page federal grid company may 11 th, 2011 moscow, russia capital markets day: presentation of 2010...
Post on 19-Dec-2015
215 views
TRANSCRIPT
Page
Federal Grid Company
May 11th, 2011Moscow, Russia
Capital Markets Day: Presentation of 2010 Results
Andrey Kazachenkov Deputy Chairman of the Management Board
PageСтр
Disclaimer
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 the confidentiality of this 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.
2
PageСтр
2010 Results and the Latest 2011 News (1)
RAB – Regulation
Dividend Policy Approval
3
Depository Receipts Listing on London Stock Exchange
Investment Program Approval
Largest in Russian Market History Bond Public Issue
Launch of the Option Program
PageСтр
2010 Results and the Latest 2011 News (2)
4
Transfer of the Company’s and Power Industry Index – Federal Grid Company’s assets in exchange for
INTER RAO UES’ shares
Successful delivery on the2010 Business Plan
Preparation of Financial Statements
Cost Reduction Program
Investment Program
PageСтр
Key messages
The largest publicly traded electricity transmission company in the world (based on the length of transmission lines and transformer capacity);
A leading Russian blue chip company and the largest Russian utility company (based on market capitalization);
Guaranteed return on investment following the transition to the Regulatory Asset Base (RAB) tariff system;
Realization of an ambitious investment program focused on grid infrastructure development;
Developing and implementing elements of the smart grid, applying innovative technologies to realize investment projects;
Focusing on greater operational efficiency and capital structure optimization.
Market Capitalization: USD 16.8 bln (as of 10.05.2011)Market Capitalization: USD 16.8 bln (as of 10.05.2011)
Regions of operations
Russian Federation: 79.48%
Free Float : 20.52%
Shareholders Structure:
Key Indicators 2010 2009
Revenues, RUR mln 113,330 87,580
Adj. EBITDA*, RUR mln 67,717 42,619
Adj. profit*, RUR mln 27,910 17,160
Total volume of electricity transmitted, bln kWh 486 466
5
* Including the reversal of impairment provisions for property, plant and equipment and other non-cash items
Company at a Glance
PageСтр
Q2-Q4 2011 2012 2013 2014
Required Revenue (RR), RUR mln. 118,509 147,906 186,768 235,862
Committed Capacity, MW 88,948 88,948 88,948 88,948
Average Tariff, RUR/MW per month 111,083 140,416 177,311 223,919
Average Tariff Increase, % 26.4 26.4 26.3 26.3
Controllable Costs, RUR mln 27,817 29,798 31,224 32,621
Non-Controllable Costs, RUR mln 16,217 16,568 21,973 29,733
Electricity transmission tariff (grid maintenance), effective as of 01.04.2011
2010-2012 RAB tariff parameters for Federal Grid Company were approved on January 1, 2010
As of April 1st, 2011, the Russian FTS determined RAB-regulation parameters for the Q2-Q4
2011–2014 period, including the application of a tariff smoothing mechanism.
RAB-regulation Transitioning
6
PageСтр
RAB-regulation timeline
201051.1%
tariff growth
Return on initially invested capital: 3.9%
Return on new invested capital: 11% p.a.
5-year regulatory period*
Return on new invested capital: 10% p.a.
201126.4% **
tariff growth
201326.3%
tariff growth
201426.3%
tariff growth
As of January 1st, 2010, the initial base of invested capital was RUR 647.6 bln;
Regulatory rate of operating costs decrease set by FTS is 2% p.a.
