OREANDA-NEWS. On 22 June 2009 JSC “OGK-6” (MICEX - OGK6; RTS – OGKF) reported its Audited Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS) for the year ended 31 December 2008. The company revenues in 2008 grew 20% reaching RUR 42,275 mln. compared to 2007 results. Despite a 20% rise in revenues the Company ended the year in losses amounting to RUR 829 mln.

Key Performance indicators

 

Period

Change (%)

2008

2007

Financial performance indicators (in thousand rubles)

 

 

 

Revenues

42,275,050

35,333,819

20%

Operating expenses

(44,687,693)

(32,801,688)

36%

Other (expenses)/income

(155,796)

369,058

-142%

Operating (loss)/profit

(2,568,439)

2,901,189

-189%

Finance income

829,010

25,642

3133%

Finance expenses

(357,907)

(606,935)

-41%

(Loss)/profit before income tax

(2,097,336)

2,319,896

-190%

Income tax benefit/(expense)

1,267,933

(773,293)

264%

(Loss)/profit for the year

(829,403)

1,546,603

-154%

(Loss)/earnings per ordinary share - basic and diluted (in Russian Roubles)

(0.0257)

0.0578

-154%

EBITDA

2,241,581

5,799,962

-61%

Production indicators

 

 

 

Electricity production, mln.kWh

38,857

34,065

14%

Heat production, Gcal

4,350

4,321

0.7%

Capacity Factor

49%

43%

6 b.p.

The on-going electricity and capacity market liberalization process coupled with the rising market prices on electricity throughout most of the year were the key factors contributing to the 20% growth in revenues. The revenues from electricity and capacity sales at free market prices increased by 165% with their share in the total sales structure reaching almost 30% from 13% a year earlier.

Revenues Structure (in thousand RUR)

 

2008

Share in revenues %

2007

Share in Revenues %

Change

%

Total Revenues

42,275,050

100

35,333,819

100

20%

Total Revenues from electricity and capacity sales

39,878,613

94

33,145,823

94

20%

Total Revenues from electricity sales at the wholesale market

38,574,575

91

31,943,730

90

21%

 Electricity sales at the regulated bilateral agreements sector

16,746,090

39

17,422,047

49

-4%

Capacity sales at the regulated bilateral agreements sector

9,354,169

22

9,821,543

28

-5%

Competitive selection of capacity

929,541

2

-

 

-

Electricity sales at the day-ahead market

9,790,839

23

3,493,764

10

180%

Electricity sales at the balancing market

1,517,634

4

1,206,376

3

26%

Unregulated bilateral agreements on electricity and capacity supply

236,301

1

-

 

-

Electricity sales at the retail market

1,304,039

3

1,202,093

3

8%

Heat sales

2,036,637

5

1,884,964

6

8%

Other revenues

359,800

1

303,032

1

19%

However the increase in expenditure has devalued the effect of rise in revenues. There were two major factors which caused the growth in operating expenses: - increase in fuel prices; - impairment of property, plant and equipment of RUR 1,971 mln. recognized by revaluations as at 01.01.2008 and as at 31.12.2008.

Alexey Mityushov, the General Director of JSC “OGK-6”, stated: “After facing considerable fuel price increase the Company has concentrated its efforts on reducing its fuel expenditures by negotiating long-term contracts on coal and finding the right cost-effective fuel balance.”

Operating Expenses (in thousand RUR)

 

2008

Share in expenses %

2007

Share in expenses %

Change

%

Fuel expenses

24,271,556

54%

17,898,648

55%

36%

Purchased heat and electricity

4,619,039

10%

3,362,873

10%

37%

Employee benefit expenses and payroll taxes

3,601,541

8%

2,854,555

9%

26%

Depreciation charge

2,812,159

6%

2,792,665

9%

1%

Impairment of property, plant and equipment

1,970,698

5%

-

-

-

Repairs and maintenance

1,834,597

4%

1,252,532

4%

46%

Other materials

1,572,695

4%

1,328,932

4%

18%

Water usage expenses

1,085,434

2%

916,310

3%

18%

Other expenses

2,919,974

7%

2,395,174

7%

22%

Total

44,687,693

100%

32,801,688

100%

36%

Revaluation

Effective 1 January 2008, the Company changed its accounting policy to revaluing its property, plant and equipment from that date and commissioned an independent appraiser to conduct two revaluations as at 1 January 2008 and as at 31 December 2008. The first revaluation showed a 123% value increase of property, plant and equipment to RUR 70,431 mln.

