Investor Presentation - fsk-ees.ru
24
Investor Presentation September 2012 LISTED STANDARD DEPOSITARY RECEIPTS
Transcript of Investor Presentation - fsk-ees.ru
Investor Presentation
September 2012
LISTED
STANDARD DEPOSITARY RECEIPTS
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Substantial growth profile: 2010 – 2011 revenue
increased by 23%
Successful implementation of efficiency programme:
c. RUR 2 bn of savings in 2011(2)
Cost of borrowed capital among lowest for Russian
companies
Investment grade credit ratings
(S&P – BBB/Stable; Moody’s – Baa2/Stable)
Federal Grid Company: Investment Profile
Scale of Business Growth Prospects
Supportive Regulatory Regime Strong Financials
Anticipated electricity demand 2010 – 2020 CAGR
of 2.4%
System upgrade focused on improving efficiency
and reliability of the transmission grid; development
of smart grid model
The largest publicly traded electricity transmission
company in the World (1): over 120,000 km
of transmission lines with total capacity of more than
300,000 MVA
Unique natural monopoly position in Russia’s high-
voltage electricity transmission market, operating in
73 out of 83 Russian regions
Source Company data; IFRS financials; Energy Forecasting Agency
(1) By length of transmission lines and transformer capacity
(2) Under RAS according to cost cutting programme
Business regulation based on 5-year Regulatory
Asset Base (RAB) model
Guaranteed return on new invested capital
11% in 2010 – 2012 and 10% in 2013 – 2014
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Key Performance Indicators
Key financial figures 2011 2010 Change
RUR MM
Revenue 139,571 113,330 23%
Adj. Operating profit (1) 46,614 29,941 56%
Adj. EBITDA (1) 83,760 67,717 24%
Adj. EBITDA margin (1) 60.0% 59.8% n/a
Adj. Profit for the period (1) 38,241 27,910 37%
CAPEX (excl.VAT) 155,120 142,743 9%
Key Operating figures
Electricity transmission (bn kWh) 485 471 3%
Sub-stations (2) 854 805 6%
Transformer capacity(3) (thousands MVA) 323 311 4%
Transmission grid length(3) (thousands km) 125 128 3%
Source Company IFRS financials; Company data
(1) Adjusted for gain on disposal of available-for-sale investments and investments in associates, loss on re-measurement of assets held for sale, non-specific impairment of PPE, impairment of
available-for-sale investments, loss on dilution of share in associates.
(2) Including leased assets and ORU and cells on substations owned by third parties
(3) Including leased grids
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Others/Free
Float
20.45%
Government of
Russia
79.55%
Federal Grid Company History – Key Milestones Incorporated in 2002
Shareholder Structure
As of September 2012
Share Information
As of September 2012
(1)
Number of shares outstanding: 1,255,948 MM
Share price (MICEX)
Current: RUR 0.22
12 month low: RUR 0.16
12 month high: RUR 0.40
Market Cap: RUR 273 bn
Free Float: 20.45%
Approved plan for the privatization of an additional 4.11% stake owned
by the government
2009 2010 2008 2011
January 2010
• Change from “cost plus” to RAB regulation
February 2009
• Inclusion of Federal Grid in MSCI Russia and MSCI Emerging Markets Indices
April 2011 • Approval of RUB 125 bn bond
placement program
May 2011
• Deal with INTER RAO
March 2011
• LSE listing
December 2010
• New dividend policy
August 2008
• RTS and MICEX include Federal Grid Company in their indices
June 2008
• Federal Grid shares listed on RTS and MICEX
Company Development
Source Company data; Bloomberg
(1) Other shareholders include Gazprom, Norilsk Nickel and other
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Key Corporate Developments in 2012
Decision to transfer control
over Holding MRSK
On 12 May 2012, the Russian Government decided to transfer
the functions of Holding MRSK’s sole executive body to Federal Grid Company
On 30 June 2012 the agreement on executive body was approved by the
Board of Directors of Holding MRSK, and on 9 July 2012, it was approved by
the Board of Directors of Federal Grid Company
Tariff decisions On 21 May 2012, the Federal Tariff Service approved tariffs for electricity
transmission over backbone grids for 2012 – 2014
According to the decision, starting in 2H 2012, the tariff will be increased by
11% with subsequent 9% tariff increases slated for mid-2013 and 2014
Investment programme On 11 May 2012, the Ministry of Energy approved a RUR 505 bn 2012 – 2014
investment program for Federal Grid Company
Capital market activities On 27 April 2012, the Board of Directors of Federal Grid Company approved
three long-term debt instruments in order to diversify its debt financing
sources:
Russian bonds totaling up to RUR 125 bn.