7
201226.4%
tariff growth
Return on initially invested capital: 5.2%
Return on initially invested capital: 6.5%
Return on initially invested capital: 7.8%
Return on initially invested capital: 9.1%
* Approved by the Government of the Russian Federation
** 32.91% for Q1 2011, 26.4% for Q2-Q4 2011
Source: The Russian Federal Tariff Service
PageСтр 8
Indicator (RUR mln) 31.12.2010 31.12.2009 (re-stated)
Change, %
Transmission fee 109,371 80,242 36.3%
Electricity sales 3,070 3,348 (8.3)%
Others 889 3,990 (77.7)%
Total Revenues 113,330 87,580 29.4%
Indicator (RUR mln) 31.12.2010 31.12.2009 (re-stated)
Change, %
Depreciation of property, plant and equipment and amortization of intangible assets
31,054 17,670 75.7%
Employee benefit expenses and payroll taxes 20,114 15,904 26.5%
Purchased electricity 15,942 15,431 3.3%
Repair and maintenance services from third parties 5,023 6,933 (27.5)%
Reversal/ (accrual) of allowance for doubtful debtors (2,164) 5,527 (139.2)%
Other expenses 17,904 16,751 6.9%
Total operating expenses (excl. PPE and IA depreciation) 87,873 78,216 12.3%
Revenue breakdown and rate of growth
Operating cost structure and change
PageСтр
Indicator, (RUR mln)31.12.2010 31.12.2009
(re-stated)
Cash and cash equivalents as the beginning of the reporting period 33,699 15,685
Net cash flow generated by operating activities 53,449 32,455
Net cash flow used in investing activities (127,043) (32,473)
Net cash flow generated by financing activities 53,468 18,032
Net (decrease)/ increase in cash flow (20,126) 18,014
Cash and cash equivalents, as of the end of the reporting period 13,573 33,699
Cash Flows
9
PageСтр 10
2009-2010 Financial Performance
Profitability rates
P&L Indicators, RUR mln
29.4%
58.9%
62.6%
17,169
Adj. EBITDA margin Adj. profit margin Adj. assets margin
Revenues Adj. EBITDA Adj. profit
ratios
PageСтр 11
Key 2010 Results of the Company Costs Reduction Program:
•Activities carried out within the Costs Reduction Program enabled Federal Grid Company to reduce grid complex operating costs by RUR 2.6 bln (100%);
•The Company accomplished measures to reduce losses in the UNEG in full;
•The 2010 total energy saving effect: 291.64 mln kWh.
Cost Optimization
Cost saving based on the results of Costs Reduction Program in 2010
Stock optimization, 0.5%
General and administrative expenses, 45%
Reduction of energy losses in
the UNEG, 5%
Raw materials
and fuel, 9%
Repairs, 40%
PageСтр
Bond Issue
RUR mln Interest rate,% Maturity Date
Series 4 6,000 7.3 06.10.2011
Series 6 10,000 7.15 26.09.2013
Series 7 5,000 7.5 27.10.2015
Series 8 10,000 7.15 26.09.2013
Series 9 5,000 7.99 24.10.2017
Series 10 10,000 7.75 24.09.2015
Series 11 10,000 7.99 24.10.2017
Total 56,000
12
Bond Portfolio
Credit Portfolio and Liquidity
Debt/ Adjusted EBITDA = 0.85
Credit Rating
Credit Potential
• Untapped credit lines total RUR 65 bln
•On 28.04.2011, the Company’s Board of Directors decided to offer bond issues up to RUR 125 bln
2009 2008 2007 2006 2005 2004
BBB BB+ BB+ B+ B+ B
Baa2 Baa2 Baa2 Baa2
2010
BBB
Baa2
Bank-Creditor Amount Due Date
Alfa-bank RUR 15 bln Jan-2013 Sberbank of Russia RUR 15 bln Feb-2012 Gazprombank RUR 25 bln May-2018 Raiffeisenbank RUR 10 bln May-2016
PageСтр 13
2010 Investment Program Implementation
Target value:Not less than
90%2,806 km11,835 MVA
Финансирование инвестиций (с учетом НДС)
45,8
26,8
39,7 37,3
66,7
29,2 24,9
35,6 35,9
70,6
0
15
30
45
60
75
90
4 кв. 2009 1 кв. 2010 2 кв. 2010 3 кв. 2010 4 кв. 2010 2010
млр
д. р
уб.
