2020 ANNUAL FINANCIAL REPORT
in compliance with the UK Disclosure and Transparency Rules
April 2021
Moscow
Contents |
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1. ABOUT THE COMPANY | 3 |
2. CORPORATE GOVERNANCE | 3 |
3. SHARE CAPITAL | 4 |
4. MARKET REVIEW | 7 |
5. DEVELOPMENT STRATEGY | 8 |
6. OPERATING ACTIVITIES | 11 |
7. DEVELOPMENT OUTLOOK | 15 |
8. MOTIVATION POLICY FOR EXECUTIVE MANAGEMENT BODIES | 18 |
9. PRODUCTIVITY MEASUREMENT | 20 |
10. FINANCIAL RESULTS | 21 |
11. DISCLAIMER | 32 |
12. RESPONSIBILITY STATEMENT | 32 |
13. CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED 31 DECEMBER 2020 AND INDEPENDENT AUDITORS’ REPORT | 34 |
Public Joint Stock Company "Federal Grid Company of the Unified Energy System" (hereinafter, “PJSC FGC UES”, “FGC”, or the “Company”) was established in 2002 in the course of reforming the Russian power sector.
The Company’s key activities are:
We are included in the list of strategically important companies for Russia’s industrial development.
PJSC FGC UES is one of the world's most reliable power grid companies which maintains its market position, including in the context of the COVID-19 pandemic.
At the end of 2020, FGC employed 21,700 people responsible for reliable operation of 889 substations and 149,100 km of power transmission lines1 across 79 regions of Russia.
FGC comprises 42 regional branches:
For more information on the Company's structure and history visit our official website https://www.fsk- ees.ru/eng, section About company.
With a focus on long-term goals, we ensure advanced transparency of our activities, social responsibility, environmental protection, workplace safety and social protection of our employees.
The Company's corporate governance system is based on adherence to the requirements of the Russian legislation, the Listing Rules of the Moscow Exchange, and the key recommendations of the Russian Corporate Governance Code (CGC). As a company with global depositary receipts traded at the London Stock Exchange, FGC complies with the applicable requirements of the UK Corporate Governance Code.
The General Meeting of Shareholders is the supreme management body, ensuring that shareholders exercise their rights to manage the Company. It is responsible for making resolutions on the most pivotal and strategic issues of the Company's operations.
FGC's Board of Directors plays a key role in the management system, providing its consistent and effective development in the interests of the Company. The powers of the Board of Directors are determined by the requirements of federal legislation and additionally substantially expanded by the Company’s Articles of Association.
For the purpose of enhancing the effectiveness of decisions taken by the Board, making a more detailed preliminary review of the most important issues and preparing relevant recommendations, four committees have been established: the Audit Committee, the HR and Remuneration Committee, Strategy Committee and Investment Committee.
In 2020, the powers of the single executive body were transferred to PJSC Rosseti, the management company. The change in FGC's management system is intended to improve the quality of the Company's manageability and the speed of decision-making, optimise the cost structure, reduce management costs, and eliminate duplication of functions.
FGC's corporate management system has been developed in accordance with the principles and recommendations of Russian Corporate Governance Code, the provisions of which are based on the world's best practices and principles of corporate governance developed by the Organisation for Economic Co-operation and Development (OECD). In accordance with the CGC, candidates to the Company's governing bodies shall meet the basic requirements for their accomplishments, expertise, skills and competencies. There are no recommendations in the CGC on gender, age or other composition of the governing bodies, which means that these approaches are not documented as policies or any other corporate regulations.
To protect the interests of our shareholders, we have effective external and internal control systems in place. The external control is performed by the independent auditor.
To prevent the spread of the coronavirus infection, FGC's Annual General Meeting of Shareholders was held in the form of absentee voting in 2020. The shareholders could read all the materials in advance and vote on the agenda items via electronic bulletins at the website of JSC STATUS, which maintains the register of the Company's shareholders.
A number of activities were carried out in 2020 in order to improve the Company's corporate governance system:
The Company continues to incorporate the best corporate governance practices, as well as tailor them following the specifics of FGC's operations and structure.
For more information on the Company’s corporate governance visit our official website www.fsk- ees.ru/eng, section Corporate governance.
As of 31 December 2020, FGC's share capital totalled RUB 637,332,661,531 and 50 kopecks, divided into 1,274,665,323,063 ordinary shares with a nominal value of 50 kopecks each. No preferred shares were placed as of the above date.
In accordance with the Company’s Articles of Association, the number of authorised shares shall be 72,140,500,768 ordinary registered shares with a nominal value of 50 kopecks each and a total nominal value of RUB 36,070,250,384. Authorised ordinary shares have the same rights as outstanding ordinary shares. There were no issues or placements of additional shares by FGC in 2020.
As of 31 December 2020, the list of shareholders included:
As a major shareholder of FGC, PJSC Rosseti owns 80.13% of the Company. The State (Russian Federation) represented by the Federal Agency for State Property Management (Rosimushchestvo) holds 0.59% of the Company's authorised capital. The decision regarding the exercise of the Russian
Federation's special right to participate in management of the Company arising from the Golden Share was not taken.
PJSC Rosseti and Rosimushchestvo have signed a shareholder's agreement on the management and voting in FGC. The agreement covers all voting shares of FGC held by the parties or to be acquired in the future. Taking into account this agreement, the degree of Rosimushchestvo's control (both direct and indirect) was 80.72% as of 31 December 2020.
At the end of 2020, the Company's free float amounted to 18.2%. The key minority shareholders are institutional investors, with the share of retail investors being approximately 4.0%.
Except for the investors mentioned above, FGC management knows no other investors holding more than 5% of the Company's authorised capital.
The share of foreign institutional investors exceeds 50% of the free float. These are the world's largest management companies: Heptagon Capital LLP, Norges Bank Investment Management, ABU DHABI INVESTMENT AUTHORITY, J.P. MORGAN CHASE & Co., Kopernik Global Investors LLC, Polunin Capital Partners Limited, State Street Corporation, and Vanguard, as well as state investment funds, including those located in Norway and the UAE. In general, foreign investors own 57.5% of FGC's free float, which is a 4.4% decrease over the past year.
72% of FGC shares held by non-residents are owned by funds and management companies (61%), banks and trusts (16%), sovereign funds (11%), pension and insurance funds (8%), and brokers (4%).
Most investors view FGC shares as an undervalued asset (Value) or an asset with good growth prospects (Growth). The intermediate position between these two approaches represents the Growth at Reasonable Price (GARP) investment style. The “By Market” group is represented by short-term investors focused on the current market situation, including brokers and hedge funds. Investors of the Index group are guided by various index solutions.
For more information on the Company’s shareholding structure and dynamics visit our official website www.fsk-ees.ru/eng, section Share information.
Market quotations for FGC shares in 2020
FGC shares are included in the MOEX First Tier quotation list, the list of securities admitted to trading at the Saint-Petersburg Exchange, as well as the Russian exchange indices (MOEX Russia Index: IMOEX; RTS Index: RTSI; Electric Utilities: MOEXEU; SMID Index: MCXSM; Broad Market Index: MOEXBMI; Responsibility and Transparency Index: MRRT; Sustainability Vector Index: MRSV, etc.). At the year-end, FGC shares outpaced the MOEX Russia Index. One of the key drivers determining the performance of shares in the past year was the Company's strong financial and operating performance amid the spread of coronavirus infection and quarantine measures that limited economic activity. Besides, according to analysts, the Company's shares are still one of the most attractive by dividend yield in the Russian market. In the course of the reporting year, the market value of FGC shares went up by 10.7%, while the MOEX Russia Index grew by 8.0%. The Company’s market capitalisation as of 31 December 2020 amounted to RUB 283.3 billion.
For more information on trading in the Company’s shares visit our official website www.fsk-ees.ru/eng, section Interactive stock chart.
Depositary receipts programme
In 2008, FGC launched the global depositary receipts (GDR) programme, which is not subject to listing procedures (according to Regulation S and Rule 144A). In 2011, the Company approved a technical listing of its global depositary receipts on the Main Market of the London Stock Exchange, where the
Company's GDRs trading commenced on 28 March 2011. Since 1 July 2013, the depository bank for the Company's depositary receipt programme is THE BANK OF NEW YORK MELLON (BNY Mellon).
As of 31 December 2020, the programme's volume accounted for 0.042% of the total outstanding shares.
Overview of FGC's GDR programmeRegulation S | Rule 144A | |
Ratio | 1:500 | 1:500 |
International Code | ISIN: US3133542015 CUSIP: 313354201 |
ISIN: US3133541025 CUSIP: 313354102 |
Price of 1 GDR as of 31 Dec 2020 | 1.00 | - |
Number of GDRs issued as of 31 Dec 2020 | 1,021,384 | 46,000 |
For more information on trading in the Company’s depositary receipts visit our official website www.fsk-ees.ru/eng, section GDR Program.
You can also find relevant information on the GDR programme at the official website of the London Stock Exchange at www.londonstockexchange.com, under FGC's ticker symbol FEES.
Dividend Policy
FGC's Dividend Policy is based on the strict approach of balancing the interests of our shareholders and the Company’s development needs, taking into account the necessity to increase the Company’s capital-raising potential and capitalisation.
The Regulation on the Dividend Policy is in compliance with Order of the Russian Government No. 1094-r dated 29 May 2017 and certain recommendations of the Corporate Governance Code in terms of determining the dividend amount of at least 50% of net profit as per financial statements, including consolidated financial statements, prepared in accordance with the International Financial Reporting Standards (IFRS).
In 2020, FGC allocated RUB 23.3 billion for dividends (of which RUB 11.2 billion were paid for the nine months of 2019 and RUB 12.1 billion — for the full year of 2019). In the reporting year, the Company's net profit stood at RUB 40.0 billion as per RAS (RUB 59.4 billion as per IFRS). In accordance with the Regulations on the Dividend Policy, FGC’s management will present a proposal to the Board of Directors to recommend the General Meeting of Shareholders of the Company to pay dividends for 2020. The decision on dividend payment will be made by the Annual General Meeting of Shareholders on June 2021.
The Russian electric power sector still maintains its defining influence on the decision-making process regarding vital strategic objectives of the country's development. It is primarily attributed to the new energy infrastructure which will allow to ensure the accelerated social and economic development of West Siberia and the Far East and strengthen the material and export potential of the country.
In 2020, Russian power plants of the Unified Energy System, including those of industrial enterprises, generated 1,047.0 billion kWh (3.1% less year-over-year), in line with the reduction of main macroeconomic indicators across the country. At the same time, according to the plan and the programme for the development of the Unified Energy System of Russia in 2020–2026, the average annual growth in demand for electricity (electric power consumption) is expected to increase by 1.1%, and the maximum power consumption (maximum loads) — by 1.5%.
The Company operates the Unified National Electric Grid (UNEG) and provides consumers with services related to electric power transmission via the UNEG. Such services are considered as monopoly operation and regulated by the state.
The Company’s core business of electricity transmission via the UNEG and technological connection services is performed basing on the tariffs that are approved by the federal executive authority for tariff regulation. State tariff regulatory functions for the services provided by PJSC FGC UES are transferred to the Federal Antimonopoly Service (FAS of Russia) according to Order of the President of the Russian Federation No. 373 dated 21 July 2015 "On certain issues of state governance and control in the area of anti-monopoly and tariff regulation".
Tariffs for electric power transmission services via the UNEG. These tariffs are set by the FAS of Russia on the basis of the return on invested capital method (RAB regulation) following the long-term regulation parameters. In order to establish the tariffs for each year of the long-term regulation period, the required gross revenue (RGR) is determined by summing up the return of capital values, the return on invested capital, and the operating and uncontrolled expenses required for provision of electricity transmission services via the UNEG. To prevent a sharp increase in tariffs, the RAB regulation method provides for a smoothing mechanism that redistributes the required gross revenue over the years throughout the entire long-term regulation period. Tariff regulation focusing on the maintenance of the rate of return based on certain long-term parameters implies that FGC will assure the reliability and quality of rendered services as provided by the FAS of Russia.
Since 1 July 2020, tariffs for electric power transmission services via the UNEG have been set by Order of the FAS of Russia No. 1618/19 dated 10 December 2019. Tariff growth amounted to +5.5%.
Payment for technological connection. The FAS of Russia defines two payment methods for technological connection to the UNEG facilities: approval of individual payment for a specific applicant (in case if construction of electrical grid facilities is required) and approval of payment per formula using the standard tariff rate.
When determining its strategic development priorities, the Company is guided by the priorities of state policy in the field of the electric grid complex, which are established by the Development Strategy of the Electric Grid Complex of the Russian Federation until 2030:
The top-level document of the Rosseti Group (which includes PJSC FGC UES) is the Development Strategy of PJSC Rosseti and its subsidiaries and affiliates (Rosseti Group) until 2030, approved by the Board of Directors of PJSC Rosseti (Minutes No. 388 dated 26 December 2019).
