the body made changes in target levels of key performance indicators (KPI) for 2012 at the meeting in person held November 1, 2012.

Indicator	Actual 2011	Plan 2012 (appr.)	Plan 2012 (adj.)
Total sales, incl.:	126,546	108,393	116,748
- from energy transmission	106,994	90,834	99,117
- from grid connection	18,860	17,303	17,303
Total costs, incl.:	101,102	89,001	93,525
- non-controllable costs	69,327	59,150	63,529
- controllable costs	31,775	29,852	29,995
Gross profit	25,444	19,391	23,224
EBITDA	39,685	34,059	39,395
Net profit	17,053	8,802	16,328
Net assets	155,178	163,263	170,288
Debt(1)/EBITDA	1.02	1.74	1.35

Note: (1) Debt is calculated as the total value of the short-and long-term loans and borrowings.

In forming the adjusted business plan for 2012, the Company used the actual financial results for the first half of 2012. According to the mentioned document sales are expected at the level of 116,748 mln rub. which is 7.7 % more than planned previously. Indicator grew mainly due to rise of sales from energy transmission services in Moscow. Thus when the business plan for 2012 was preparing it was expected that since January 1st, 2012 “Joint Payment” energy transmission operator function in Moscow would be settled on JSC “United Utility Company” (OEK). Correspondingly anticipated sales from energy transmission services were calculated regarding planned individual tariff and absence of approved tariff and balance decisions.

However in fact decree of Moscow Regional Commission for Energy dated December 26th, 2011 No. 165/1 adopted “Double payment” scheme. According to it services rendered by JSC “MOESK” are paid as per joint tariff that includes among others payments to JSC “OEK”. It is worth mentioning that in the second half of 2012 sales in Moscow and Moscow region are calculated regarding the changes of administrative boarders of the regions.

Planned costs by the end of 2012 account to 93,525 mln rub., that is 4,523 mln rub. higher than previously approved. Non-controllable costs rise in comparison with previously approved plan is generally associated with the decision concerning described above payment scheme within Moscow. Moreover owing to annex of “New Moscow” territories to the capital non-controllable costs were adjusted with regard to approved individual tariffs for payment settlements with territory grid organizations (TGO) and volumes of affirmed capacity and net power flow for the purposes of payment calculation in favor of “FGC UES”, JSC. It should be noted that costs for electricity purchased to compensate losses are expected to fall due to decrease of average price and loss volume. Adjustment of controllable costs is mainly driven by changes in the following articles: costs for repair, costs for consultancy services, costs for leasing, costs for personnel.

Gross profit increase is planned basing on the more rapid growth of sales compared with costs of production and sales of products, works and services. It will also allow the Company to raise EBITDA.

Net profit growth in comparison with the approved plan is the result of rise of productive supply, fall of costs for electricity purchased to compensate losses, increase of other revenues and cutting of taxes paid.

Debt/EBITDA dynamics measuring debt burden proves following the course of developing of stable and reliable Company. Considerable fall of the indicator states the reduction of borrowed funds and rising of EBITDA.

Indicator	Actual 2011	Plan 2012 (appr.)	Plan 2012 (adj.)
Productive supply (own), thousand kWh	75,470	75,890	78,116
Losses, %	10.33	10.22	9.63

The adjusted business plan for 2012 envisages extension of own productive supply relating to actual level of 2011 by 3.5 %. Herewith adjustment of previously approved plan for 2012 accounted to 2.9 %. Annual productive supply growth is driven by augmentation of energy consumption volume and gradual reduction of losses. Thus according to the adjusted business plan it is anticipated to achieve the year reduction of losses by 0.59 p.p. against previously planned.

Investment program

Within the context of the adjusted business plan for 2012 approval issue there was adopted adjusted investment program of the Company for 2012-2017.

 

Indicator	Plan 2012 (appr.)	Plan 2012 (adj.)
Disbursement, mln rub. without VAT	30,601	33,007
Financing, mln rub. including VAT	37,442	37,952
Commissioning of fixed assets, without VAT	35,333	37,504
Commissioning, ÌVÀ	4,662	4,631
Commissioning, km	3,126	4,170

Capital investments disbursement and commissioning adjustment was executed with regard of concluding of contracts on compensation of losses and concluding of new contracts for grid connection. Moreover investment program was adjusted taking into account changes of Moscow region electric power industry perspective development program.

On November 14th, 2012 Russian Ministry of Energy approved changes into 2012-2017 JSC “MOESK” investment program relating to key parameters of 2012 investment program (Order No. 576).

According to approved adjustments it is planned that financing volume in 2012 will account to 37,952.2 mln rub. including VAT. That is higher than the indicator of the investment program approved by the Order No. 241 dated May 5th 2012 by 511 mln rub. It is worth mentioning that investment program for Moscow including territories of New Moscow was reduced by 749.5 mln rub. or 3 %, while for Moscow region – expanded by 1,260.3 mln rub., that equals to 10 %.

Key performance indicators (KPI)

In order to raise performance efficiency of the Company Board of Directors decided to make changes in KPI system for 2012. Quarterly KPI of the Company remained unaltered.

Indicator	2012 KPI (appr.)	2012 KPI (adj.)
Return on equity (ROE), cash flow backed, %	5.78	10.52
Electricity losses against output to the grid, %	10.22	9.63
Efficiency of investment program implementation for current year (by deadlines and costs), %	≥ 95	≥ 95
Reliability criteria, concurrently:
- not exceeding the cutoff number of accidents matching statements of p. 2.1. of the Instructions	0	0
- system-wide indicator of power supply failures to consumers (for feeders of 6 kV and higher)	<1	<1
- system-wide indicator of average duration of power supply disruptions to consumers (for feeders of 6 kV and higher)	<1	<1