OREANDA-NEWS. April 26, 2012. Federal Grid Company of Unified Energy System (“Federal Grid” or the “Company”, ticker: FEES on MICEX-RTS and LSE) and its subsidiaries (“Federal Grid Cimpany UES Group” or the “Group”), the operator and manager of Russian unified electricity transmission grid system, announces its audited consolidated financial results for the year ended 31 December 2011 in accordance with IFRS, reported the press-centre of Federal Grid.

Key Highlights
Financial:
— Revenue of RUB 139,571 million, up 23%compared to2010
— EBITDA of RUB 93,236 million, up 86% compared to2010
— Adjusted EBITDA* of RUB83,760 million, up 24% compared to2010
— Operating profit of RUB 71,837 million, up 215% compared to2010
— Adjusted operating profit** of RUB 46,614 million, up 56% compared to2010
— Profit for the period of RUB 48,988 million, up 166% compared to2010
— Adjusted profit*** for the period of RUB 38,241 million, up 37% compared to2010
— EPS of RUB 0.039, up 160% compared to2010
— Adjusted EPS**** of RUB 0.031, up 35% compared to2010

* Adjusted EBITDA is calculated as EBITDA (profit for the period before income tax expense, finance income and costs, depreciation and amortisation) under IFRS adjusted to exclude a one-off gain on sale of available-for-sale investments and investments in associates, a loss on re-measurement of assets held for sale, a non-specific impairment of property, plant and equipment, an impairment of available-for-sale investments, a loss on dilution of share in associates, and to include finance income.

** Adjusted operating profit is calculated as operating profit under IFRS adjusted to exclude a one-off gain on disposal of available-for-sale investments and investments in associates, a loss on re-measurement of assets held for sale, and non-specific impairment of property, plant and equipment.

*** Adjusted profit for the period is calculated as profit for the period under IFRS adjusted to exclude a one-off gain on sale of available-for-sale investments and investments in associates, a loss on re-measurement of assets held for sale, a non-specific impairment of property, plant and equipment, an impairment of available-for-sale investments, a loss on dilution of share in associates and related deferred income tax effects.
**** Adjusted EPS is calculated as adjusted profit for the period divided by the weighted average number of the Company’ shares outstanding during the reporting period.

Operational:
Electricity transmission totalled 484.7 Bn kWh (+3% compared to 2010).
The total number of substations amounted to 854 (including leased), compared to 805 in 2010.
Total transformer capacity increased to 322,533 MVA (+3.7% compared to 2010).

Major events in 2011
February: Federal Grid Company approved a share-option programme for management.
March: Federal Grid Company successfully listed its GDRs on the London Stock Exchange.
April: The Federal Tariff Service set new RAB parameters for Federal Grid Company for 2011 to 2014 using a redistributed tariff mechanism (“tariff smoothing”)
During the year: the Company issued rouble-denominated bonds totalling RUB 55 billion and raised a long-term bank loan of RUB 25 billion.

Commenting on the 2011 results, Chairman of the Management Board Oleg Budargin said:
"In 2011 we strengthened Federal Grid Company’s financial position and achieved all of the KPIs set by the Board of Directors. Major growth factors include additional revenue from electricity transmission and technical connection of customers to the Unified National Electric Grid.

“Our main priority in the past year has been to ensure reliable, stable supply of electricity to consumers, and to increase operating efficiency by introducing new technologies. This area of focus benefits our shareholders, investors, customers and the electricity sector as a whole.

“In 2011, we launched a comprehensive upgrade programme for the UNEG, including the creation of a next-generation backbone 'smart grid'. In December, the Company put into operation the second phase of experimental digital substations in Moscow, and we are now working on constructing pilot clusters of smart grids in the Amur, Primorsk and Khabarovsk regions, St. Petersburg and a number of other regions across Russia. We believe that creating a 'smart grid' will reduce losses across all voltage classes by 25%, increase the throughput capacity of our transmission lines, smooth out load scheduling and reduce the probability of accidents by 30%. By our calculations, the total economic effect for Russian energy industry resulting from the introduction of a 'smart grid' could be RUB 50 billion a year, which will also create additional shareholder value for Federal Grid Company.

“We realise how important investing in the future is, and in 2011 the Company allotted RUB 1.9 billion for research and development, working closely with leading scientific institutions and with major companies.

“Looking ahead to 2012, we will continue to pursue large-scale innovation-based projects of national importance, and to work hard on increasing operating efficiency, which we are hopeful will help to grow the value of the Company".

Commenting on the financial results, Deputy Chairman of the Management Board (Chief Financial Officer) Andrey Kazachenkov said:

"We can confidently say that the Group's results for 2011 are positive.

“Our financial position remains stable and we fully funded our investment programme during the year.

“Сonsolidated revenue increased by 23% compared to the last year, mainly as a result of the increase in tariffs for transmission services established by the Federal Tariff Service and a higher volume of technological connection services rendered.

“Adjusted EBITDA rose by 24% to RUB 83,760 million, as revenue and adjusted operating profit grew 23% and 56% year-on-year, compared to a slower increase in operating expenses excluding depreciation and amortisation of 17%. Adjusted operating profit was up by 56% to RUB 46,414 million, underscoring our successful measures to control operating costs.

“Adjusted profit for the period increased by 37% to RUB 38,241 million due to the above factors and certain deferred tax effects. Adjusted profit margin amounted to 27%, as compared with 25% in 2010.”