Plans and targets until 2024 | |
Reliability of power supply |
The reliability of electricity transmission services will be maintained at a consistently high level due to:
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UNEG expansion |
The Company's priority projects for development of the UNEG infrastructure until 2024 include:
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Customer satisfaction |
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Economic efficiency |
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Technological and innovative development | Innovative development is aimed at improving the efficiency of asset
management, reducing operating expenses, improving system reliability and
availability of electricity grid services, intellectualising of the grid, and driving
sustainable performance.
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Energy and environmental security | The main objectives of the electric grid complex environmental policy are as follows:
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To prevent actualisation of the cyberthreat risks, FGC aims to ensure the information security of critical information infrastructure facilities in accordance with legislative requirements. Work priorities in this area:
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Long-Term Development Programme
The Company implements the Long-Term Development Programme of PJSC FGC UES for the period 2020–2024 and up to 2030 (hereinafter referred to as the Company's LDP), approved by the FGC Board of Directors at the end of 2020. Key events of 2020 that affected the global and Russian economy (including the outbreak of coronavirus infection), and the social-economic development projections updated in the light of these events were taken into account during the work on the Company's LDP.
The Company's LDP encompasses general goals and objectives for the specified planning horizon up to 2030 defined on the basis of electricity development trends and the needs of the Russian economy.
Risk management system
The target of the risk management system effective at the Company is to ensure the stable and continuous functioning as well as development by means of the timely identification, assessment and efficient management of risks that threaten the Company’s efficient business operation and reputation, employee health, environment, and property interests of shareholders and investors.
FGC's risk management system has been established based on the generally accepted conceptual frameworks for risk management developed by the Committee of Sponsoring Organisations of the Treadway Commission — COSO ERM Enterprise Risk Management. Integrated Framework.
PJSC FGC UES’s Regulation on the Risk Management System has been developed to meet the requirements of the latest Russian and international standards.
FGC has approved a register of 16 key operational risks (КОR) and evaluates their impact on the achievement of the Company's target performance indicators, and annually updates the materiality level and takes measures related to risk management.
Risk assessment is carried out using the scenario and/or expert method. The risk materiality level is determined based on results of the assessment in accordance with the materiality levels (moderate, significant, critical) determined in the Methodology for Operational Risks Assessment.
Risk | Risk assessment parameters | Risk importance in 2020 |
КОR-001 Risk of deviation of the actual scope of electricity transmission services from the value set in the business plan | Revenue | Critical |
КОR-002 Risk of deviation of the average tariff for electricity transmission services from the value set in the business plan | Revenue | Moderate |
КОR-003 Risk of deviation of the actual volumes of technological connection from the value set in the business plan | Revenue | Significant |
КОR-004 Risk of deviation of expenses on purchasing losses from the value set in the business plan | Expenses | Significant |
КОR-005 Risk of deviation of non-controllable costs from the value set in the business plan, except for expenses for the purchase of electricity to compensate for losses | Expenses | -2 |
КОR-006 Risk of increase in operating expenses compared to those established for the planned period | Expenses | -3 |
КОR-007 Risk of deviation of overdue accounts receivable from the amount set in the business plan | Revenue | Significant |
КОR-008 Risk of fluctuation in the Debt/EBITDA indicator from the value set in the business plan | Creditworthiness and liquidity | Moderate |
КОR-009 Risk of fluctuation in the net profit from the value set in the business plan | Net profit | -4 |
КОR-010 Risk of failure to deliver key parameters of the investment programme | Key parameters of the Investment Programme | Significant |
КОR-011 Risk of fluctuation in the percent indicator of reduction in investment costs from the value established for the planned period | Indicator – Reduction of unit investment costs | Moderate |
КОR-012 Risk of failure to achieve the capacity utilisation rate established for the planned period | Revenue | -5 |
КОR-013 Risk of failure to achieve the reliability level of electricity transmission services established under tariff regulation | Indicator – Reliability of electricity transmission services | Significant |
КОR-014 Risk of failure to achieve the quality level of technological connection services established under tariff regulation | Indicator – Quality of technological connection services | Moderate |
КОR-015 Risk of an accident at the fault of the Company | Industrial safety | Critical |
КОR-016 Risk of deviation of the labour productivity improvement indicator from the value set in the business plan | Labour productivity | Moderate |
No adjustments were made in the assessment of key operating risks in 2020. In 2021, the Company expects a reduction in the probability of occurrence and the level of consequences for the КОR-003 and КОR-007 risks, the materiality level for them has been reduced to Moderate one.
PJSC FGC UES performs regulated operations of providing the electric power transmission services via the UNEG, technological connection to the electrical grids, as well as other non-regulated activities.
Electric power transmission services
FGC's core activity and source of revenue is the transmission of electricity via the UNEG.
According to Russian legislation, the FGC electricity transmission services via the UNEG are monopolistic activities regulated by the Russian Government.
The main consumers of the FGC electric power transmission services are regional distribution companies, retail suppliers and large industrial enterprises.
In 2020, revenue from electricity transmission services provided by the Company amounted to RUB 221.8 billion according to the IFRS consolidated financial statements. Based on results of the FGC performance in 2020, the volume of electricity supply from the UNEG to consumers amounted to 535,709 million kWh, which is 23,013 million kWh (or by 4.1%) lower compared to 2019. Electricity losses in 2020 amounted to 23,030 million kWh (4.30% of electricity supply from the grid to consumers via the UNEG), which is 0.15 p.p. higher than the level of 2019. The increase in electricity losses was associated with the change in the UNEG operating regime in 2020 as a result of the shift in the loading regime of power stations, partially offset by lower electricity consumption due to quarantine measures on the back of COVID-19 pandemic as well as reduced electricity consumption by enterprises of the oil and gas transmission industry related to the OPEC+ agreement.
In 2020, the Company implemented the Energy Saving and Energy Efficiency Improvement Programme of PJSC FGC UES for 2020–2024. As for 2020, operational benefits of measures undertaken by FGC aimed to reduce electricity losses in general amounted to 45.2 million kWh.
We also note a growth in the number of consumers: the total amount of valid agreements on electricity transmission via the UNEG increased by 4.4% to 669 by the end of 2020.
FGC purchases electricity in a volume corresponding to the actual volume of losses in the UNEG from constituent entities of the Russian Federation united into pricing and non-pricing zones.
The scope of services provided in the backbone transmission network depends on the general state of the national economy and is determined as power capacity supplied to consumers of electricity transmission services and capacity of power receivers connected to the network.
In 2020, the value of paid capacity under the UNEG amounted to an average of 83.9 GW. By the end of 2020, the reduction in paid capacity was 2.5 GW against 2019, which was due to the phased transition of Rosseti's SDCs implemented since 2017 to settlements with FGC for electricity transmission services based on the actual capacity.
For more information on the electricity transmission services provided by the Company visit our official website http://www.fsk-ees.ru/eng. http://www.fsk- ees.ru/consumers/uslugi_po_peredache_elektroenergii/
Technological connection services
Technological connection is the Company's comprehensive service that connects electricity receiving devices of consumers, power generation facilities and electric grid facilities to the electric grid system of FGC. We provide these services to both new and existing consumers who want to change operation parameters of an energy facility.
In the reporting year, the Company performed technological connection under 171 contracts, including 12 connections of generation facilities and 159 connections of electricity consumers.
In 2020, there was a decrease in the volume of technological connection related to the completion of technological connection upon major projects in 2019 and previous periods, postponement of
technological connection upon major projects in 2019 and previous periods, postponement of technological connection for later periods due to unavailability of applicants, as well as the severe epidemiological situation caused by the coronavirus pandemic.
For more information on the electricity transmission services provided by the Company visit our official website http://portaltp.fsk-ees.ru/sections/Map/map.jsp
Improving the quality of our services
A higher level of FGC's responsibility in terms of providing sustainable and reliable power supply is connected with peculiarities of Russian climate. We understand our great responsibility and do our utmost for electricity to be delivered to our consumers continuously, with no failures and in compliance with all technical specifications.
In 2020, the specific accident rate at Company facilities declined by 6% due to the introduction of new equipment, advancement of servicing personnel skills and expertise and other activities. The average specific accident rate for SS and PTLs has a steady downward trend. The number of technological disruptions associated with erroneous actions of operational personnel reduced to zero.
* Act No. 36 dated 26 October 2017 documenting the fact of erroneous actions of operational personnel along with erroneous actions of maintenance personnel is taken into account.
The indicator of electricity shortage tends to stabilise within the medium-term value. In 2020, the value of the indicator stood at 1,433 MWh. Target value of the services reliability indicator amounts to 1,463 MWh in 2021.
The reliability level of the services provided is determined as the ratio of the actual total duration of electricity outage in the control period (hour) to the maximum number of technological connection points of service consumers for the same period and amounted to 0.00825. Target value of the services reliability indicator amounted to 0.0334 in 2020.
Other types of activities
In addition to electricity transmission technological connection services, the Company and its subsidiaries (hereinafter referred to as “Group”) carry out other activities:
These activities do not have a significant impact on its revenue (less than 4%) and are not core.
Key production indicators
Indicator | 2020 | 2019 | Change 2020/2019, % |
Number of substations, units* | 889 | 951 | -6.5 |
Total length of power transmission lines including rented ones, thousand km* | 149.1 | 148.3 | +0.5 |
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Total length of power transmission lines including rented ones, thousand km* | 149.1 | 148.3 | +0.5 |
Electricity transmitted from the UNEG, billion kWh | 535.7 | 558.7 | -4.1 |
Actual electricity losses, billion kWh | 23.0 | 23.2 | -0.9 |
Substation transformer capacity including rented ones, GVA | 352.0 | 353.0 | -0.3 |
Power capacity paid by the consumers of electricity transmission services provided by FGC via the UNEG | 83.9 | 86.4 | -2.9 |
* Information on the number of FGC's substations and length of power transmission lines is given according to the data of state registered ownership of FGC and other owners, including facilities rated 0.4–110 kV, but excluding power transmission lines (PTLs) and substations (SSs) rated 10 kV and lower, leased to FGC for a long term and operated in Krasnodar Krai.
INVESTMENTS
The Company builds new electrical grid facilities and reconstructs the existing ones. We pay special attention to modernisation and increase of operation reliability of the unified power system for uninterrupted power supply to the consumers.
When carrying out investment activities, the Company is guided by the principles of efficiency and effectiveness of investments, matching investment objectives to its strategic goals.
The Investment Programme for 2020–2024 is adjusted in accordance with the decision of the Government of the Russian Federation and management bodies of PJSC Rosseti and PJSC FGC UES on stabilising the financial and economic situation of the subsidiaries and affiliates of PJSC Rosseti in 2020 taking into account the current economic environment.
The Company’s Investment Programme for 2021–2024 is aimed at providing for the commissioning of fixed assets with a capacity of 35 thousand MVA, and 7,100 km of electricity transmission lines. Total value of the planned investment is RUB 538.3 billion. The Investment Programme 2021–2024 is to be financed using the PJSC FGC UES own funds and bonds. The Programme provides even distribution of financing over the period, which enables the Company to maintain a balanced structure of its financing sources.
Implementation of the Investment Programme in 2020
* Put into operation (accounted for). |
** Including the non-cash part of RUB 34.8 billion in the framework of electric grid asset exchange with JSC DVEUK. |
In 2020, the Company carried out several major projects for the construction of overhead lines and substations as part of the Investment Programme, including in the North Caucasus, the Republic of Karelia and Murmansk Region (330 kV Artem – Derbent OHL, 500 kV Nevinnomyssk — Mozdok OHL, 330 kV shunt reactor (SR) at 330 kV Borei distribution station (DS), 330/110 kV autotransformer (AT) with a capacity of 125 MVA at 330 kV Artem SS).
For more information on FGC's investment activities visit our official website http://www.fsk-ees.ru/investments/investment_program/
INNOVATION
The Company adopted the Innovative Development Programme 2016–2020 of PJSC FGC UES up to 2025, which is consistent with the Company’s Long-Term Development Programme, as a means to manage innovation.
Priority areas of innovative development were defined with due regard to the analysis of the FGC’s technological and innovative level, as well as the assessment of market and technology development forecast.
