TGC-1 releases 2009 IFRS results


TGC-1 presents audited IFRS consolidated financial report for the year ended December 31, 2009 of the Company and its subsidiary – Murmanskaya CHPP.

In 2009, consolidated revenue increased RUR 7,760 mn or 23% as compared to 2008 – to RUR 41,349.9 mn. The increase of the revenue was mainly due to effective operations on the electricity and capacity market which undergoes liberalization, higher heat output (+2.2% to 2008), as well as favorable prices in unregulated sector of the market. The table below presents the revenue breakdown for 2008-2009 (in mn RUR):

2009 2008
Electricity sales 15,685.74 12,161.42
Capacity sales 6,634.05 5,584.07
Heat sales 18,022.92 14,778.39
Other sales 1,007.29 1,065.67
Total revenue 33,589.55 41,350.00

Net operating expenses (excluding reversed impairment reserve) in 2009 increased at a slower pace – by RUR 2,645.5 mn or 7.8% to RUR 36.382 mn, which is explained by a number of factors. First, higher water levels in 2009 let the Company considerably substitute thermal generation by more cost-effective hydrogeneration (the share of hydro in total electricity output in 2009 was 52%), which led to only marginal increase of fuel expenses (+0.9%). Amortization was up only 1.5%, water usage expenses were up 1.6%, heat distribution increased 5% y-o-y. Total costs’ growth was mainly driven by electricity and heat purchases (66.6%), which were primarily made to fulfill unregulated electricity and capacity contracts and export sales; and by repairs and maintenance expenses (+44.8%), which are indispensable to ensure reliable operation of equipment. Other expenses increased only marginally which was the result of management’s efforts to control non-priority expenses as the Company implements its ambitious investment program.
Pursuant to IFRS rules, at each reporting date management assesses whether there is any indication of impairment of property, plant and equipment. If any such indication exists, management estimates the recoverable amount which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the difference is recognized as an expense (impairment loss) in the income statement. An impairment loss recognized in prior periods is reversed if there has been a positive change in the estimates used to determine an asset’s recoverable amount.
Management considered recent favourable changes in operation of the Russian electricity market and resolved to partially reverse the impairment provision related to the thermal power plants and heating grid of Nevsky branch in the amount of RUR 4,295 mn and RUR 1,860 mn respectively. On the other hand, management recognised further impairment loss in respect of the property, plant and equipment of subsidiary – Murmanskaya thermal power plant – in the amount of RUR 722.1 mn. Therefore, the total effect of impairment loss reversal, that was accounted for in P&L, was 5,432.8 mn RUR.
As a result operating profit in 2009 increased more than ten-fold as compared to 2008 and totalled RUR 10,400.5 mn, while net profit was up seven-fold and totalled RUR 8,414 mn.
The table below presents the key IFRS financials for 2008-2009 (in mn RUR):

Revenue 41,350.00 33,589.55
Operating expenses, net (36,382.42) (33,736.90)
Impairment loss reversed during the year 5,432.91 1,179.45
Operating profit 10,400.49 1,032.10
Profit before income tax 10,695.96 1,302.07
EBITDA* 13,191.19 3,782.53
Profit for the year 8,414.56 1,180.47
EBITDA margin, % 32.6% 11.3%
Net margin, % 20.3% 3.5%

* - for purposes of business-planning TGC-1 calculates EBITDA as «operating profit + amortization».