Stock-exchange authorized ruble bonds totaling up to RUR 100 bn.
Eurobonds totaling up to RUR 100 bn.
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Investment Programme: 2012 – 2014
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Transmission lines, km
Transformer capacity, MVA
On 11 May 2012 the Ministry of Energy approved Federal Grid Company’s investment programme for 2012 – 2014
The approved plan entails investments totalling RUR 505 billion into the commissioning of 50,386 MVA of new transformer capacity and 13,147 kilometres of new transmission lines
In 2012 Federal Grid Company plans to invest RUR 196 billion
New construction 2012 – 2014
14,874
4,371
2012 2013 2014
19,063
4,108
16,449
4 ,668
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2012 – 2014 Investment Programme
RUR 265.4 bn (52.6%)
New construction
22,068 MVA
12,239 km
RUR 191.5 bn (37.9%)
Technical upgrades
and renovation
28,318 MVA
908 km
RUR 30.8 bn (6.1%)
Other projects
RUR 11.3 bn (2.2%)
Innovations and
energy efficiency
RUR 4.7 bn (1.0%)
Acquisition of
production facilities
RUR 1.2 bn (0.2%)
R&D
(planned)
Total Volume over 2012 – 2014:
Projected investment: RUR 504.8 bn
Capacity to be commissioned: 50,386 MVA
Grids to be commissioned: 13,147 km
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Construction of electricity supply
facilities on Elginskoye coal deposit
Start Date: 2010
Due Date: 2013
Capacity provision of Kalininskaya
NPP generating unit #4 (1,000 MW)
Start Date: 2009
Due Date: 2012
Underground cabling
in St. Petersburg
Start Date: 2011
Due Date: 2016
Infrastructure for Sochi Olympic
Games 2014
Start Date: 2008
Due Date: 2012
Transition from overhead lines to
cable and construction of Skolkovo
220 KV substation
Start Date: 2010
Due Date: 2012
Capacity provision of
Boguchanskaya HPP start-up
complex (1,000 MW)
Start Date: 2008
Due Date: 2014
Infrastructure for APEC summit in
Vladivostok in 2012
Start Date: 2008
Due Date: 2011
Status: completed
Construction of Zeyskaya HPP—
Russian-Chinese border
transmission line
Start Date: 2010
Due Date: 2013
Electricity supply of East Siberia
Pacific Ocean oil pipeline
Start Date: 2010
Due Date: 2016
Key Investment Projects
Source Company Data
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RAB Regulation: Transforming Approach to Financing
Regulatory Asset Base (RAB) Regulation
On 12 May 2012, Russia’s Federal Tariff Service approved tariffs under RAB regulation for 2012 – 2014
Federal Grid Company tariff was increased by 11.0% starting from 1 July 2012, by 9.4% starting from 1 July
2013, and by 9.4% from 1 July 2014
Return on initial invested capital in 2014 was raised from 9.1% to 10.0% and now equals the return on new
invested capital
RAB base is accounted for once assets are commissioned and put on the company’s balance sheet
2010 2011 From 1 July 2012* From 1 July 2013* From 1 July 2014*
Return on initial invested capital 3.9% 5.2% 6.5% 7.8% 10.0%
Return on new invested capital 11.0% 11.0% 11.0% 10.0% 10.0%
Tariff growth 51.1% 32.9% (1) for Q1,
26.4% for Q2 – Q4
11.0% 9.4% 9.4%
January 2010
• Switched to 3-year RAB regulation
September 2010
• Regulation period prolonged to 5 years
April 2011
• Tariff growth for 2011 has been smoothed out to 5%
RAB Return Calculation
(1) Approved by Federal Tariff Service (FTS) on 12 May 2012
May 2012
• FTS approved tariffs for 2012-2014
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Weighted average debt maturity of 4.1 years
Weighted average cost of RUR debt financing: 8.4%
100% of debt portfolio is unsecured
7,497
13,545
57,497
7,545 2,0026,000
50,000
130,778
132,780
0
40,000
80,000
120,000
160,000
2009 2010 2011
ST Debt LT Debt
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Capital Structure
S&P
Outlook
Moody’s
Outlook
Debt Profile Evolution RUR MM
Federal Grid Ratings
Series 7 5,000 7.50 October 2015
Series 8 10,000 7.15 September 2013
Series 9 5,000 7.99 October 2017