Areas of innovative developmentArea | Brief description |
Digital substation | Substation with a high level of automation. Implementation period: 2016–2025. Technologies: SS equipment, relay protection and automation (RPA) system and process automation system (PAS) based on IEC 61850. |
Remote control and security | The Automated Process Control System (APCS) provides for remote control, increased systemic reliability, reduced management costs and high operational readiness. Implementation period: 2016–2025. Technologies: systems of process control of the level of grid control centres (SCADA, EMS) and the level of facilities (SSPI, SSPTI), innovative digital measurement systems. |
Digital design | An engineering ecosystem based on modern design information technology. Implementation period: 2015–2020 (modification and development of information services: 2020–2025). Technologies: CAD (PLM, BIM), simulation tools, electronic design services, data processing logistics, mobile terminals, geolocation, laser technologies, etc. |
Power quality | Voltage control devices and systems of balancing and compensation of voltage harmonics are placed in complex circuit-mode nodes of a grid, which ensures control at a new qualitative level. Implementation period: 2016–2025. Technologies: a package of FACTS technologies (DCD, static thyristor compensator (STC), controlled shunt reactor (CSR), phase shifting devices (PSD), STATCOM), systems of balancing and compensation of voltage harmonics, monitoring and control distributed systems, etc. |
Energy efficiency | A set of measures allowing to achieve further reduction of electricity consumption and losses. Implementation period: 2015–2022 (implementation of target programmes: 2018–2025). Technologies: automation, new heat insulation materials to ensure reduced consumption for the own needs of the substation control building (SCB) of SS. |
Reliability and asset management | Development of a methodology for integrated management of production funds and assets, based on the planning of technical impacts on equipment, taking into account the analysis of its current condition, costs and potential risks. Implementation period: 2016–2019 (modification and development: 2020–2025). Technologies: transactional asset management systems, mobile terminals, unmanned aviation equipment, systems of consequences simulation for process disruptions, systems of remote data reading from sensors and RFID, etc. |
Composite materials and superconductivity | Development of new technological solutions with wider use of new construction materials in accordance with the Order of the Russian Government related to the development of the composite materials' industry. Implementation period: 2015–2025. Technologies: composite materials for OHL and SS structures, composite materials for insulating products, composite core and conductor products, high-temperature superconductivity technology, etc. |
The total amount of financing the Innovative Development Programme of FGC for 2020–2024 is to be RUB 20.2 billion (including VAT). In 2020, RUB 1.1 billion were allocated to finance R&D, a 19.6% increase against the prior-year comparative.
Digital transformation is a priority area of FGC's innovative development. The Company's digital transformation activities comply with the Digital Transformation Programme of PJSC FGC UES for 2019–2030. The Digital Transformation Programme of PJSC FGC UES 2019–2030 aims to significantly enhance the reliability, quality and availability of the services for electric power transmission and technological connection of consumers as well as to reduce costs in business processes.
New infrastructure will be built as part of implementing the Digital Transformation Programme to ensure the most efficient electricity transmission between electric power industry entities and develop consumer services and related services by changing the logic of technological and business processes and shifting to risk-oriented management based on the implementation of digital technologies and big data analysis.
For more information on FGC's innovation activities visit our official website http://www.fsk-ees.ru/innovation/innovative_development/innovative_development_program/
The remuneration system of the Company's executive bodies underwent significant changes in the reporting year due to the transfer of the powers of the sole executive body to the management company since 15 May 2020.
Remuneration system of executive bodies until 15 May 2020
The Company's system of remuneration payable to executive bodies was stipulated by the Regulations on Terms of Employment Contracts and Payment of Remuneration and Compensation to JSC FGC UES' Top Management6.
The remuneration was comprised of fixed (salary) and variable (bonuses) parts. The variable part was comprised of quarterly and yearly bonuses (following the fulfilment of quarterly and yearly KPIs, correspondingly). The amount of bonus predominantly depended on following the fulfilment of KPIs approved by the Board of Directors. If any KPI was not fulfilled, bonuses of all members of the Management Board, including the Chairman of the Management Board, got reduced by a certain percent depending on the KPI’s weight.
Total (aggregated) remuneration paid to the Chairman and members of the Management Board, RUB thousand
Type (element) of remuneration | 20207 |
Fixed part | |
Salary (attached to the position) | 35,122 |
Total fixed part of remuneration | 35,122 |
Variable part | |
Bonuses accrued in accordance with employment contract | 134,543 |
Other types of remuneration | 19,547 |
Severance allowances, compensations and other payments accrued in connection with early termination of powers | 42,933 |
Total variable part of remuneration | 197,023 |
Total remuneration | 232,145 |
Remuneration system of executive bodies after 15 May 2020
The remuneration of the Company's management company (PJSC Rosseti) is determined in accordance with the Agreement on the transfer of powers of the sole executive body of PJSC FGC UES to PJSC Rosseti No. 5765/660884 dated 15 May 2020.
During the management company's service in the reporting year (from 15 May 2020 to 31 December 2020), the remuneration was paid in the amount of RUB 557,537,671.85 (including VAT).
FGC has a system for measuring targets based on key performance indicators (KPIs), which provides management motivation to meet the KPI targets that characterise the achievement of development goals by the Company.
The Company operates a multilevel KPI system: levels of Company (KPIs of top managers), its Executive Office, and the FGC branches (MPS, EMPS). At each management level, KPIs are established and monitored at a higher level of management, thus making it possible to apply an end-to-end control mechanism.
Strategic priority | KPI | Actual value for 2019 / assessment of the achievement of the results for 2019 | Target value for 2020 | Actual value of 20208 / % against the comparative of 20199 | Achievement assessment for 2020 / deviation reasons |
---|---|---|---|---|---|
UNEG expansion | Respect of deadlines for technological connections | 1.0/ achieved | ≤ 1.1 | 1.1 | achieved |
Compliance with the commissioning schedule | 101%/ achieved | ≥ 90% | 103% / 102% | achieved | |
Economic efficiency | Total shareholder profitability | introduced from 2020 | ≥ MOEX EU index change in the reporting period (14.00%) | 15.14% | achieved |
Return on invested capital | introduced from 2020 | ≥ 95.0% | 106.2% | achieved | |
Profit from operating activities (EBITDA) | introduced from 2020 | implemented | implemented | achieved | |
Reduction in unit operating expenses (costs) | ≥ 5.1%/ achieved | ≥ 2.0% | 2.7% | achieved | |
Level of electricity losses | 4.15%/ achieved | ≤ the value specified in the Company's Business Plan (4.39%) |
4.30% | achieved | |
Improvement of labour productivity | 4.72%/ achieved | ≥ 2.00% | 3.29% / 70% | achieved | |
Indicator of reduction in account receivables | introduced from 2020 | ≤ 100% | 95.00% | achieved | |
Debt/EBITDA | introduced from 2020 | ≤ 3.0 | 1.8 | achieved | |
Technological and innovative development | Efficiency of innovation activities | 126%/ achieved | ≥ 90% | - / - 10 | - / - |
Reliability of power supply | Readiness for operation in the heating season | introduced from 2020 | ≥ 0.95 | 0.98 / - | Achieved / - |
Achievement of reliability of services provided | 0.25 (section 1) 0.93 (section 2, ENS) / achieved |
≤ 1 | 0.93 / 100% | achieved | |
Absence of increase in the number of people injured in accidents | introduced from 2020 | No increase | 1 fatal accident | not achieved / 1 fatal accident |
This report contains selected financial information, which has been derived from the Consolidated Financial Statements of PJSC “FGC UES” (the “Company”) and its subsidiaries (the “Group”) as at and for the year ended 31 December 2020, prepared in accordance with International Financial Reporting Standards (“IFRS”). The selected financial and operating data below should be read in conjunction with the Group’s consolidated financial statements prepared in accordance with IFRS.
Summary of results
For the year ended 31 December 2020 and 2019, the Group’s revenue amounted to RUR 237,304 million and RUR 249,611 million, respectively. For the year ended 31 December 2020 and 2019, the Group’s profit amounted to RUR 59,390 million and RUR 86,638 million, respectively.
Consolidated Statement of Profit or Loss (IFRS)
(in millions of roubles)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Revenues | 237,304 | 249,611 |
Other operating income | 4,860 | 6,291 |
Operating expenses | (160,124) | (155,282) |
Gain on disposal of assets | - | 10,444 |
Reversal/(accrual) of allowance for expected credit losses | (246) | (1,624) |
Impairment of property, plant and equipment, net | (12,549) | (6,726) |
Operating profit | 69,737 | 102,714 |
Finance income | 13,099 | 13,796 |
Finance costs | (7,232) | (6,896) |
Disposal of an associate | - | (62) |
Share of profit of associates and joint ventures (net of income tax) | 142 | 144 |
Profit before income tax | 75,746 | 109,696 |
Income tax expense | (16,356) | (23,058) |
Profit for the period | 59,390 | 86,638 |
Consolidated Statement of Financial Position (IFRS)
(in millions of roubles)31 December
2020 |
31 December
2019 |
|
---|---|---|
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 1,069,114 | 1,024,901 |
Right-of-use assets | 14,216 | 12,719 |
Intangible assets | 7,684 | 6,609 |
Investments in associates and joint ventures | 1,481 | 1,296 |
Other non-current financial assets | 62,476 | 45,711 |
Deferred income tax assets | 781 | 275 |
Trade and other accounts receivable | 67,614 | 72,084 |
Advances given and other non-current assets | 2,361 | 2,107 |
Total non-current assets | 1,225,727 | 1,165,702 |
Current assets | ||
Cash and cash equivalents | 30,096 | 37,077 |
Other financial assets | 16,643 | 25,903 |
Trade and other accounts receivable | 39,147 | 41,709 |
Income tax prepayments | 1,357 | 93 |
Inventories | 17,526 | 16,968 |
Advances given and other current assets | 9,349 | 2,576 |
114,118 | 124,326 | |
Assets held for sale | 313 | 313 |
Total current assets | 114,431 | 124,639 |
TOTAL ASSETS | 1,340,158 | 1,290,341 |
EQUITY AND LIABILITIES | ||
Equity | ||
Share capital: Ordinary shares | 637,333 | 637,333 |
Treasury shares | (4,719) | (4,719) |
Share premium | 10,501 | 10,501 |
Reserves | 32,755 | 30,937 |
Retained earnings | 274,948 | 227,558 |
Equity attributable to shareholders of FGC UES | 950,818 | 901,610 |
Non-controlling interests | 168 | 174 |
Total equity | 950,986 | 901,784 |
Non-current liabilities | ||
Deferred income tax liabilities | 57,339 | 46,871 |
Non-current debt | 219,850 | 208,343 |
Non-current trade and other accounts payable | 5,863 | 14,121 |
Non-current advances received | 13,612 | 10,230 |
Government grants | 753 | 811 |
Retirement benefit obligations | 7,531 | 6,955 |
Total non-current liabilities | 304,948 | 287,331 |
Current liabilities | ||
Dividends payable | 335 | 11,388 |
Current debt and current portion of non-current debt | 23,769 | 31,444 |
Trade and other accounts payable | 42,155 | 41,580 |
Advances received | 10,099 | 8,872 |
Taxes, other than on income payable | 4,167 | 4,265 |
Provisions | 3,642 | 1,202 |
Current income tax payable | 57 | 2,475 |
Total current liabilities | 84,224 | 101,226 |
Total liabilities | 389,172 | 388,557 |
TOTAL EQUITY AND LIABILITIES | 1,340,158 | 1,290,341 |
Consolidated Statement of Cash Flows (IFRS)
(in millions of roubles)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Profit before income tax | 75,746 | 109,696 |
Adjustments: | ||
Depreciation of property, plant and equipment | 38,514 | 35,564 |
Depreciation of right-of-use assets | 1,090 | 899 |
Loss on disposal of property, plant and equipment | 1,561 | 1,094 |
Amortisation of intangible assets | 1,360 | 1,405 |
Impairment of property, plant and equipment, net | 12,549 | 6,726 |
Gain on disposal of assets | - | (10,444) |
Share of profit of associates and joint ventures, net of income tax | (142) | (144) |
(Reversal)/accrual of allowance for expected credit losses | (246) | 1,624 |
Accrual of provisions | 2,350 | 863 |
Disposal of an associate | - | 62 |
Finance income | (13,099) | (13,796) |
Finance costs | 7,232 | 6,896 |
Other non-cash transactions | (333) | (132) |
Total impact of adjustments | 50,836 | 30,617 |
Decrease in non-current trade and other accounts receivable | 11,515 | 845 |
Increase in non-current advances given and other non-current assets | (423) | (936) |
Decrease in non-current accounts payable | (2,453) | (5,027) |
Increase in non-current advances from customers | 3,533 | 7,824 |
Cash flows from operating activities before changes in working capital and provisions | 138,754 | 143,019 |
Changes in working capital: | ||
Decrease in trade and other accounts receivable | 2,719 | 7,865 |
(Increase)/decrease in advances given and other current assets | (6,794) | 1,727 |
(Increase)/decrease in inventories | (205) | 362 |
(Decrease)/increase in trade and other payables | (2,900) | 52 |
Use of provisions | (966) | (344) |
Increase/(decrease) in advances from customers | 660 | (7,841) |
Cash flow from operating activities before payment of income tax | 131,268 | 144,840 |
Income tax paid | (10,390) | (8,606) |
Net cash flows generated by operating activities | 120,878 | 136,234 |
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property, plant and equipment | (89,885) | (92,315) |
Proceeds from disposal of property, plant and equipment | 51 | 484 |
Purchase of intangible assets | (2,450) | (2,194) |
Redemption of promissory notes | 66 | 10 |
Placement of bank deposits | (44,157) | (30,554) |
Redemption of bank deposits | 53,288 | 8,830 |
Dividends received | 1,578 | 1,463 |
Loans given | (105) | (5) |
Repayment of loans given | 105 | 23 |
Purchase of other financial assets | (14,151) | - |
Proceeds from sale of financial assets | - | 32,141 |
Interest received | 4,447 | 3,048 |
Net cash flows used in investing activities | (91,213) | (79,069) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from current and non-current borrowings | 30,000 | 22 |
Repayment of current and non-current borrowings | (27,415) | (19,443) |
Repayment of principal portion of lease liabilities | (1,192) | (783) |
Dividends paid | (23,042) | (20,205) |
Acquisition of non-controlling interests | - | (74) |
Interest paid on lease agreements | (1,405) | (1,217) |
Interest paid | (13,592) | (16,006) |
Net cash flows used in financing activities | (36,646) | (57,706) |
Net decrease in cash and cash equivalents | (6,981) | (541) |
Cash and cash equivalents at the beginning of the period | 37,077 | 37,618 |
Cash and cash equivalents at the end of the period | 30,096 | 37,077 |
Non-IFRS Financial Information
(in millions of roubles, except for margins and ratios in %)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
EBITDA (1) | 110,843 | 140,664 |
EBITDA margin (2) | 46.7% | 56.4% |
Adjusted EBITDA (3) | 132,925 | 136,101 |
Adjusted EBITDA margin (2) | 56% | 54.5% |
Adjusted operating profit (4) | 82,286 | 98,996 |
Adjusted operating profit margin (2) | 34.7% | 39.7% |
Adjusted profit for the year (5) | 69,429 | 82,224 |
Return on assets (6) | 5.3% | 6.7% |
Return on equity (7) | 7.5% | 9.6% |
(1) EBITDA represents profit for the year before income tax, finance income and costs, depreciation,
amortisation;
(2) Margins are calculated as EBITDA, adjusted EBITDA and adjusted operating profit divided by the
total revenue for the year;
(3) Adjusted EBITDA is calculated as EBITDA adjusted to exclude impairment of property, plant and
equipment, revenue from connection services, reversal / (accrual) of allowance for expected credit
losses, gain on disposal of assets, disposal of an associate and movement in provision for legal claims
and including financial income;
(4) Adjusted operating profit is calculated as operating profit adjusted for impairment of property, plant
and equipment and gain on disposal of assets;
(5) Adjusted profit for the year is calculated as profit for the year adjusted for impairment of property,
plant and equipment, gain on disposal of assets, disposal of an associate and including respective
deferred income tax;
(6) Return on assets is calculated as adjusted profit for the year divided by the average total assets for
the year;
(7) Return on equity is calculated as adjusted profit for the year divided by the average total equity for
the respective year.
