3. KEY PERFORMANCE RESULTS

3.1 Situation in Power Industry 3.2 International Activities 3.3. Generating Capacities. Developing Generating Potential 3.4. Ensuring Safety of Russian NPPs 3.5. Radiation Effect on Personnel and Population 3.6. Environmental Impact 3.7. Financial Results 3.8. HR Policy, Occupational Safety and Health 3.9. Innovation Management. Knowledge Preservation and Transfer 3.10. Social Policy. Developing Areas of Presence. Charity 3.11. Investment Program

3.7. Financial Results

The main factor of growth in net profit by 4,683.4 mln rubles is achievement of the record power generation for the entire history of the Russian nuclear industry.

KEY FINANCIAL AND ECONOMIC INDICATORS CHARACTERIZING ROSENERGOATOM CONCERN JSC FINANCIAL STATUS, EFFICIENCY AND PERFORMANCE, MLN RUBLES

INDICATOR 2013 2014 2015 ∆2015/2014, %
Revenue 232,857 253,215 263,757 4%
Gross profit 96,309 105,607 103,616 -2%
Business expenses 16 15 21 44%
Management expenses 10,637 11,325 10,364 -8%
EBITDA 109,806 123,969 135,177 9%
Net profit 2,211 9,238 13,922 51%
Net cash flow 8,802 -4,605 12,073 -362%
Net assets 1,059,013 1,181,245 1,298,091 10%
Return on sales (by net profit) 0,95% 3,65% 5,28% 45%
Return on assets 20,0% 19,5% 18,7% -4%
Return on equity 0,22% 0,83% 1,12% 36%
EBITDA margin (EBITDA/revenue) 47,16% 48,96% 51,25% 5%
Debt/equity ratio 0,10 0,08 0,07 -15%
Current liquidity ratio 1,19 1,28 1,10 -14%
Equity 1,057,723 1,180,017 1,296,820 10%
Borrowed funds 104,326 94,450 87,932 -7%
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PHYSICAL REVENUE STRUCTURE IN 2015, MLN RUBLES

TOTAL REVENUE FROM SALES OF ELECTRICITY (CAPACITY) ACCORDING TO ACCOUNTING STATEMENTS TOTAL
261,257.5
Including
• Revenue from sales of own products 259,444.4
Including
• Day-ahead market 168,029.5
• Capacity according to deregulated capacity supply agreements 38,537.9
• Regulated agreements (capacity) 23,007.1
• Capacity supply agreements 18,470.2
• Regulated agreements (electricity) 8,325.1
• Bilibino NPP 2,095.5
• Balancing market 979.1
• Revenue from sales of purchased products 1,813.1

KEY FACTORS INFLUENCING ACTUAL REVENUE INCREASE:

REVENUE ANALYSIS

The increase in actual revenue from electricity and capacity sales over 12 months of 2015 compared to 12 months of 2014 equaled 11,000.8 mln rubles.

Over 12 months of 2015, electricity and capacity sold by Rosenergoatom Concern JSC totaled 303,590.338 mln rubles (VAT inclusive).

The actual amount of electricity sold by Rosenergoatom Concern JSC at the WECM, including the Bilibino NPP, totaled 196,983 mln kWh during 12 months of 2015.

PROFIT ANALYSIS

The net profit according to the results of business activities in 2015 totaled 13,921.6 mln rubles versus 9,238.2 mln rubles in the similar period of the previous year.

ASSETS ANALYSIS

According to the balance sheet, net assets amounted to 1,298,091 mln rubles as of December 31, 2015, having increased over 2015 by 116,846 mln rubles due to implementation of investment projects for extension of the NPP power units life cycles and a program for ensuring safe and sustainable operation of the existing power units.

The net assets of Rosenergoatom Concern JSC as of December 31, 2015 exceeded the registered capital by 48%, which is fully compatible with the requirements of the regulatory acts. Taking into account that net assets both exceeded registered capital and increased during the reporting period, we may say that, based on this indicator, the financial status of Rosenergoatom Concern JSC is quite healthy.

The amount of assets of Rosenergoatom Concern JSC increased by 8% (114,863 mln rubles) in 2015. The growth was caused by an increase in the value of current assets by 27% (25,837 mln rubles) and non-current assets — by 7% (89,006 mln rubles).

An increase in the value of non-current assets is caused by growth in the fixed capital by 7% (79,592 mln rubles) due to commissioning of the Rostov NPP power unit No. 3, and increment of in-progress fixed capital investments, which evidences considerable investment into fixed capital by the Concern.