Series 10 10,000 7.75 September 2015
Series 11 10,000 7.99 October 2017
Series 12 10,000 8.10 April 2016
Series 15 10,000 October 2014
Gazprombank 10,000
Series 6 10,000 7.15 September 2013
Debt/Capital 6% 15%
Total Equity/Total Assets 0.83x 0.77x
Adjusted EBITDA (1) (RUR MM) 67,717 83,760
Total Debt/Adjusted EBITDA (2) 0.85x 1.59x
Key Ratios 2010 2011
Same as Sovereign: BBB
Stable
One Notch Below Sovereign: Baa2
Stable
Credit Portfolio (as of September 2012)
Interest Rate, % Maturity/Put date Bond issue RUR MM
Series 13 10,000 8.50 June 2021
Maturity date Credit line RUR MM
Gazprombank 15,000 October 2014
Series 18 15,000 8.50 June 2014
8.75
Gazprombank 10,000 November 2014
Series 19 20,000 7.95 July 2018
June 2017
Total 160,000
Credit Potential (as of September 2012):
Total amount of untapped credit lines: RUR 112.5 bn
Source Company data; IFRS financials
(1) Adjusted for gain on disposal of available-for-sale investments and investments in associates, loss on re-measurement of assets held for sale, non-specific impairment of PPE, impairment of
available-for-sale investments, loss on dilution of share in associates.
(2) The coupon rate for the first year is 9,00%, following coupons are determined by the formula (CPI-100%)+2,5%.
Series 22 10,000 9.00(2) July 2022
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Net Debt / EBITDA, 2011
Total Debt / (Total Debt + Equity), 2011
Credit Rating Comparison
Debt Profile Compares Favourably with International
Peers ...
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Company Moody’s S&P Fitch
Sovereign (Russia) Baa1 (Stable) BBB (Stable) BBB (Stable)
Federal Grid Baa2 (Stable) BBB (Stable) -
3.2x
3.6x
4.2x
3.1x2.7x
2.2x2.0x
1.0x0.7x
0.0
1.0
2.0
3.0
4.0
5.0
En
de
sa
Fe
de
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Grid
RW
E
ED
F
En
erg
y
Int. P
ow
er
E-O
N
En
el
Iberd
rola
Na
tio
na
l
Grid
56%61%
72%
55%50%
44%43%
35%
13%
0%
20%
40%
60%
80%
Fe
de
ral
Grid
En
de
sa
E-O
N
Int. P
ow
er
Iberd
rola
En
el
RW
E
ED
F
En
erg
y
Na
tio
na
l
Grid
Source Company IFRS financials, Bloomberg
Note: Peers’ revenue is generated from both electricity production and transmission, whereas Federal Grid’s is only from transmission
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RUR Bonds and RUR Eurobonds – Current Yields
Strong Presence on the Local Market
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Source: MICEX as of 07.08.2012
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Head of Investor
Relations:
Alexander Duzhinov
Nadezhda Sukhova
Egor Toropov
Vladimir Baklanov
Tel.: +7 495 710 9064
Mob: +7 916 041 8053
Fax: +7 495 710 9641
E-mail: [email protected]
Tel.: +7 495 710 9541
E-mail: [email protected]
Tel.: +7 495 710 9333 ext. 2275
E-mail: [email protected]
Tel.: +7 495 710 9333 ext. 2926
E-mail.: [email protected]
IR Contacts
Contacts for Institutional Investors and Analysts
Appendix
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87,580
113,330
139,571
0
50,000
100,000
150,000
2009 2010 2011
17,160
27,910
38,241
19.6%24.6% 27.4%
0
20,000
40,000
2009 2010 2011
0%
10%
20%
30%
40%
50%
90,934
142,743155,120
0
50,000
100,000
150,000
2009 2010 2011
42,619
67,717
83,760
48.7%59.8% 60.0%
0
30,000
60,000
90,000
2009 2010 2011
20%
45%
70%
95%
EBITDA Маржа
Чистая прибыль Маржа
Revenue RUR MM
EBITDA adj. (1) and Margin RUR MM %
CAPEX (excl. VAT) RUR MM
Profit for the period adj. (1) and Margin RUR MM %
Financial Highlights
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Source Company IFRS financials
(1) Adjusted for gain on disposal of available-for-sale investments and investments in associates, loss on re-measurement of assets held for sale,
non-specific impairment of PPE, impairment of available-for-sale investments, loss on dilution of share in associates.
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306311
330
0
300
350
2009 2010 2011
Total Transformer Capacity Thousands MVA