The indicators presented above are not financial performance measures that are required by, or presented in accordance with IFRS. Accordingly, they should not be considered as alternatives to profit for the year as a measure of operating performance or to cash flows from operating activities as a liquidity measure. The Group’s calculation of these ratios may be different from calculations used by other companies and therefore comparability may be limited. The Group believes that EBITDA and Adjusted EBITDA provide useful information to investors, because they are indicators of the strength and performance of its ongoing business operations and indicators of its ability to fund discretionary spending, such as: capital expenditures, the acquisition of subsidiaries and other investments and its ability to incur and service debt. While depreciation and amortisation are considered operating costs under IFRS, these expenses primarily represent non-cash current year allocations of costs associated with long-lived assets that have been acquired or constructed in prior periods.
Adjusted profit for the year
Adjusted profit for the year is used to calculate the return on assets and the return on equity indicators. Profit for the year was adjusted for impairment of property, plant and equipment, gain on disposal of assets, disposal of an associate and including respective deferred income tax.
The following table sets forth a reconciliation of adjusted profit for the year to profit for the periods indicated.
(in millions of roubles)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Profit for the year | 59,390 | 86,638 |
Adjustments to profit for the year: | ||
Gain on disposal of assets | - | (10,444) |
Impairment of property, plant and equipment, net | 12,549 | 6,726 |
Disposal of an associate | - | 62 |
Deferred income tax on adjustments | (2,510) | (758) |
Adjusted profit for the year | 69,429 | 82,224 |
EBITDA and Adjusted EBITDA
EBITDA represents profit for the year before income tax, finance income and costs, depreciation and amortisation. Adjusted EBITDA represents EBITDA adjusted to exclude impairment of property, plant and equipment, revenue from connection services, reversal / (accrual) of allowance for expected credit losses, gain on disposal of assets, disposal of an associate and movement in provision for legal claims and including financial income.
The following table sets forth a reconciliation of profit for the year to EBITDA and adjusted EBITDA for the periods indicated.
(in millions of roubles)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Profit before income tax | 75,746 | 109,696 |
Add back: | ||
Finance income | (13,099) | (13,796) |
Finance costs | 7,232 | 6,896 |
Depreciation and amortisation | 40,964 | 37,868 |
EBITDA | 110,843 | 140,664 |
Adjustments to EBITDA: | ||
Revenue from connection services | (5,670) | (17,190) |
Gain on disposal of assets | - | (10,444) |
Impairment of property, plant and equipment, net | 12,549 | 6,726 |
(Reversal) / accrual of allowance for expected credit losses | (246) | 1,624 |
Disposal of an associate | - | 62 |
Movement in provision for legal claims | 2,350 | 863 |
Add back: | ||
Finance income | 13,099 | 13,796 |
Adjusted EBITDA | 132,925 | 136,101 |
Liquidity ratios and other measures
(in millions of roubles, except ratios)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Current liquidity ratio (1) | 1.36 | 1.39 |
Cash liquidity ratio (2) | 0.56 | 0.70 |
Total equity/Total assets ratio | 0.71 | 0.71 |
Net debt (3) | 196,892 | 176,859 |
(1) Current liquidity ratio is calculated as total current assets divided by total current liabilities net of dividends payable;
(2) The cash liquidity ratio is calculated as a sum of cash and cash equivalents, short-term bank deposits, short-term acquired bonds and short-term promissory notes divided by total current liabilities net of dividends payable;
(3) Net debt represents non-current and current debt reduced by cash and cash equivalents, short-term bank deposits, short-term acquired bonds and short-term promissory notes.
Revenue
The Group's revenue is derived primarily from the provision of electricity transmission services. Changes in this type of revenue are primarily dependent on changes in tariffs set by the Federal Antimonopoly Service on tariffs (FAS) and volumes of electricity transmitted during the year. The Group also earns revenue from the services of technological connection of electricity producers to power grids, services rendered under transmission facilities construction contracts and sale of electricity to the third parties at the wholesale of electricity and capacity market.
The Group's revenue decreased by RUR 12,307 million, or 4.9%, from RUR 249,611 million for the year ended 31 December 2019 to RUR 237,304 million for the year ended 31 December 2020.
The table below sets out the Group's revenue for the periods indicated.
(in millions of roubles except for percentages)Year ended 31 December 2020 |
Percentage of total revenue | Year ended 31 December 2019 |
Percentage of total revenue | Percentage change between the year ended 31 December 2020 and 2019 |
|
---|---|---|---|---|---|
Transmission fee | 221,849 | 93.5% | 222,382 | 89.1% | (0.2)% |
Connection services | 5,670 | 2.4% | 17,190 | 6.9% | (67)% |
Construction services | 3,155 | 1.3% | 4,391 | 1.8% | (28.1)% |
Grids repair and maintenance services | 2,133 | 0.9% | 1,780 | 0.7% | 19.8% |
Electricity sales | 1,749 | 0.7% | 1,676 | 0.6% | 4.4% |
Other revenues | 2,748 | 1.2% | 2,192 | 0.9% | 25.4% |
Total revenues | 237,304 | 100% | 249,611 | 100% | (4.9)% |
Transmission fee
The Group's revenue from electricity transmission services was down by RUR 533 million or 0.2%, from RUR 222,382 million for the year ended 31 December 2019 to RUR 221,849 million for the year ended 31 December 2020. The change is mainly due to a decrease in regulatory and technological electricity losses under contracts for the provision of transmission services resulted from a drop in the demand for electricity consumption. It was partially offset by a 5% increase in the power transmission tariff since 1 July 2019 and 1 July 2020 (in both periods), taking into account the phased transition to payment for the declared capacity and the actual values.
Connection services
The Group's revenue from connection services decreased by RUR 11,520 million, or 67%, from RUR 17,190 million for the year ended 31 December 2019 to RUR 5,670 million for the year ended 31 December 2020. The decrease was in accordance with services schedule based on customer orders.
Construction services
The Group's revenue from construction services decreased by RUR 1,236 million, or 28.1%, from RUR 4,391 million for the year ended 31 December 2019 to RUR 3,155 million for the year ended 31 December 2020. The decrease is due to the change in the work completion percentage at various stages of construction projects.
Grids repair and maintenance services
The Group's revenue from grids repair and maintenance services increased by RUR 353 million, or 19.8%, from RUR 1,780 million for the year ended 31 December 2019 to RUR 2,133 million for the year ended 31 December 2020.
Electricity sales
The Group's revenue from electricity sales grew by RUR 73 million or 4.4%, from RUR 1,676 million for the year ended 31 December 2019 to RUR 1,749 million for the year ended 31 December 2020, which is due to a change in the volume of electricity sold by JSC “MGTES”.
Other revenues
Other revenue surged by RUR 556 million or 25.4%, from RUR 2,192 million for the year ended 31 December 2019 to RUR 2,748 million for the year ended 31 December 2020, after the provision of technical audit services for Dagestan Grid Company JSC facilities in 2020. The Group's other revenue includes rental income, communication services, design works and research and development services.
Other operating income
Other operating income primarily includes income from non-core activities. The Group's other operating income decreased by RUR 1,431 million, or 22.7%, from RUR 6,291 million for the year ended 31 December 2019 to RUR 4,860 million for the year ended 31 December 2020.
Operating expenses
The table below sets out the Group's operating expenses for the periods indicated.
(in millions of roubles except for percentages)Year ended 31 December 2020 |
Percentage of total operating expenses | Year ended 31 December 2019 |
Percentage of total operating expenses | Percentage change between the year ended 31 December 2020 and 2019 |
|
---|---|---|---|---|---|
Depreciation of property, plant and equipment, right-of-use assets and intangible assets | 40,964 | 25.6% | 37,868 | 24.4% | 8.2% |
Purchased electricity for production needs | 36,777 | 23% | 37,737 | 24.3% | (2.5)% |
Employee benefit expenses and payroll taxes | 32,940 | 20.6% | 32,066 | 20.7% | 2.7% |
Taxes, other than on income | 13,619 | 8.5% | 13,426 | 8.6% | 1.4% |
Repairs and maintenance expenditure | 3,835 | 2.4% | 3,885 | 2.5% | (1.3)% |
Electricity grids usage fee | 3,264 | 2% | 1,969 | 1.3% | 65.8% |
Electricity transit | 2,639 | 1.6% | 1,807 | 1.2% | 46% |
Subcontract works for construction contracts | 2,614 | 1.6% | 3,132 | 2% | (16.5)% |
Other expenses | 23,472 | 14.7% | 23,392 | 15% | 0.3% |
Total operating expenses | 160,124 | 100% | 155,282 | 100% | 3.1% |
Depreciation of property, plant and equipment, right-of-use and intangible assets
The Group’s depreciation for property, plant and equipment, right-of-use assets and intangible assets increased by RUR 3,096 million or 8.2% from RUR 37,868 million for the year ended 31 December 2019 to RUR 40,964 million for the year ended 31 December 2020 as a result of new capacities put into operation.
Purchased electricity for production needs
The cost of electricity purchased for production needs dropped by RUR 960 million or 2.5%, from RUR 37,737 million for the year ended 31 December 2019 to RUR 36,777 million for the year ended 31 December 2020, which is mainly due to a decrease in the volume of actual electricity losses in the UNEG networks and the weighted average price determined by JSC ATS.
Employee benefit expenses and payroll taxes
The Group's expenses on remuneration and payroll taxes increased by RUR 874 million or 2.7% from RUR 32,066 million for the year ended 31 December 2019 to RUR 32,940 million for the year ended 31 December 2020, which is mainly related to the annual indexation of employee salaries in accordance with the Industry Tariff Agreement in the Russian Federation's electric power industry.
Taxes other than on income
The Group's taxes other than on income increased by RUR 193 million, or 1.4%, from RUR 13,426 million for the year ended 31 December 2019 to RUR 13,619 million for the year ended 31 December 2020.
Repairs and maintenance expenditure
The Group’s expenses for repairs and maintenance decreased by RUR 50 million, or 1.3%, from RUR 3,885 million for the year ended 31 December 2019 to RUR 3,835 million for the year ended 31 December 2020.
Electricity grids usage fee
The Group’s expenses for the electricity grids usage fee increased by RUR 1,295 million, or 65.8%, from RUR 1,969 million for the year ended 31 December 2019 to RUR 3,264 million for the year ended 31 December 2020 as a result of increase of power grid facilities included in UNEG register which are in usage of the Group.
Electricity transit
The Group’s expenses for electricity transit increased by RUR 832 million, or 46.0%, from RUR 1,807 million for the year ended 31 December 2019 to RUR 2,639 million for the year ended 31 December 2020 as a result of increase in the volume of electricity transmitted as well as increase in the tariff for electricity transit.
Works related to the construction contracts
The Group’s expenses for subcontract works for construction contracts decreased by RUR 518 million, or 16.5%, from RUR 3,132 million for the year ended 31 December 2019 to RUR 2,614 million for the year ended 31 December 2020 as a result of change in the work completion percentage at various stages of construction projects (in line with decrease of revenue from construction services).
