JSC “Moscow United Electric Grid Company” publishes results for the first half of 2013 August

Joint-Stock Company “Moscow United Electric Grid Company”, one of the largest regional distribution companies of the Russian Federation, published in the quarterly report financial statements for the first half of 2013, prepared in accordance with Russian Accounting Standards (RAS).

Table 1. Statements of Financial Performance mln RUR

Category		H1 2012		H1 2013		Change		2013 (plan)
Total Revenue		55,167		59,083		7.1 %		124,585
- electricity transmission revenue		48,680		54,223		11.4 %		110,401
- technological connection revenue		6,327		4,690		-25.9 %		12,792
Total Costs		42,905		45,604		6.3 %		102,421
- electricity transmission costs		41,129		45,196		9.9 %		101,274
- technological connection costs		1,747		358		-79.5 %		928
Gross Profit		12,262		13,479		9.9 %		41,759
Gross Profit margin (%)		22.2		22.8		0.6 p.p.		33.5
EBITDA		20,822		18,857		-9.4 %		22,164
EBITDA margin (%)		37.7		31.9		-5.8 p.p.		17.8
Net Profit		10,907		5,951		-45.4 %		15,258
Net Profit margin (%)		19.8		10.1		-9.7 p.p.		12.2

As reported in H1 2013 statements total revenue increased by 7.1 % compared with the results of 1H 2012 and amounted to 59,083 mln rub. At the same time, electricity transmission revenue increased by 11.4 %, technological connection revenue decreased by 25.9 %. The positive dynamics of electricity transmission revenue is conditioned by the increase in productive supply and the growth of electricity transmission tariff. The decrease in technological connection revenue compared to the same period in 2012 is due to a reduction of share of profits on contracts concluded prior to January 1st, 2011 (according to the «old tariffs») and the increase in the share of contracts concluded after changing in the tariff policy (reduction of technological connection tariffs).

In turn, costs increased by 6.3 % to 45,604 mln rub. mainly due to the growth in uncontrollable costs from distribution grid companies’ (Municipal Unitary Enterprises, Territorial Grid Organizations), costs on the purchase of electricity to compensate for losses, expenses for the services of JSC “FGC UES” and depreciation.

Gross profit increased by 9.9 % as a result of the excess of revenue over costs.

Net profit amounted to 5,951 mln rub., that is 45.4 % lower than the same period last year. The decrease in net profit is due to the increase of other costs over other incomes in the credit balance. The increase in other costs is due to the creation of a reserve for accounts receivable on technological connection under the “One Contact” principle.

Key performance indicators decreased in comparison with the results of the same period last year. Thus, the decline in net profit over increasing revenue led to a decrease in net profit margin to the level of 10.1 % (9.7 p.p. decrease). The EBITDA margin in H1 2013 constituted 31.9 %, that is 5.8 % lower than the same period last year, mainly due to the increase of other costs over other incomes in the credit balance.

Table 2. Balance sheet mln RUR

Category		June 30th 012		June 30th 013		Change		2013 (plan)
Total assets		269,351		284,755		5.7 %		314,395
- non-current assets		209,405		228,793		9.3 %		270,507
- current assets		59,946		55,962		-6.6 %		43,889
Total liabilities		269,351		284,755		5.7 %		314,395
- capital and reserves		166,084		177,095		6.6 %		185,202
- long-term liabilities		50,028		51,107		2.2 %		76,270
- short-term liabilities		53,239		56,553		6.2 %		52,924

Over the reporting period, the balance sheet increased by 5.7 %, reaching a value of 284,755 mln rub. In this case, non-current assets share in total assets rose 9.3 % and constituted 80.3 % mainly due to an increase in the most influential section – fixed assets. In the current assets, the share of which in total assets constituted 19.7 %, accounts receivable decreased by 17.4 % (including decrease of short-term accounts receivable by 7.6 % and long-term – by 22.8 %), inventories lowered by 2,3 % however cash and cash equivalents increased by 361.8 %. The increase of cash and cash equivalents is due to the reservation of funds for the planned repayment of the loan, which was to be paid in July 2013. Reduction in accounts receivable is due to the formation of the Company's allowance for doubtful accounts.

As per liabilities, the increase in retained income by 15.5 %, and the decline in long-term debt from 18.6 % to 17.9 % are worth mentioning. This is due to the reducing of long-term accounts payable on contracts for technological connection. In order to reduce risks in the event of a significant increase in interest rates on the debt capital markets, and given the unstable situation in the financial market, the Company made a smooth transition from bank lending to public borrowing. Thus, over the past year, long-term liabilities change constituted 2.2 %, short-term – 6.2 %. Long-term liabilities of the Company increased due to growth on long-term debt, including successful placement of exchange bonds BO-01 and BO-02 in total of 10 bln rub. with 3 years maturity. The increase in current liabilities is mainly influenced by the increase of short-term credits resulting from the partial transfer from long-term debt into the short-term, as well as by increase of the estimated liabilities.