Electricity Transmission bn kWh
453 471 485
0
200
400
600
2009 2010 2011
Operational Overview
Transmission Grid Length Thousands km
121 122125
0
110
120
130
2009 2010 2011
Source Company data
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17,670
31,054
15,904
20,11415,431
15,942
6,933
4,42722,278
16,33678,216
87,873
34,052
24,046
13,781
3,977
24,894
100,750
0
20,000
40,000
60,000
80,000
100,000
2009 2010 2011
D&A Personnel ExpensesPurchased Electricity Repair and MaintenanceOther
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80,242
109,371
134,754
3,070
87,580
113,330
3,348
2,246
3,990
889
2,571139,571
60,000
80,000
100,000
120,000
140,000
2009 2010 2011
Transmission Fees Electricity Sales
Other Revenues
Revenue Structure RUR MM
Cost Structure RUR MM
Revenue and Cost Structure
(1)
(2)
(3)
Source Company IFRS financials
(1) Including payroll taxes
(2) Federal Grid purchases electricity to cover electricity transmission losses in its grid
(3) Includes change in allowance for bad debt other items
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Change in EBITDA
67,717
26,241
(1,850)
(3,932)
3,153
(4,456) (3,113)
83,760
0
25,000
50,000
75,000
100,000
EBITDA Adj. 2010 Revenue Increase Finance Income
Decrease
Payroll Increase Electricity and
Repair Expense
Decrease
Impairment (PPE,
AR)
Other EBITDA Adj. 2011
RUR MM 16,043
(+24%)
Source Company IFRS financials
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Free Cash Flow
Cash and cash equivalents at the end of the period
Net cash generated by operating activities
Cash and cash equivalents at the beginning of the period
Net cash used in investing activities
Net cash generated by financing activities
Net increase in cash and cash equivalents
13,573
68,152
12,054
25,627
68,645
(124,743)
RUR MM
(748)
83,760
(4,484) (9,883)
68,645
(155,120) (4,999)
EBITDA 2011 Reconciliation
adjustments
Changes in WC Income tax Operating CF Capex Interest paid FCF
(100,000)
(50,000)
0
50,000
100,000
(91,474)
Source Company IFRS financials
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Development of the Russian Energy Sector
Plan for Development of Electric Energy Facilities
Approved by Government of the Russian Federation
Includes:
Objectives and development priorities for next 15 years
Electric energy consumption forecast
Deployment plan for electric energy facilities
Electric Grid Development Plan
Approved by Russia’s Ministry of Energy
Includes:
Electric Grid scheme and development program
Renovation program
Coordinated plans for construction and operation of grid infrastructure and generating facilities
Regional Power Industry Development Plan
Approved by Regional Administrations
Includes:
Plans for commissioning of grid infrastructure and generating facilities into operation
Balance of electric energy production and consumption
Federal Grid Company’s Investment Programme
Approved by Russia’s Ministry of Energy
Agreed with: Federal Tariff Service, Ministry of Economic Development, System Operator of UES
Includes:
List of plans and specifications of construction projects
Sources of financing
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Smart Grid is a brand-new grids setup based on new principles and
technologies related to electric energy transmission and transformation,
which allows for:
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Integrating all types of generation (including small generators) and all types of consumers (from households to large industries) for the situational management of demand for their services and active participation in energy system operation
Changing real-time parameters and grid topology, in accordance with current mode conditions, eliminating the causes and development of emergencies
Securing further of market opportunities for the infrastructure through the mutual provision of a broad range of services for market and infrastructure participants