Gain on disposal of assets
The Group recognized a gain on disposal of assets in the amount of RUR 10,444 million for the year ended 31 December 2019; as part of the exchange agreement with JSC Far East Energy Management Company the Group transferred certain assets in exchange for UNEG assets.
Accrual of expected credit losses
The Group recognised reversal of the allowance for expected credit losses in the amount of RUR 246 million for the year ended 31 December 2020 and a net accrual of the allowance for expected credit losses in the amount of RUR 1,624 million for the year ended 31 December 2019.
Impairment of property, plant and equipment, net
The Group has accrued an impairment loss in the amount of RUR 12,549 million for the year ended 31 December 2020 and RUR 6,726 million for the year ended 31 December 2020 due to the signs of impairment (downturn in the overall business environment in the Russian Federation).
Finance income
Finance income primarily includes interest income from investments in bank deposits, dividend income and unwind of discount of accounts receivable. Finance income decreased by RUR 697 million, or 5.1%, from RUR 13,796 million for the year ended 31 December 2019 to RUR 13,099 million for the year ended 31 December 2020.
Finance costs
Finance costs increased by RUR 336 million, or 4.9%, from RUR 6,896 million for the year ended 31 December 2019 to RUR 7,232 million for year ended 31 December 2020.
Income tax expenses
The Group recognised an income tax expense in the amount of RUR 16,356 million for the year ended 31 December 2020 and RUR 23,058 million for the year ended 31 December 2019. The effective tax rate was 21.6% and 21.0% for the years ended 31 December 2020 and 2019.
Profit for the year
As a result of the above-mentioned factors, the Group recognised profit in the amount of RUR 59,390 million for the year ended 31 December 2020 compared to RUR 86,638 million for the year ended 31 December 2019.
Capital resources
The electricity transmission business is capital-intensive and many of the Group’s facilities are subject to long term usage and require regular maintenance and upgrades. Expenditures to maintain, expand and increase the efficiency and size of the transmission grid are, accordingly, an important priority and have a significant effect on the Group’s cash flows and future operating results.
The table below sets out total additions to property, plant and equipment and construction in progress, as well repair and maintenance expenditures for the periods indicated.
(in millions of roubles)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Total addition to property, plant and equipment and construction in progress | 97,116 | 132,588 |
Repairs and maintenance of equipment | 3,835 | 3,885 |
Material expenses | 4,521 | 4,412 |
Liquidity
The Group’s primary sources of liquidity are cash generated via operating activities, debt and equity financing. Future requirements for the Group’s business needs, including those to fund additional capital expenditures in accordance with its business strategy, are expected to be financed by a combination of cash flows generated by the Group’s operating activities, as well as external financing sources.
The table below summarizes the Group’s cash flows for the periods indicated.
(in millions of roubles)Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Net cash generated by operating activities | 120,878 | 136,234 |
Net cash used in investing activities | (91,213) | (79,069) |
Net cash used in financing activities | (36,646) | (57,706) |
Net decrease in cash and cash equivalents | (6,981) | (541) |
Cash and cash equivalents at the beginning of the year | 37,077 | 37,618 |
Cash and cash equivalents at the end of the year | 30,096 | 37,077 |
Net cash generated by operating activities
Net cash generated by the Group’s operating activities decreased by RUR 15,356 million, or 11.3%, from RUR 136,234 million for the year ended 31 December 2019 to RUR 120,878 million for the year ended 31 December 2020.
Net cash used in investing activities
The net amount of cash used in investing activities of the Group went up by RUR 12,144 million or 15.4%, from RUR 79,069 million for the year ended 31 December 2019 to RUR 91,213 million for the year ended 31 December 2020, which is mainly due to the receipt in 2019 of funds from the sale of financial assets (shares of PJSC Inter RAO).
Net cash used in financing activities
Net cash outflow from financing activities of the Group decreased by RUR 21,060 million, or 36.5%, from RUR 57,706 million for the year ended 31 December 2019 to RUR 36,646 million for the year ended 31 December 2020. This was mainly caused by the increase in the proceeds from borrowings for the year ended 31 December 2020.
Debt
As at 31 December 2020, the Group’s total debt amounted to RUR 243,619 million as compared to RUR 239,787 million as at 31 December 2019.
The following table sets out the Group’s current debt and non-current debt for the periods indicated.
(in millions of roubles)31 December 2020 | 31 December 2019 | |
---|---|---|
Total current debt and current portion of non-current debt | 23,769 | 31,444 |
Total non-current debt | 219,850 | 208,343 |
Total debt | 243,619 | 239,787 |
Net debt | 196,892 | 176,859 |
The key reasons for the increase of the Group’s debt relates to a placement of interest-bearing bonds.
Credit ratings
The Company's management does everything that it takes to maintain the Company's credit ratings at a sovereign level (not lower than the credit rating of obligations of the Russian Federation). To date, according to the scales of international rating agencies S&P, Moody’s, and Fitch, the credit ratings of PJSC FGC UES are at a sovereign level; the rating assigned by JSC ACRA agency is AAA (RU), the highest one on a national scale (as of February 2021):
Rating agency | International scale rating | Forecast |
Standard & Poor’s | BBB– | Stable |
Moody’s | Ваa3 | Stable |
Fitch Ratings Ltd | ВВВ | Stable |
Rating agency | National scale rating | Forecast |
JSC ACRA | AAA (RU) | Stable |
This Report has been prepared for shareholders of Public Joint Stock Company "Federal Grid Company of the Unified Energy System" (the Company) and for no other person. The Company, its directors, employees, agents or advisers do not accept responsibility for any other person to whom this document is shown or into whose hands it may reach, and any such responsibility or liability is expressly disclaimed against.
By their very nature, statements concerning risks and uncertainties that the Company faces in this Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements contained in this Annual Financial Report reflect knowledge and information that were available at the date of preparing this Report. The Company is under no obligation to update these forward looking statements. Further, nothing in this Report should be construed as a profit forecast.
I hereby confirm that to the best of my knowledge:
(a) the consolidated financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair assessment of the assets, liabilities, financial position and profit or loss of PJSC FGC UES, and those of consolidated enterprises taken as a whole (the Group); and
(b) this Annual Financial Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of principal risks and uncertainties that cause them.
Pavel Grebtsov
Deputy Director General for Economic Affairs and Finance
29 April 2021
Independent Auditors' Report
Notes to the Consolidated Financial Statements
To the Shareholders and Board of Directors of
Public Joint-Stock Company
“Federal Grid Company of Unified Energy System”
Opinion
We have audited the consolidated financial statements of Public Joint-Stock Company “Federal Grid Company of Unified Energy System” and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2020 and its consolidated financial performance and its consolidated cash flows for 2020 in accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Russian Federation, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters.Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Key audit matter | How our audit addressed the key audit matter |
---|---|
Impairment of non-current assets |
|
Due to the existence of impairment indicators in respect of non-current assets as of 31December 2020, the Group performed impairment testing. The value-in-use of property, plant and equipment forming a significant share of the Group’s non-current assets, as of 31 December 2020, was determined by the projected cash flow method. The impairment testing of property, plant and equipment was one of the most significant matters for our audit because the property, plant and equipment balance forms a significant part of the Group’s assets at the reporting date, and because management’s assessment of the value-in-use is complex and largely subjective and is based on assumptions, in particular, on projected electricity transmission volumes, transmission fees, as well as operating and capital expenditures that depend on the expected future market or economic conditions in the Russian Federation. Information on the results of the impairment analysis of non-current assets is disclosed by the Group in Note 6 to the consolidated financial statements. |
As part of our audit procedures, we also assessed the assumptions and methodologies applied by the Group, in particular, those relating to projected total revenue from electricity transmission, fee solutions, operating and capital expenditures, long-term rates of fee growth and discount rates. We tested the incoming data imported in the model and the arithmetic accuracy of the model used to determine the recoverable amount in the impairment test of property, plant and equipment. We engaged valuation specialists to analyze the model used to determine the recoverable amount in the impairment test of property, plant and equipment. We also analyzed the sensitivity of the model to changes in the main indicators of assessment and the Group’s disclosures of assumptions on which the results of impairment testing largely depend. |
Allowance for expected credit losses on trade and other receivables | |
The allowance for expected credit losses on trade and other receivables was one of the most significant matters for our audit due to the material balances of receivables as of 31 December 2020, as well as due to the fact that management’s assessment of the possible recoverability of these receivables is based on assumptions, in particular, on the predicted solvency of the Group’s customers. Information on the allowance for expected credit losses on receivables is disclosed in Notes 11 and 29 to the consolidated financial statements. |
We analyzed the Group’s accounting policy on receivables with respect to the allowance for expected credit losses We considered the calculation of expected credit losses performed by the Group’s management, which is based on credit losses experience adjusted for projected factors specified for the Group’s customers. As part of our audit procedures, we also assessed the assumptions used by Group’s management, as well as analysis of credit risk and financial performance of counterparties, analysis of receivables payments, ageing structure and overdue receivables and assessed the applicable levels of allowance for expected credit losses. We also assessed the information on allowance for expected credit losses disclosed in the consolidated financial statements. |
Key audit matter | How our audit addressed the key audit matter |
---|---|
Recognition, measurement and disclosure of provisions and contingent liabilities |
|
Recognition, measurement and disclosure of provisions and contingent liabilities concerning legal issues require significant judgment. Due to significance of provisions and contingent liabilities and difficulties in estimating their consequences, it was one of the matters of most significance in our audit. Information on provisions and contingent liabilities is disclosed in Notes 22 and 28 to the consolidated financial statements. |
Our audit procedures included review of legal claims and court decisions, discussion of potential outcomes of contingent liabilities with the Group’s management and the legal department personnel and analysis of provisions’ amounts adequacy. We also analyzed the relevant disclosures in the consolidated financial statements. |
Other information consists of the information included in the Annual report other than the consolidated financial statements and our auditor’s report thereon. Management is responsible for the other information. The Annual report is expected to be made available to us after the date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Audit Committee of Board of Directors are responsible for overseeing the Group’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We communicate with Audit Committee of Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide Audit Committee of Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with Audit Committee of Board of Directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare cirumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Partner in charge of the audit resulting in this independent auditor's report is T.L. Okolotina
Consolidated Statement of Financial Position
(in millions of Russian Rouble unless otherwise stated)
Notes | 31 December
2020 |
31 December
2019 |
|
---|---|---|---|
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 6 |
|
|
Right-of-use assets | 7 |
|
|
Intangible assets | 8 |
|
|
Investments in associates and joint ventures | 9 |
|
|
Other non-current financial assets | 10 |
|
|
Deferred income tax assets | 17 |
|
|
Trade and other accounts receivable | 11 |
|
|
Advances given and other non-current assets | 12 |
|
|
Total non-current assets |
|
|
|
Current assets | |||
Cash and cash equivalents | 13 |
|
|
Other financial assets | 14 |
|
|
Trade and other accounts receivable | 11 |
|
|
Income tax prepayments |
|
|
|
Inventories | 15 |
|
|
Advances given and other current assets | 12 |
|
|
Assets held for sale |
|
|
|
Total current assets |
|
|
|
TOTAL ASSETS |
|
|
|
EQUITY AND LIABILITIES | |||
Equity | |||
Share capital: Ordinary shares | 16 |
|
|
Treasury shares | 16 | ( |
( |
Share premium |
|
|
|
Reserves | 16 |
|
|
Retained earnings |
|
|
|
Equity attributable to shareholders of FGC UES |
|
|
|
Non-controlling interests |
|
|
|
Total equity |
|
|
|
Non-current liabilities | |||
Deferred income tax liabilities | 17 |
|
|
Non-current debt | 18 |
|
|
Non-current trade and other accounts payable | 21 |
|
|
Non-current advances received |
|
|
|
Government grants |
|
|
|
Retirement benefit obligations | 19 |
|
|
Total non-current liabilities |
|
|
|
Current liabilities | |||
Dividends payable | 16 |
|
|
Current debt and current portion of non-current debt | 18, 20 | ||
Trade and other accounts payable | 21 | ||
Advances received | |||
Taxes, other than on income payable | |||
Provisions | 22 | ||
Current income tax payable | |||
Total current liabilities |
|
|
|
Total liabilities |
|
|
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
Consolidated Statement of Profit or Loss and Other Comprehensive Income
(in millions of Russian Rouble unless otherwise stated)
Notes | Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|---|
Revenues | 23 |
|
|
Other operating income | 23 |
|
|
Operating expenses | 24 | ( |
( |
Gain on disposal of assets | 31 |
|
|
Reversal/(accrual) of allowance for expected credit losses | 11 | ( |
( |
Impairment of property, plant and equipment, net | 6 | ( |
( |
Operating profit |
|
|
|
Finance income | 25 |
|
|
Finance costs | 26 | ( |
( |
Disposal of an associate | 9 | ( |
|