EVALUATION OF NET ASSETS OF ROSENERGOATOM CONCERN JSC

INDICATOR ACTUAL VALUE OF THE INDICATOR CHANGES OVER THE TIME PERIOD
As of December 31, 2014 As of December 31, 2015
thousand rubles % of balance sheet total thousand rubles % of balance sheet total thousand rubles
1 2 3 4 5 6 = (column 4 — column 2)
Net assets 1,181,244,997 87% 1,298,091,334 88% 116,846,337
Registered capital 671,516,536 50% 671,516,563 46% 0
Net assets over registered capital 509,728,434 38% 626,574,771 43% 116,846,337
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CHANGES IN ASSETS OF ROSENERGOATOM CONCERN JSC, MLN RUBLES

As of December 31, 2015, non-current assets totaled 1,348,290 mln rubles, or 92% of the total asset value.

Current assets of Rosenergoatom Concern JSC increased by 25,837 mln rubles, or 27% in 2015. As part of the current assets, the amount of cash and cash equivalents grew considerably (by 12,120 mln rubles), short-term financial investments increased (5,720 mln rubles allocated for Atomenergoprom JSC according to the financial policy of Rosatom State Corporation), and trade receivables augmented by 6,015 mln rubles due to a boost in electricity and capacity sales in the WECM owing to the Rostov NPP power unit commissioning.

STRUCTURE OF ACCOUNTS RECEIVABLE

The cost of property of Rosenergoatom Concern JSC as of the end of the reporting period totaled 1,470,670 mln rubles. The biggest share in the Concern's economic assets is taken by equity (88%).

CHANGES IN LIABILITIES OF ROSENERGOATOM CONCERN JSC

The equity increased by 116,802 mln rubles as a result of financing of fixed capital and construction work in progress through depreciation deductions and provisions, according to the Russian Federation Government Regulation dated January 30, 2002 No. 68 on Approval of Rules for Funds Allocation by Operating Companies for Provisions Aimed at Ensuring Nuclear Power Plants Safety at All Stages of Their Life Cycle and Development.

BUDGETING

In order to achieve key performance indicators, the Concern applies a systematic approach to planning and accounting of incomes, costs, and cash flows.

On an annual basis, to ensure the Concern’s production program fulfillment and guaranteed funding for priority areas of industrial and economic activities and development, budgets (including the cash flow budget), and income and expense estimates by activity are prepared in the context of branches of the Concern, its Headquarters and the Concern as a whole; they are the basic documents for expenditures of the Concern and its branches for the planning period.

The budgeting process is carried out in compliance with the medium-term planning by Rosatom State Corporation, and it comprises the process of detailed quarterly planning of the first year of the business plan developed for three years. The company is also engaged in operational financial planning (planning horizon of 1 month).

Funds are spent strictly within the limits communicated to structural units in accordance with the approved consolidated income and expense estimates for the production and sale of products subject to adjustments made pursuant to the approved procedure. Spending is funded according to the cash flow budget.

Expenses of structural units of the Concern’s Headquarters and branches are monitored on a monthly basis; the fulfillment of consolidated estimate is analyzed quarterly, while identifying reasons for variations of actual costs from target costs in order to optimize costs and to achieve the established target parameters for the Concern in general.

Budgeting process products are approved key performance indicators which are decomposed down to the level of nuclear power plants and the Concern’s Headquarters.

COST MANAGEMENT IN 2015

According to the Order by Vladimir Putin, President of the Russian Federation 1 , the Concern developed an action plan to reduce specific semifixed costs for power generation. Branches and structural units of the Headquarters received individual tasks for reduction of costs with inclusion in KPI maps. Implementation of the said plan allowed to save 3.3 bln rubles of operating expenditures, including the saving of 0.3 bln rubles of costs for the Concern’s Headquarters administration and maintenance activities.

In order to achieve the target for 2015, the following measures were taken:

  • Reduction of labor costs with a respective reduction in insurance contributions due to optimization of indexation periods and application of a differentiated approach to indexation according to grades;
  • Decrease of the volume of consultation services;
  • Optimization of IT support;
  • Refusal of outstaffing contracts;
  • Reduction of advertising costs;
  • Decrease of transportation costs due to revision of the list of employees provided with corporate vehicles;
  • Reduction of other costs (representation, communication, security, personnel training, rental, environmental).

Thus, stringent control of the Concern’s branches and structural units compliance with the allocated limits, which had been formed in consideration of the cost reduction task, supported the growth of the Concern's operations efficiency and reduction of specific semi-fixed costs from 360.4 to 329.3 rubles per MWh, or 8.6%, if compared to 2014.

FINANCIAL PERFORMANCE CONTROL

The Concern approved regulatory documents and guidelines on financial statements internal control system (FS ICS). The main purpose of the FS ICS is to provide reasonable assurance of the reliability of financial statements for external and internal users. The Improvement Plan for Concern’s FS ICS comprising measures aimed at enhancing the quality of accounting and ensuring the reliability of financial statements, is prepared each year.