план факт
170,
51
167,
03
Plan Actual
Investment Program Financing (VAT incl.)
Transformer capacityTransmission lines
PageСтр
2010-2014 Investment Program
Total 2010-2014 planned investments: RUR 952.4 bln
Federal Programs(2)
(4,808 km; 4,181 MVA)
Enhancing the reliability of power supply for Moscow, St.
Petersburg and Tyumen(980 km; 17,531 MVA)
Backbone grids development(3)
(5,367 km; 10,890 MVA)
Innovations, energy efficiency and technological management improvement
Fixed assets renovation (10,468 km; 37,866 MVA)
Technological connections (33 km; 2,577 MVA)
Other projects
Joint projects with regional administrations(1)
(5,367 km; 10,890 MVA)
Providing for NPP, HPP and HCP output (5,180 km; 10,936
MVA)
(1) Excluding Moscow, St. Petersburg and Tyumen
(2) East Siberia – Pacific Ocean oil pipeline, Sochi Olympic Games, Vankor, Sayan, etc.
(3) Projects other than joint projects with regional administrations14
127.4 (13.4%)
90.4 (9.5%)
212.8 (22.3%)
65.8 (6.9%)
216.3 (22.7%)
14.7 (1.5%)28.4 (3.0%)
58.7 (6.2%)
137.9 (14.5%)
PageСтр
Key Investment Projects
Transmission lines (220 kV, 330 kV, 500 kV and750 kV)
Transmission lines and SSes
Underground cable laying
Infrastructure for the 2014 Sochi Olympic Games
Commissioning date – 2012
Infrastructure for the 2012 APEC Summit in Vladivostok
Commissioning date – 2011
15
Capacity provision of Kalininskaya NPP generating unit #4 (1,000 MW)
Commissioning date – 2011
Capacity provision of Novovoronezhskaya NPP-2 generating unit #1 (1,150 MW)
Commissioning date – 2012
Underground cabling in Moscow, St. Petersburg, Nizhny Novgorod
Transition from overhead lines to cable and construction of Skolkovo 220 KV substation
Commissioning date – 2012
Capacity provision of Boguchanskaya HPP start-up complex (1,000 MW)
Commissioning date – 2013
Construction of electricity supply facilities on Elginskoye coal deposit
Commissioning date – 2013
Construction of Zeyskaya HPP – Russian-Chinese border transmission line
Commissioning date – 2013
Electricity supply of East Siberia – Pacific Ocean oil pipeline
Commissioning date – 2012
PageСтр
2010-2014 Investment ProgramNew Construction Projects
16
2010 2011 2012
26,557
13,047
22,4745,435
3,2933,521
Transmission lines, km
Transformer capacity, MVA
2010-2014 new construction projects
2013 2014
19,000
5,893
8,1022,936
73 new substations with a total transformer capacity of 89,180 MVA
123 new high-voltage transmission lines with a total length of 21,078 km
PageСтр
Integrating all types of generation (including distributed generation) and all types of consumers (from households to large industrial enterprises) for situational management of demand for their services and active participation in energy system performance;
Real-time changes in parameters and grid topology that prevent accidents from happening in the system;
Enhancing market infrastructure opportunities by rendering a wide range of services (both for market entities and infrastructure);
Minimizing electricity loss, enhancingthe self-diagnostic and self-sealing system that complies with reliability and power quality terms;
Integrating power grid and information infrastructure for all-mode system management, accompanied by full information support.
The smart grid is a leading-edge concept for the electricity grid, based on the desire to save energy and using breakthrough technologies and design.
The smart grid is a leading-edge concept for the electricity grid, based on the desire to save energy and using breakthrough technologies and design.
Smart Grid, the future of Russian Electricity Sector
17
Generation and alternative energy sources
Transmission lines
Customers
Power transmission and storage (HCAB)
Industrial plants
Intelligent grid element
Intelligent grid
Micro-turbines and counter tank
PageСтр
Vyborg Transforming Complex:
Pilot project for the introduction of the static reactive-power compensator (STATCOM) with a capacity of ±50 MVar
Technological value:
•Maximum transferred capacity to Finland increased by 20 MW;
•Reduction in the number of technological failures at the VTC.