Share of profit of associates and joint ventures (net of income tax) | 9 |
|
|
Profit before income tax |
|
|
|
Income tax expense | 17 | ( |
( |
Profit for the period |
|
|
|
Other comprehensive income/(loss) | |||
Items that will not be reclassified subsequently to profit or loss | |||
Change in fair value of financial investments | 10 | ||
Remeasurements of retirement benefit obligations | 19 | ( |
( |
Income tax relating to items that will not be reclassified | 17 | ( |
( |
Total items that will not be reclassified to profit or loss |
|
|
|
Items that are or may be reclassified subsequently to profit or loss | |||
Foreign currency translation difference | 9 | |
( |
Total items that are or may be reclassified to profit or loss |
( |
||
Other comprehensive income for the period, net of income tax |
|
|
|
Total comprehensive income for the period |
|
|
|
Profit attributable to: | |||
Shareholders of FGC UES | 27 |
|
|
Non-controlling interests |
|
|
|
Total comprehensive income attributable to: | |||
Shareholders of FGC UES |
|
|
|
Non-controlling interests |
|
|
|
Earnings per ordinary share for profit attributable to shareholders of FGC UES - basic and diluted (in Russian Rouble) | 27 |
|
|
Consolidated Statement of Cash Flows
(in millions of Russian Rouble unless otherwise stated)
Notes | Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|---|
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Profit before income tax |
|
|
|
Adjustments: | |||
Depreciation of property, plant and equipment | 24 |
|
|
Depreciation of right-of-use assets | 7 |
|
|
Loss on disposal of property, plant and equipment | 24 |
|
|
Amortisation of intangible assets | 24 |
|
|
Impairment of property, plant and equipment, net | 6 |
|
|
Gain on disposal of assets | 32 | |
( |
Share of profit of associates and joint ventures, net of income tax | 9 | ( |
( |
(Reversal)/accrual of allowance for expected credit losses | 11 |
( |
|
Accrual of provisions | 22, 24 | ||
Disposal of an associate | 9 |
|
|
Finance income | 25 | ( |
( |
Finance costs | 26 |
|
|
Other non-cash transactions | ( |
( |
|
Total impact of adjustments | |||
Decrease in non-current trade and other accounts receivable |
|
|
|
Increase in non-current advances given and other non-current assets | ( |
( |
|
Decrease in non-current accounts payable | ( |
( |
|
Increase in non-current advances from customers | |||
Cash flows from operating activities before changes in working capital and provisions | |||
Changes in working capital: | |||
Decrease in trade and other accounts receivable | |||
(Increase)/decrease in advances given and other current assets | ( |
||
(Increase)/decrease in inventories |
( |
|
|
(Decrease)/increase in trade and other payables | ( |
||
Use of provisions | ( |
( |
|
Increase/(decrease) in advances from customers | ( |
||
Cash flow from operating activities before payment of income tax | |||
Income tax paid | ( |
( |
|
Net cash flows generated by operating activities | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Purchase of property, plant and equipment | ( |
( |
|
Proceeds from disposal of property, plant and equipment | |||
Purchase of intangible assets | ( |
( |
|
Redemption of promissory notes | |||
Placement of bank deposits | ( |
( |
|
Redemption of bank deposits | |||
Dividends received | |||
Loans given | ( |
( |
|
Repayment of loans given | |||
Purchase of other financial assets | ( |
||
Proceeds from sale of financial assets | |||
Interest received | |||
Net cash flows used in investing activities | ( |
( |
|
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Proceeds from current and non-current borrowings | 18 | ||
Repayment of current and non-current borrowings | 18 | ( |
( |
Repayment of principal portion of lease liabilities | 18 | ( |
( |
Dividends paid | 16 | ( |
( |
Acquisition of non-controlling interests | ( |
||
Interest paid on lease agreements | 18 | ( |
( |
Interest paid | 18 | ( |
( |
Net cash flows used in financing activities | ( |
( |
|
Net decrease in cash and cash equivalents | ( |
( |
|
Cash and cash equivalents at the beginning of the period | 13 | ||
Cash and cash equivalents at the end of the period | 13 |
Consolidated Statement of Changes in Equity
(in millions of Russian Rouble unless otherwise stated)
Notes | Share capital | Share premium | Treasury shares | Reserves | Retained earnings | Total | Non-controlling interests | Total equity | |
---|---|---|---|---|---|---|---|---|---|
As at 1 January 2020 | ( |
||||||||
Total comprehensive income for the period | |||||||||
Profit for the period | |||||||||
Other comprehensive income/(loss), net of related income tax | |||||||||
Change in fair value of financial investments, net of income tax | 10, 16 | ||||||||
Remeasurements of retirement benefit obligations, net of income tax | 16, 19 | ( |
( |
( |
|||||
Foreign currency translation difference | 9, 16 | ||||||||
Total other comprehensive income | |||||||||
Total comprehensive income for the period | |||||||||
Dividends | 16 | ( |
( |
( |
( |
||||
As at 31 December 2020 | ( |
||||||||
Consolidated Statement of Changes in Equity
(in millions of Russian Rouble unless otherwise stated)
Notes | Share capital | Share premium | Treasury shares | Reserves | Retained earnings | Total | Non-controlling interests | Total equity | |
---|---|---|---|---|---|---|---|---|---|
As at 1 January 2019 | ( |
||||||||
Total comprehensive income for the period | |||||||||
Profit for the period | |||||||||
Other comprehensive income/(loss), net of related income tax | |||||||||
Change in fair value of financial investments, net of income tax | 10, 16 | ||||||||
Remeasurements of retirement benefit obligations, net of income tax | 16, 19 | ( |
( |
( |
|||||
Foreign currency translation difference | 9, 16 | ||||||||
Total other comprehensive income | |||||||||
Total comprehensive income for the period | |||||||||
Transfer of accumulated revaluation reserve at disposal of financial investments | 10 | ( |
|||||||
Dividends | 16 | ( |
( |
( |
( |
||||
Acquisition of non-controlling interests | 4 | ( |
( |
( |
( |
||||
As at 31 December 2019 | ( |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Public Joint-Stock Company “Federal Grid Company of Unified Energy System” (“FGC UES” or the “Company”) was established in June 2002 for the purpose of operating and managing the electricity transmission grid infrastructure of the Russian Unified National Electric Grid (the “UNEG”).
FGC UES and its subsidiaries (the “Group”) act as the natural monopoly operator for the UNEG. The Group’s principal operating activities consist of providing electricity transmission services, providing connection to the electricity grid, maintaining the electricity grid system, technical supervision of grid facilities and investment activities in the development of the UNEG. The majority of the Group’s revenues are generated via tariffs for electricity transmission, which are approved by the Russian Federal Antimonopoly Service ( “FAS”) based on the Regulatory Asset Base (“RAB”) regulation.
On 14 June 2013 the Government of the Russian Federation (the “RF”) transferred its stake in FGC UES to PJSC “ROSSETI” (former OJSC “IDGC Holding”), the holding company of an electricity distribution group, controlled by the Government of the RF. As at 31 December 2020, FGC UES was 80.13% owned and controlled by PJSC “ROSSETI”. The remaining shares are traded on the Moscow Stock Exchange and as Global Depository Receipts on the London Stock Exchange.
On 15 May 2020 the Annual General Shareholders’ Meeting of the Company was taken the decision to transfer the powers of the sole executive body of FGC UES to a management organisation, namely PJSC “ROSSETI” (minutes No. 24 dated May 15, 2020).
The registered office of the Company is located at 5A Akademika Chelomeya Street, Moscow 117630, Russian Federation.
Relationships with the state. The Government of the RF is the ultimate controlling party of FGC UES. The Government directly affects the Group's operations via regulation over tariff by the FAS and its investment program is subject to approval by both the FAS and the Ministry of Energy.The Government's economic, social and other policies could have a material impact on the Group’s operations.
The Group’s business environment. The Group operates primarily in the Russian Federation and hence is exposed to risks related to the Russian economy and political market environments. The economy of the Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory system is continuing to evolve and is subject to varying interpretations, and changes, which can occur frequently. The ongoing political tension and international sanctions against certain Russian companies and individuals still adversely impact the Russian economy.
The pandemic of coronavirus (COVID-19) in 2020 has caused a financial and economic tension in the world markets, lower consumption expenditure and business activities. A drop in demand on oil, natural gas and crude products have caused a fall in hydrocarbon world prices. The stock exchange, currency and commodity markets have shown a significant volatility since March 2020.
Many countries as well as the Russian Federation have imposed quarantine measures. Social distancing and isolation measures have resulted in discontinued operations in retail, transport, travel and tourism, foodservice and many other areas.
The impact of the pandemic on economics in countries individually and globally has had no historical analogies ever when governments took measures to save the economy. Various forecasts of changes in the macroeconomic indicators both in the short- and long-term horizon, the extent of impact of the pandemic on businesses including the estimation how long the crisis and recovery from it will last display different views.
The Group considers the influence of the events on the Group's operations as limited taking into consideration the following factors:
systemic nature and position of the industry where the Group operates to ensure uninterruptible energy and power supply to users;
state regulation of tariffs on the primary operational activities which allows to make forecasts within the approved tariffs on the Group's services;
the means and extent of use of the Group's production assets have not changed;
absence of currency risk (the majority of the Group's revenues and expenditures as well as monetary assets and liabilities are denominated in Russian Ruble (“RR”));
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
absence of direct adverse effect on the main operational activities of the Group from the regulatory changes aimed to prevent the spread of COVID-19.
Global economic activity has begun a gradual recovery during the second quarter following the partial removals of restrictions aimed to prevent the epidemic spread, as well as a partial recovery in benchmark crude oil prices following the new OPEC+ production agreement reached and the compliance to the target cuts. This recovery has continued throughout the second half of 2020. Nevertheless, the scale and duration of these events remain uncertain and may continue to influence future earnings, cash flows and financial position of the Group.
The Group continues to monitor and assess the situation and take appropriate action such as:
cooperate with the federal and regional authorities to prevent the spread of coronavirus and take all required measures to ensure safety, health protection of its employees and contractors;
conduct measures to ensure stable electricity supply, realize investment projects and financial stability of the Group;
monitor forward-looking and actual information about the pandemic impact on the economy of the Russian Federation and on the business activities of the Group's main counterparties;
incorporate such forward-looking and actual information together with estimation of its degree of reliability and representation into the assessment of the possible influence on the changing micro- and macroeconomic conditions on the Group's financial position and performance.
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
Each entity of the Group individually maintains its own books of accounts and prepares its statutory financial statements in accordance with the Russian Accounting Standards (hereinafter – RAS).
The Group’s consolidated financial statements are based on the statutory records in accordance with RAS with adjustments and reclassifications for the fair presentation in accordance with IFRS.
Basis for measurement
These consolidated financial statements have been prepared on the historical cost basis, except for financial assets measured at fair value through profit or loss and financial assets measured at fair value through other comprehensive income.
Functional and presentation currency
The Russian Rouble (“RR”) is functional currency for FGC UES and its subsidiaries and the currency in which these Consolidated Financial Statements are presented. All financial information presented in RR have been rounded to the nearest million, unless otherwise stated.
New accounting developments
The Group first-time adopted certain standards and amendments which related to the Group's operations and become effective for annual periods beginning on or after 1 January 2020. The application of these standards and interpretations did not have a material impact on these consolidated financial statements of the Group.
Amendments to IFRS 3 Business Combination.
These amendments revise the definition of a business with the aim to make its application less complicated. In addition, they introduce an optional “concentration test” that, if met, eliminates the need for further assessment. Under this concentration test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business.
Conceptual framework for financial reporting.
The revised Conceptual Framework for Financial Reporting contains a new Chapter on measurement, recommendations for reporting financial results, new definitions and recommendations (in particular – definition of “liabilities”) and explanations on specific issues such as the role of management, prudence, and measurement uncertainty in the preparation of financial statements.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Amendments to IAS 1 and IAS 8, Definition of Material.
These amendments specify the definition of “material” and its application by including recommendations on the definition that were previously presented in other IFRSs and align the definition across the Standards. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
Amendments to IFRS 16 "Lease Assignments Related to the Covid-19 Pandemic»
Amendments to IFRS 16 "Lease Assignments Related to the Covid-19 Pandemic". These amendments provide for an exemption for lessees from applying the requirements of IFRS 16 in terms of accounting for lease modifications in the case of lease assignments that arise as a direct consequence of the Covid-19 pandemic. As a practical simplification, the lessee may decide not to analyze whether the lease assignment granted by the lessor in connection with the Covid-19 pandemic is a modification of the lease agreement. The lessee who makes such a decision must account for any change in lease payments resulting from a lease assignment related to the Covid-19 pandemic, in the same way that this change would be accounted for under IFRS 16 if it were not any modification of the lease agreement.
Certain new standards, amendments and interpretations have been issued but are not effective for the reporting period of the Group's consolidated financial statements.
The Group plans to adopt these pronouncements when they become effective; they are not expected to have a significant impact on the Group’s Consolidated Financial Statements.