However the second revaluation conducted to reflect the economic obsolescence of property, plant and equipment resulted from economic downturn recognised a decrease of carrying amount of property, plant and equipment of RUR 24,083 million, which was charged against previously recognised valuation surplus in amount of RUR 17,690 mln. (net of related deferred tax of RUR 4,422 mln.) and to the income statement as impairment loss in amount of RUR 1,971 mln. As the result of revaluation the value of property, plant and equipment as at 31 December 2008 has become RUR 53,751 mln. (86% increase to 31 December 2007).

As part of the revaluation of property plant and equipment the Company has reviewed the estimated useful lives of property, plant and equipment at 1 January 2008. As a result, the useful lives of certain elements of property, plant and equipment were extended, which had a positive impact on this year's depreciation charge.

Consolidated Balance Sheet as at 31 December 2008

 

 

31 December
 2008

 

31 December
 2007

 

Notes

’000 RUR

 

’000 RUR

ASSETS

 

 

 

 

Non‑current assets

 

 

 

 

Property, plant and equipment

5

53,751,322

 

31,567,910

Other non-current assets

6

1,253,464

 

604,720

Total non‑current assets

 

55,004,786

 

32,172,630

 

Current assets

 

 

 

 

Inventories

7

4,585,801

 

3,255,204

Short-term investments

8

3,901,413

 

14,919,590

Income tax receivable

 

413,818

 

400,798

Other current assets

 

92,490

 

310,357

Receivables and prepayments

9

3,799,135

 

1,699,708

Cash and cash equivalents

 

215,014

 

648,427

Total current assets

 

13,007,671

 

21,234,084

TOTAL ASSETS

 

68,012,457

 

53,406,714

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

Equity

 

 

 

 

Share capital-ordinary shares

10

15,497,760

 

15,486,028

Treasury shares

 

-

 

(177)

Revaluation reserve

 

13,401,156

 

-

Share premium

 

18,339,193

 

18,239,259

Retained earnings

 

5,803,100

 

6,957,503

Total equity

 

53,041,209

 

40,682,613

 

 

 

 

 

Non-current liabilities

 

 

 

 

Deferred income tax liabilities

12

5,755,707

 

3,743,421

Non-current debt

11

2,923,677

 

-

Employee benefits

13

722,118

 

604,002

Other non-current liabilities

 

34,972

 

278,304

Total non-current liabilities

 

9,436,474

 

4,625,727

 

 

 

 

 

Current liabilities

 

 

 

 

Current debt and current portion of non-current debt

11

-

 

5,000,000

Accounts payable and accrued charges

14

5,298,648

 

2,634,944

Other taxes payable

 

236,126

 

463,430

Total current accounts payable

 

5,543,774

 

8,098,374

Total liabilities

 

14,971,248

 

12,724,101

TOTAL LIABILITIES AND EQUITY

 

68,012,457

 

53,406,714

Consolidated Income Statement for the year ended 31 December 2008

 

 

2008

 

2007

 

Notes

’000 RUR

 

’000 RUR

Revenues

15

42,275,050

 

35,333,819

Operating expenses

16

(44,687,693)

 

(32,801,688)

Other (expenses)/income

 

(155,796)

 

369,058

Operating (loss)/profit

 

(2,568,439)

 

2,901,189

Finance income

17

829,010

 

25,642

Finance expenses

17

(357,907)

 

(606,935)

(Loss)/profit before income tax

 

(2,097,336)

 

2,319,896

Income tax benefit/(expense)

12

1,267,933

 

(773,293)

(Loss)/profit for the year

 

(829,403)

 

1,546,603

(Loss)/earnings per ordinary share - basic and diluted (in Russian Roubles)

18 

(0.0257)

 

0.0578

Consolidated Statement of Cash Flows for the year ended 31 December 2008

 

 

2008

 

2007

 

Notes

’000 RUR

 

’000 RUR

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

(Loss)/profit before income tax

 

(2,097,336)

 