Minimizing losses, developing self-diagnosis and self-recovery systems by observing reliability conditions and electric energy quality
Integrating the electric grid and information infrastructure to create an all-mode management system with full-scale information support
Generation
and alternative
sources of energy
Transmission lines
Microturbines
and accumulators
Consumers
Smart Grid
Smart grid
element
Industrial facilities Energy transmission and storage (High-Capacity Storage Batteries)
Smart Grid — New Quality of Russian Energy Industry
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South
Urals
East
Northwest
Siberia
Moscow
Volga
Center
Pilot projects in the Northwest are focused on:
Ensuring required reliability of energy supply to
urban consumers
Building efficient grids
Providing electricity exchange
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Pilot projects in East provide for:
High-quality energy supply for natural resources deposits
Additional efficient capacity
Reliable electric energy supply in the southern part of the
Primorye territory
Smart Grid: Pilot Projects in the Northwest and East
Vladivostok
St. Petersburg
Khabarovsk
Smart Grid
East
Smart Grid
Northwest
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Prospects for Energy Bridge Development in Russia
Existing export/import Building connections
Услуги
UES of Northwest
UES of Urals UES of
Volga
UES of East UES of Siberia
UES of South
UES of
Center
West-East Energy
Bridge
Export/import to/
from Norway
Export/import
to/from Finland
St. Petersburg
Export to Turkey
Export to Azerbaijan
and Georgia
Moscow
Export/import to/from
Kazakhstan
Integration of Urals and
Siberia energy systems
Center-Urals Energy
Bridge
Tomsk
Export to China
Integration of Siberia
and East energy systems
Export to Mongolia
Export to
China
Export to
South Korea
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The materials comprising this Presentation have been prepared by the Company solely for use by the Company’s
management at investor meetings with a limited number of institutional investors who have agreed to attend such
meetings and to be subject to obligations to maintain Company to confirm confidentiality of presentation.
This Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue
or the solicitation of an offer to buy or acquire securities of the Company or any of its subsidiaries in any jurisdiction or an
inducement to enter into investment activity. No part of this Presentation, nor the fact of its distribution, should form the
basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.
This Presentation does not constitute a recommendation regarding the securities of the Company.
This Presentation is not directed at, or intended for distribution to or use by, any person or entity that is a citizen
or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability
or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.
The forward-looking statements in this Presentation are based upon various assumptions, many of which are based,
in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends,
data contained in the Company’s records and other data available from third parties. These assumptions are inherently
subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control
and it may not achieve or accomplish these expectations, beliefs or projections. In addition, important factors that,
in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking
statements include the achievement of the anticipated levels of profitability, growth, cost and its recent acquisitions, the
timely development of new projects, the impact of competitive pricing, the ability to obtain necessary regulatory approvals,
and the impact of general business and global economic conditions. Past performance should not be taken as an
indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future
performance.
Disclaimer