Vyborg Transforming Complex:
Pilot project for the introduction of the static reactive-power compensator (STATCOM) with a capacity of ±50 MVar
Technological value:
•Maximum transferred capacity to Finland increased by 20 MW;
•Reduction in the number of technological failures at the VTC.
The first stage of the Experimental Digital Substation put into pilot production at The Centre for Science and Technology of the Electricity Sector.Primary purpose is the development of innovative technologies for their further deployment at electricity grid facilities.
Technological value:
•The automated process reduces the risk of human failure on grid operations, and increases its reliability;
•Advantages include: cost cutting, reduction in maintenance requirements and operating costs;
• Deployment of this type of substations will significantly improve the reliability of power supply for the customers.
The first stage of the Experimental Digital Substation put into pilot production at The Centre for Science and Technology of the Electricity Sector.Primary purpose is the development of innovative technologies for their further deployment at electricity grid facilities.
Technological value:
•The automated process reduces the risk of human failure on grid operations, and increases its reliability;
•Advantages include: cost cutting, reduction in maintenance requirements and operating costs;
• Deployment of this type of substations will significantly improve the reliability of power supply for the customers.
500 kV Beskudnikovo Substation:
Pilot project for the introduction of the synchronized synchronous compensator (ASC)
±100 MVar.
Technological value:
• Ensuring reliable operation of TPP 22 and TPP 27 generators under SC in JSC Mosenergo’s 220 kV grid;
• Stabilizing the voltage level at the 500 kV Beskudnikovo Substation.
500 kV Beskudnikovo Substation:
Pilot project for the introduction of the synchronized synchronous compensator (ASC)
±100 MVar.
Technological value:
• Ensuring reliable operation of TPP 22 and TPP 27 generators under SC in JSC Mosenergo’s 220 kV grid;
• Stabilizing the voltage level at the 500 kV Beskudnikovo Substation.
Development of advanced technologies and equipment
18
PageСтр
Multi-chamber discharge insulator for overhead transmission lines:
This piece of equipment will help to increase reliability of power supply by reducing effects of lightning on the system, remove the need for lightning protection cables and reduce the cost of construction and maintenance of transmission lines.
Multi-chamber discharge insulator for overhead transmission lines:
This piece of equipment will help to increase reliability of power supply by reducing effects of lightning on the system, remove the need for lightning protection cables and reduce the cost of construction and maintenance of transmission lines.
Explosion-proof oil-immersed electrical equipment:
Technological value:• Reduces the damage to substations from
fire caused by transformers;• Improves life expectancy of substations;• Helps to minimise financial losses from
equipment and communication damage;• Helps to avoide the possibility of fire
spreading to other buildings.
Explosion-proof oil-immersed electrical equipment:
Technological value:• Reduces the damage to substations from
fire caused by transformers;• Improves life expectancy of substations;• Helps to minimise financial losses from
equipment and communication damage;• Helps to avoide the possibility of fire
spreading to other buildings.
New methods of crashing ice deposits and ice cover on wires and lightning protection cables for overhead transmission lines:
The principal achieved effect was upgrading overhead transmission line reliability in areas of ice deposits and ice coating events. This will reduce outages 25% (the volume of non-transmitted electricity equals approximately 3,000 MWh for the UES).
New methods of crashing ice deposits and ice cover on wires and lightning protection cables for overhead transmission lines:
The principal achieved effect was upgrading overhead transmission line reliability in areas of ice deposits and ice coating events. This will reduce outages 25% (the volume of non-transmitted electricity equals approximately 3,000 MWh for the UES).
Mobile test complex based on magnetic explosion generators for testing the electric grid for lightning resistance.
Key purpose – testing overhead transmission line facilities and SSes for lightning protection
The development of overhead transmission line and SS lighting protection design will reduce the construction cost for lightning protection systems.