Amendments to IAS 1 “Classification of Liabilities as Short-term or Long-term”
Amendments to IAS 37 “Onerous Contracts – Contract Performance Costs”
Amendments to IAS 16 “Property, Plant and Equipment: Proceeds before Intended Use”
Amendments to IFRS 3 “References to the Conceptual framework”
Amendment to IFRS 9 “Financial Instruments” - commission fee for the “10% test” in the event of derecognition of financial liabilities
Amendment to IFRS 1 “First-Time Adoption of International Financial Reporting Standards” – a subsidiary applying International Financial Reporting Standards for the first time
IFRS 17 “Insurance Contracts”
Amendment to IAS 41 “Agriculture” - Taxation in the measurement of fair value
Amendments to IAS 1 “Presentation of financial statements”
Amendments to IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”.
Changes in presentation. Reclassification of comparative data
Some items in the comparative financial statements were reclassified to comply with the current period presentation. All reclassifications are immaterial.
Use of professional judgements and estimates
The preparation of consolidated financial statements in conformity with IFRS requires management to make a number of professional judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The management constantly reviews assumptions and estimates based on previous experience and other factors that affect the application of accounting policies and the reported amounts of assets and liabilities. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected by these changes.
The professional judgements and assumptions that have the most significant effect on the amounts recognised in these consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Carrying value of property, plant and equipment. At each reporting date management assesses whether there is any indication of impairment in respect of property, plant and equipment. Such indication includes a change in business plans, tariffs and other factors leading to unfavorable impact on the Group’s business.
When measuring value in use, management assesses estimated cash flows from assets or groups of assets (cash generating units) and calculates an acceptable discount rate for the present value of these cash flows. For more detailed information see note 6 «Property, plant and equipment».
Determining the lease term under contracts with an option to extend the lease or an option to terminate the lease - the Group as the lessee.
The Group determines the lease term as the non-cancellable period of a lease together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the lessee is reasonably certain no to exercise that option. When making an assumption whether the Group is reasonably certain to exercise the option to extend the lease of the option to terminate the lease for the purpose of determining the lease term, the Group takes into consideration the factors as follows:
if the leased item is special purpose;
location of the item;
a practical possibility for the Group and lessor to choose another contractor (asset);
costs related to termination the lease and to enter into a new (replacement) agreement;
existence of significant improvements to leased items.
Impairment of accounts receivable. Allowance for expected credit losses of accounts receivable is based on management assumption of debt recovery made for each debtor individually. For the purposes of assessing credit losses, the Group consistently takes into account all reasonable and verifiable information on past events, current and projected events that is available without excessive effort and is appropriate for the assessment of receivables.
Experience gained in the past is adjusted on the basis of data available to date to reflect current conditions that had no impact on previous periods and to exclude the impact of conditions that have occurred in the past and no longer exist.
Retirement benefit obligations. The costs of the defined benefit pension plan and its related costs are determined using actuarial valuations. Actuarial valuations involve using demographic and financial data assumptions. As the programme is the long-term one there is considerable uncertainty about such estimates.
Deferred tax assets recognition. At each reporting date, management assesses the amount of deferred tax assets to be recognized to the extent that tax deductions are likely to be used. In determining future taxable profit and deductions, management makes estimates and judgments based on the taxable profit of previous years and expectations for future profits that are reasonable in the current circumstances.
Note 3. Summary of significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements.
Principles of consolidationSubsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to non-controlling interests, even if doing so causes the non-controlling interests to have a debit balance (“deficit”) on the account.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Business combination
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which the Group obtains control of the acquiree.
The Group measures goodwill at the acquisition date as:
The fair value of the consideration transferred: plus
The recognized amount of any non-controlling interests in the acquiree; plus
The fair value of the pre-existing equity interest in the acquiree if the business combination is achieved in stages; less
The net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss for the period.
Transaction costs that the Group incurs in connection with a business combination, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss for the period.
Accounting for acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners, and therefore no goodwill is recognized as a result. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.
Purchases of subsidiaries from parties under common control
Purchases of subsidiaries from parties under common control are accounted for using the predecessor values method. Under this method the consolidated financial statements of the combined entity are presented as if the businesses had been combined prospectively from the date on which business combination between entities under common control occurred. The assets and liabilities of the subsidiary transferred under common control are at the predecessor entity’s carrying amounts. The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial information was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded in the consolidated financial statements. Any consideration for the acquisition is accounted for in the consolidated financial statements as an adjustment to retained earnings within equity.
Investments in associates (equity accounted investees)
Associates are such entities in which the Group has significant influence, but not control, over the financial and operating policies.
Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment also includes transaction costs.
The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued, except to the extent that the Group has an obligation or has made payments on behalf of the investee.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Foreign currency
Monetary assets and liabilities denominated in foreign currency at the reporting date are translated to RR at the exchange rate at that date. Foreign currency transactions accounted for at the exchange rates prevailing at the date of the transactions. Foreign currency profit or loss arising from retranslation is recognised in profit or loss.
Financial assets
The Group classifies financial assets as follows: financial assets measured at amortised cost, financial assets measured at fair value through other comprehensive income, financial assets measured at fair value through profit or loss. The classification depends on the business model for managing financial assets and the contractual characteristics of cash flows.
Financial assets are classified as measured at amortised cost if the following conditions are met: the asset is held under a business model that aims to hold assets to receive contractual cash flows, and at the end of the contract, cash flows are received on the specified dates that are solely payments to the principal amount and interest on the outstanding portion of the principal amount.
The Group includes the following financial assets in the category of financial assets measured at amortised cost:
trade and other receivables that meet the definition of financial assets in case the Group does not intend to sell them immediately or in the nearest future;
bank deposits, that do not meet the criteria of cash equivalents;
promissory notes and bonds not held for trading;
loans given;
cash and cash equivalents.
For financial assets classified as measured at amortised cost, an allowance for expected credit losses (hereinafter – ECL) is made.
When financial assets measured at amortised cost and fair value through profit or loss are derecognized, the Group recognizes the financial result of their disposal equal to the difference between the fair value of the consideration received and the carrying amount of the asset in the Consolidated Statement of profit or loss and other comprehensive income (through profit or loss).
The Group treated the following equity instruments of other companies as financial assets measured at fair value through other comprehensive income:
those that are not classified as measured at fair value with any change therein recognised in profit or loss; and
those that do not provide the Group with control, joint control, or significant influence over the company under investment.
When equity instruments of other companies classified at the Group's discretion as measured at fair value through other comprehensive income are derecognized, the previously recognized components of other comprehensive income are transferred from the provision of fair value change to retained earnings.
Impairment of financial assets
Loss allowances are measured on either of the following bases: 12-month ECLs that result from possible default events within the 12 months after the reporting date; and lifetime ECLs that result from all possible default events over the expected life of a financial instrument.
The Group uses a simplified approach to estimating an allowance for expected credit losses – an estimate of an amount equal to the expected credit losses for the entire term of trade receivables or contractual assets that arise as a result of transactions within the scope of IFRS 15 Revenue from Contracts with Customers (including those containing a significant financing component) and lease receivables.
For other financial assets classified as at amortised cost loss allowances are measured as 12-month ECLs unless there has been a significant increase in credit risk since initial recognition.
The estimated allowance for expected credit losses on a financial instrument is estimated at each reporting date at the amount equal to the expected credit losses for the entire period if the credit risk for the financial instrument has increased significantly since initial recognition, taking into account all reasonable and verifiable information, including forward-looking information.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
As indicators of significant deterioration in credit risk the Group considers the actual or anticipated difficulties of the Issuer or of a debtor's asset, the actual or expected breach of a contract, the expected renegotiation of the contract due to financial difficulties of the debtor at a disadvantage for the Group the terms on which it would disagree in other circumstances.
Based on the usual credit risk management practice, the Group defines default as the inability of the counterparty (Issuer) to meet its obligations (including repayment of funds under the agreement) due to a significant deterioration in its financial position.
A credit impairment loss on a financial asset is accounted by recognizing an estimated allowance for impairment. For a financial asset measured at amortised cost, the amount of the impairment loss is calculated as the difference between the asset's carrying amount and the present value of expected future cash flows discounted at the initial effective interest rate.
If, in subsequent periods, the credit risk of a financial asset decreases as a result of an event occurring after the recognition of this loss, the previously recognized impairment loss is reversed by reducing the corresponding valuation allowance. As a result of the recovery, the carrying amount of the asset should not exceed the amount at which it would have been recorded in the statement of financial position if the impairment loss had not been recognized.
Financial liabilities
The Group classifies financial liabilities into the following measurement categories: financial liabilities measured at fair value through profit or loss; and financial liabilities measured at amortised cost.
The Group includes the following financial liabilities in the category of financial liabilities measured at amortised cost:
loans and borrowing (debt)
trade and other payables
Loans and borrowing are initially recognized at fair value taking into account transaction costs that are directly related to raising these funds. Fair value is determined based on prevailing market interest rates for similar instruments if it differs significantly from the transaction price. In subsequent periods borrowings are carried at amortised cost using the effective interest rate method; any difference between the fair value of funds received (net of transaction costs) and the amount due is recorded in profit or loss as interest expense over the entire period of the liability to repay the borrowed funds.
Borrowing costs are charged in the reporting period in which they were incurred if they were not related to the acquisition or construction of qualified assets. Borrowing costs related to the acquisition or construction of assets that take a significant amount of time to prepare for use (qualifying assets) are capitalized as part of the asset's value.
Capitalization is performed when the Group:
incurs the costs of qualified assets,
incurs borrowing costs and,
conducts activities related to preparing assets for use or sale.
Capitalization of borrowing costs continues until the asset is ready for use or sale. The Group capitalizes borrowing costs that could have been avoided if it had not incurred the costs of qualifying assets. Borrowing costs are capitalized on the basis of the Group's average cost of financing (weighted average interest expense related to expenses incurred on qualifying assets), except for loans that were received directly for the purpose of acquiring a qualifying asset. Actual borrowing costs reduced by the amount of investment income from temporary investment of loans are capitalized.
Accounts payable are accrued starting the moment the counterparty fulfills its obligations under the agreement. Accounts payable are recognized at fair value and subsequently accounted at amortised cost using the effective interest rate method.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Property, plant and equipment
Property, plant and equipment are stated at cost less any subsequent accumulated depreciation and any subsequent accumulated impairment losses, where required.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed (built) assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located and capitalized borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
If significant parts of an item of property, plant and equipment have different useful lives, they are accounted as separate items (major components) of property, plant and equipment.
The cost of improvement and reconstruction is capitalized with a simultaneous write-off of replaced items. Cost of repair and maintenance is expensed when they occur. The gain or loss on disposal of an item of property, plant and equipment is recognised within profit or loss when they occur.
Depreciation on property, plant and equipment is calculated on a straight-line basis when it is available for use.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.
The useful lives, in years, of assets by type of facility are as follows:
Useful lives, years | |
---|---|
Land and buildings | 50-80 |
Electric power transmission grids | 20-50 |
Substations | 13-30 |
Other | 5-50 |
At each reporting date the management assesses whether there is any indication of impairment of property, plant and equipment. If any such indication exists, the 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 impairment loss is recognised as current period loss. An impairment loss recognised for an asset in prior periods is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
Intangible assets
All of the Group’s intangible assets have definite useful lives and primarily include capitalised computer software and licences. Acquired computer software and licences are capitalised on the basis of the costs incurred to acquire and bring them to use.
Research costs are recognised as an expense as incurred. Costs incurred on development projects are recognised as intangible assets only when the Group can demonstrate the technical feasibility of completing the intangible
asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure incurred during the development. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. The carrying value of development costs is reviewed for impairment annually.
After initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation of intangible assets is calculated on a straight-line basis over the useful lives. At each reporting date the management assesses whether there is any indication of impairment of intangible assets. If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less cost to sell.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Leases
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. An agreement is, or contains, a lease if it conveys the right to control the use of an identified asset for a period in exchange for consideration.
Right-of-use assets are initially measured at cost and amortised to the earlier of the following: the end date of useful lives of the right-of-use asset or the lease end date. The initial cost of the right-of-use asset includes the amount of the initial measurement of the lease liability, lease payments made before or at the commencement of the lease, and initial direct costs. After initial recognition, the right-of-use assets are carried at cost less accumulated depreciation and accumulated impairment losses. Right-of-use assets are presented in the Сonsolidated Statement of financial position as a separate line item.
The lease liability is initially measured at the present value of the lease payments that are not paid on inception of the lease and subsequently measured at amortized cost in the form of interest in the finance costs line in the consolidated statement of profit or loss and other comprehensive income. Lease liabilities are presented in the Сonsolidated Statement of financial position under Current and Non-current Borrowings lines.
The Group recognises lease payments under short-term contracts as an expense on a straight-line basis over the lease term.
Regarding a separate lease agreement, the decision may be made on the qualification of the agreement as a lease with the low cost of an asset. Lease payments under such an agreement will be recognized as an expense on a straight-line basis over the lease term.
For leases of land plots under electric grid facilities with an indefinite period of time or with a contract term of not more than 1 year with the possibility of annual renewal, the Group determines the term of the contract using the useful life of fixed assets located on leased land plots as basic criteria.