2,319,896

Adjustments to reconcile profit before
income tax to net cash provided by operations:

 

 

 

 

Depreciation

5

2,812,159

 

2,792,664

Impairment loss of property, plant and equipment

5

1,970,698

 

-

Loss on disposal of property, plant and equipment

 

78,586

 

-

Reversal of tax penalties

 

-

 

(313,825)

Financial (income)/expenses

17

(471,103)

 

571,171

Other

 

246,136

 

61,692

Operating cash flows before working capital changes and income tax paid

 

2,539,140

 

5,431,598

Working capital changes:

 

 

 

 

Change in accounts receivable and prepayments

 

(1,945,930)

 

(618,855)

Change in inventories

 

(1,387,080)

 

(335,722)

Change in other assets

 

217,868

 

(101,496)

Change in other non-current assets

 

(821,830)

 

(232,921)

Change in accounts payable and accruals

 

2,741,370

 

90,101

Change in other non-current liabilities

 

(101,606)

 

(3,749)

Change in taxes payable other than income tax

 

(227,304)

 

(74,918)

Cash provided by operating activities
 before interest and taxes

 

1,014,628

 

4,154,038

Interest paid

 

(326,191)

 

(584,509)

Income tax paid

 

(224,817)

 

(1,509,677)

Net cash generated from operating activities

 

463,620

 

2,059,852

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Acquisition of property, plant and equipment

 

(10,111,064)

 

(5,444,970)

Proceeds from/(acquisition of) short-term deposits

 

11,018,177

 

(14,919,590)

Interests received

17

829,010

 

-

Proceeds from disposal of property, plant and equipment

 

11,949

 

61,784

Net cash from/(used in) investing activities

 

1,748,072

 

(20,302,776)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from borrowings

 

2,282,041

 

18,570,266

Issue of share capital

 

-

 

20,894,377

Repayment of borrowings

 

(4,358,364)

 

(20,062,316)

Disposal/(acquisition) of treasury shares

 

177

 

(177)

Dividends paid

 

(568,959)

 

(654,057)

Net cash (used in)/generated from financing activities

 

(2,645,105)

 

18,748,043

Change in cash and cash equivalents

 

(433,413)

 

505,169

Cash and cash equivalents at the beginning of the year

 

648,427

 

143,258

Cash and cash equivalents at the end of the year

 

215,014

 

648,427

Consolidated Statement of Changes in Equity for the year ended 31 December 2008

’000 RUR

Ordinary share capital

 

Merger reserve

 

Revaluation reserve

 

Retained earnings

 

Share premium

 

Total equity

As at 1 January 2007

26,731,061

 

(9,937,275)

 

-

 

2,282,917

 

-

 

19,076,703

Profit for the year

-

 

-

 

-

 

1,546,603

 

-

 

1,546,603

Total recognised income and expense

-

 

-

 

-

 

-

 

-

 

1,546,603

Decrease in share capital

(13,900,152)

 

9,937,275

 

-

 

3,845,485

 

-

 

(117,392)

Issue of shares

2,655,119

 

-

 

-

 

-

 

18,239,259

 

20,894,378

Acquisition of treasury shares

-

 

-

 

-

 

(177)

 

-

 

(177)

Dividends

-

 

-

 

-

 

(717,502)

 

-

 

(717,502)

As at 31 December 2007

15,486,028

 

-

 

-

 

6,957,326

 

18,239,259

 

40,682,613

As at 1 January 2008

15,486,028

 

-

 

-

 

6,957,326

 

18,239,259

 

40,682,613

Loss for the year

-

 

-

 

-

 

(829,403)

 

-

 

(829,403)

Revaluation of property, plant and equipment

-

 

-

 

13,401,156

 

-

 

-

 

13,401,156

Total recognised income and expense

-

 

-

 

-

 

-

 

-

 

12,571,753

Dividends to shareholders

-

 

-

 

-

 

(325,000)

 

-

 

(325,000)

Disposal of treasury shares

 

 

-

 

-

 

177

 

-

 

177

Acquisition under common control

11,732

 

-

 

-

 

-

 

99,934

 

111,666

As at 31 December 2008

15,497,760

 

-

 

13,401,156

 

5,803,100

 

18,339,193

 

53,041,209