Mobile test complex based on magnetic explosion generators for testing the electric grid for lightning resistance.
Key purpose – testing overhead transmission line facilities and SSes for lightning protection
The development of overhead transmission line and SS lighting protection design will reduce the construction cost for lightning protection systems.
Introduction of advanced technologies
19
PageСтр
Key Elements of the Company’s Financial Strategy
Формирование единой информационной управленческой среды
Повышение акционерной стоимости Компании для формирования долгосрочного экономического потенциала
реализации стратегических целей
Соблюдение параметров тарифного регулирования
Реализация стабильной политики в области тарифообразования
Внедрение комплексной системы управления
издержками
Повышение эффективности использования ресурсов и
активов
Налоговое управление
Совершенствование системы управления ликвидностью
Внедрение новых финансовых инструментов
Максимизация денежных потоков ФСК от ДЗО и прочей деятельности
Повышение публичности на международных финансовых
рынках
Совершенствование системы планирования
Оптимизация процессов учета и отчетности
Усиление системы внутреннего контроля
Внедрение комплексной системы управления
рисками
Разработка стратегии взаимодействия с
инвест.сообществом
Повышение ликвидности рынка акций
и депозитарных расписок
Реализация дивидендной политики
Реализация кредитной политики
Оптимизация структуры капитала
20
Improving shareholder value
Meeting tariff regulation parameters
Efficiently enhancing resource and asset use
Enhanced transparency on international financial
markets
Forming a common information management environment
Planning system improvement
Optimizing accounting and reporting processes
Reinforcing the Internal control system
Implementing a complex risk management system
Tax management
Realization of stable tariff setting policy
Implementation of a complex costs management system
Upgrading the liquidity management system
Implementation of new financial instruments
Maximizing FGC UES cash flow from subsidiary and affiliated companies and
other activities
Developing IR strategy
Upgrading shares and GDR markets liquidity
Realization of the Company’s dividend policy
Realization of the corporate credit policy
Capital structure optimization
PageСтр
Federal Grid Company: a Russian Blue Chip
Source: MICEX, MSCI Barra
21
Unique position in the Russian energy sectorLeading public Russian company:
Market capitalization – USD 16.8 bln (as of 10.05.2011)Free float – 20.52 %Included in MICEX, MICEX Large Cap & RTS indices
Foreign capital markets presence and potential investor base expansion:
Included in MSCI EM and MSCI Russia indicesGDR listing on the LSE (March 28th, 2011)
Significant potential revenue growth:Transition to RAB regulation -> stable business modelApproved tariff growth: 2010 – 51%; 2011 – 26.4%; 2012 – 26.4%; 2013 – 26.3%; 2014 – 26.3%Focus on reducing the cost of capitalReturn on new invested capital 2010-2012 -11%; 2013-2014 – 10%Significant potential for credit portfolio increase -> further reduction in the weighted average cost of capital (WACC)
Fundamental growth potential - EV/RAB does not exceed 0.7
Developed markets
Emerging markets
Source: Bloomberg, Thomson Reuters
Company Country EV/EBITDA(2011E)
EV/Sales(2011E) EV /RAB
ELIA Belgium 9.4 3.3 1.13
Terna S.p.A. Italy 9.7 7.2 1.34
REN Portugal 7.6 4.8 1.26
Red Electrica Spain 9.4 6.8 n/a
National Grid UK 8.6 2.8 1.47
ITC Holdings USA 11.8 7.7 n/a
Power Grid India 11.2 9.4 n/a
CTEEP Brazil 6.4 5.1 n/a
Transener SA Argentina 4.1 1.6 n/a
Transelectrica Romania 5.9 0.9 0.89
Federal Grid Company Russia 5.3 3.0 0.62
PageСтр
Contacts:Federal Grid Company5A Akademika Chelomeya Street, Moscow, Russia, 117630
Investor RelationsE-mail: [email protected]
22