For leases of electric grid facilities with an indefinite term or with a contract term of not more than 1 year with the possibility of annual renewal, the Group determines the term of the contract using the useful life of its own fixed assets with similar technical characteristics as basic criteria.
Advances given
Advances given are classified as non-current if they are connected with the acquisition of an asset which will be classified as non-current upon initial recognition. Advances given for the acquisition of an asset are included in its carrying amount upon the acquisition of control over the asset, and when it is probable that the Group will obtain economic benefit from its usage.
Inventories
Inventories are measured at the lower of cost or net realizable value. The cost of inventories is determined on the weighted average cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.
Net realizable value is the estimated selling price in the ordinary course of business of the Group, less the estimated costs of completion and selling expenses.
Inventories aimed to maintain works on prevention and elimination of accidents (emergency situations) in electric grids (sectorial emergency reserve) are recognised within the item Inventories.
Value-added tax
Output value added tax related to sales is payable to tax authorities on the earlier of (a) collection of receivables from customers or (b) delivery of goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the VAT invoice. As part of advances given and other assets are recognised (on a net basis) the amounts of VAT accrued from advances received and advances given, as well as VAT recoverable and prepayment for VAT. Amounts of VAT payable to the budget are disclosed separately as part of current liabilities. Where allowance for the expected credit losses has been made for receivables, the allowance loss is recorded for the gross amount of the debtor, including VAT.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Pension and post-employment benefits
In the normal course of business the Group makes mandatory social security contributions to the Pension Fund of the RF on behalf of its employees. These contributions are expensed when incurred and included in employee benefit expenses and payroll taxes in profit or loss.
In addition, the Group maintains a number of post-employment and compensation long-term benefit plans which are defined benefit in nature. These plans include life pension, lump sum upon retirement, financial support after retirement, jubilee and death benefits and cover majority of the Group’s employees. Under the pension plan amount of pension benefits that an employee will receive after retirement depends on his date of birth, number of years of service, position, salary and presence of awards. The Group settles its liability to provide life pension benefits through a non-state pension fund. The assets held in the non-state pension fund are recognised within other non current assets. Other benefits, apart from life pension payable via the non-state pension fund, are provided for when they are due directly by the Group.
The liability recognised in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Russian government bonds that have terms to maturity approximating the terms of the related pension liabilities.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in profit or loss.
Income tax
Income tax expense is comprised of current and deferred income tax. It is recognized in profit or loss, except to the extent that it relates to a business combination, or items recognized in other comprehensive income or directly in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to income tax payable with respect to previous years.
Deferred tax is recognized with respect to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss,
temporary differences relating to investments in subsidiaries and associates to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes, penalties and late-payment interest may be due. The Group accrues tax liabilities based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions, and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities for prior periods; such changes to tax liabilities will impact the tax expense in the period that such a determination is made.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
Share capital
Ordinary shares with discretionary dividends are classified as equity upon completion of share issue and registration of the issue in the Federal Financial Markets Service of the RF. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity.
Treasury shares
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s shareholders until the shares are cancelled or reissued or disposed. Where such shares are subsequently reissued or disposed, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s shareholders. Treasury shares are recorded at weighted average cost. Gains or losses resulting from subsequent sales of shares are recorded in the consolidated statement of changes in equity, net of associated costs including taxation.
Dividends
Dividends are recognised as a liability and deducted from equity at the end of the reporting period only if they are declared (approved by shareholders) before or on the end of the reporting period. Dividends are disclosed when they are declared after the end of the reporting period, but before the consolidated financial statements are authorised for issue.
Revenue from Contracts with Customers
The Group recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset. When (or as) a performance obligation is satisfied, the Group recognizes as revenue the amount which the Group expects to be entitled for in exchange for transferring promised assets to a customer excluding VAT.
Transmission fee
Transmission fees are recognised during the period (billing month) and are measured using the output method (cost of transferred electricity and power volumes). The tariffs for the distribution of electricity through the UNEG are approved by the Federal executive authority for state regulation of tariffs (the FAS).
Electricity sales
Production of electricity in forced mode is made at prices that are approved by the Federal executive authority for state regulation of tariffs. Electrical power supply to territorially isolated energy systems is made at prices that are set by executive authorities of constituent entities of the Russian Federation for state regulation of tariffs.
Sale of electricity is recognised over the time (billing month) and is measured using the output method (cost of transferred electricity and power volumes).
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Technological connection services
Revenue from the services for technological connection to the electric grid is a non-refundable fee for connecting consumers to the electric grids. The Group transfers control of a service at a point in time (when the consumer is connected to the electric grid or, for certain types of customers - when the Group ensures possibility for the consumer to be connected to the electric grid) and, therefore, satisfies a performance obligation at a point in time.
The payment for technological connection is based on an individual project; standard tariffs, peak capacity unit tariffs, payment formula for technological connection are approved by the regional energy commission (department for prices and tariffs of relevant regions) and do not depend on revenue from services on electricity transmission. Payment to technological connection to the unified national (All-Russia) grids is approved by the FAS.
The Group made judgment that connection service is a separate performance obligation that is recognised when the respective services are provided. The customer obtains distinct connection service and there are no any other performance obligations beyond the connection services agreement. Practically and in accordance with the law on electricity market, connection services and electricity transmission agreements are negotiated separately with different customers as different packages and with different commercial objectives with no relation in the contracts in pricing, purpose, acceptance, or type of service.
Construction services
Revenue from construction services are recognised over time as the Group creates or enhances an assets that is controlled by the customer and those assets has no alternative use to the entity and the Group has an enforceable right to payment for performance completed to date.
Other revenue
Revenue from rendering other services (technical, repair and maintenance service, consulting, organizational and technical services, communication and IT services, other services) and revenue from other sales is recognised when the customer obtains control over the asset.
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivable
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). The accounting policies for recognition of trade and other receivables are given in section Financial Assets.
Contract liabilities
A contract liability is an obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. Contract liabilities are recognized within “Advances received”.
Advances received are primarily a deferred income for the future connection services and construction contracts. Advances received from buyers and customers are analyzed by the Group for the presence of a financial component. If there is a gap of time of more than 1 year between the receipt of advances from customers and transfer of the promised goods and services for reasons other than providing financing to the counterparty (under contracts for technological connection to electric grids), interest expense is not recognised. Such advances are recorded at the fair value of assets received by the Group from buyers and customers in advance.
Finance income and cost
Finance income comprises of interest income on funds invested, dividend income, gains on the disposal of financial assets measured at fair value and amortised cost, discounts on financial instruments. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Finance costs are comprised of interest expense on borrowings, lease liabilities, and loss on disposal of financial assets measured at fair value or amortised cost, discounts on financial instruments. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest rate method.
Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income, less the related expenses, in equal amounts over the expected useful life of the related asset.
Earnings per share
The Group presents basic and diluted earnings per share data for its ordinary shares. Earnings per share are determined by dividing the profit or loss attributable to owners of the Company by the weighted average number of participating ordinary shares outstanding during the reporting period.
Measurement of fair values
When measuring the fair value of an asset or liability, the Group uses observable market data as much as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level of the input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy during the reporting period when the change has occurred.
The Group considers the point of time when transfers between and for certain levels are recognised when an event or change in circumstances occurs.
Note 4. Principal subsidiaries
31 December 2020 | 31 December 2019 |
---|
Name | Ownership, % | Voting, % | Ownership, % | Voting, % |
---|---|---|---|---|
Transmission companies: | ||||
JSC “The Kuban trunk grids” | 100 | 100 | 100 | 100 |
OJSC “The Tomsk trunk grids” | 90.5 | 100 | 90.5 | 100 |
Other companies | ||||
JSC “Mobile gas-turbine electricity plants” | 100 | 100 | 100 | 100 |
JSC “Research and development centre of FGC UES” | 100 | 100 | 100 | 100 |
JSC “Specialised electricity transmission service company of the UNEG” | 100 | 100 | 100 | 100 |
JSC “Engineering and construction management centre of Unified Energy System” | 100 | 100 | 100 | 100 |
Transmission companies. JSC “The Kuban trunk grids” and OJSC “The Tomsk trunk grids” own the UNEG assets which are maintained and operated by the Company.
JSC “Mobile gas-turbine electricity plants”. The primary activity of the company is generating and sale of electricity provided by mobile gas-turbine electricity plants used in power deficient points of the power system or in peak periods as temporary source of additional capacity.
JSC “Research and development centre of FGC UES” is a research and development project institution in the sphere of electric power.
JSC “Specialised electricity transmission service company of the UNEG”. The main activities of this company are technical inspection, maintenance and regular and emergency repairs of power grids and other electric power facilities of the UNEG.
JSC “Engineering and construction management centre of Unified Energy System”. The main activity of this company is functioning as a customer-developer in capital construction projects associated with the reconstruction and technical modernisation of electricity supply facilities and infrastructure.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Government-related entities.
Within the current operations the Group performs transactions with other government-related entities. Such transactions are performed at regulated tariffs either at market prices or market interest rates.
Taxes are accrued and settled in accordance with the Russian tax legislation.
During the years ended 31 December 2020 and 31 December 2019 the Group had the following significant transactions with government-related entities:
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|||
---|---|---|---|---|
Transmission revenue | 172,256 | 174,611 | ||
Electricity sales | 733 | 744 | ||
Construction services | 3,216 | 871 | ||
Technological connection services | 5,517 | 17,063 | ||
Dividend income | 1,578 | 1,463 | ||
Interest income on loans, promissory notes, bank deposits and cash in bank | 3,132 | 2,380 | ||
Net reversal of allowance for expected credit losses | 507 | 189 | ||
Purchased electricity for production needs | (7,529) | (6,770) | ||
Short-term leases | (108) | (1,799) | ||
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Significant balances with government-related entities are presented below:
31 December 2020 | 31 December 2019 | |
---|---|---|
Non-current assets | ||
Other non-current financial assets | 61,807 | 45,216 |
Advances to construction companies and suppliers of property, plant and equipment (included in construction in progress) | 539 | 610 |
Trade and other accounts receivable | ||
(net of allowance for expected credit losses of RR 177 million as at 31 December 2020 and RR 160 million as at 31 December 2019) | 67,017 | 69,779 |
Advances given and other non–current assets | 26 | 8 |
Current assets | ||
Cash and cash equivalents | 25,075 | 31,035 |
Other financial assets | 6,528 | 25,718 |
Trade and other accounts receivable | ||
(net of allowance for expected credit losses of RR 4,886 million as at 31 December 2020 and RR 5,425 million as at 31 December 2019) | 30,963 | 35,552 |
Advances given and other current assets | ||
(net of allowance for impairment of RR nil million as at 31 December 2020 and RR 73 million as at 31 December 2019) | 153 | 75 |
Non-current liabilities | ||
Non-current debt | (9,462) | (6,287) |
Trade and other accounts payable | (3,227) | (3,015) |
Advances received | (10,131) | (8,020) |
Current liabilities | ||
Current debt abd current portion of non-current debt | (596) | (490) |
Dividends payable | (335) | (2,389) |
Trade and other accounts payable | (1,836) | (3,933) |
Advances received | (7,312) | (5,810) |
Liabilitities related to the exchange contract with JSC “Far Eastern Energy Management Company” (Note 31) are included in non-current trade and other accounts payable.
As at 31 December 2020 the Group had undrawn committed financing facilities with government-related banks of RR 60,021 million (31 December 2019: RR 65,000 million).
Parent company. During the years ended 31 December 2020 and 31 December 2019 the Group had the following significant transactions with the parent company of FGC UES - PJSC “ROSSETI”:
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|
---|---|---|
Revenues | 326 | 350 |
Operating expenses | (841) | (714) |
Significant balances with the parent company are presented below:
31 December 2020 | 31 December 2019 | |
---|---|---|
Short-term trade and other receivables | 116 | - |
Financial investments into shares | 669 | 495 |
Bonds | 10,000 | - |
Short-term trade and other payables | (139) | (408) |
Dividends payable | - | (8,999) |
For the year ended 31 December 2020, the Group accrued a remuneration in the amount of RR 579 million in accordance with the agreement on the transfer of authority of the sole executive body FGC UES to PJSC “ROSSETI”.
Directors’ compensation. Fees, compensation or allowances to the members of the Board of Directors for their services in that capacity and for attending Board meetings are paid depending on results for the year. Fees, compensation or allowances, are not paid to the members of the Board of Directors who are government employees.
For the year ended 31 December 2020, the members of the Board of Directors were paid with remuneration of RR 8 million (for the year ended 31 December 2019: RR 10 million) with insurance charges.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
The remuneration to the members of the Management Board includes salary, non-monetary compensations and bonuses. The remuneration paid to the Management Board (exclusive of insurance charges to social funds) as disclosed in the table below is the remuneration accrued during the relative period.
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|
---|---|---|
Short-term compensation, including salary and bonuses | 194 | 325 |
Termination benefits | 43 | 9 |
Post-employment benefits and other long-term benefits | (40) | (25) |
Total | 197 | 309 |
Note 6. Property, plant and equipment
Land and Buildings | Power trans-mission grids | Substations | Construction
in progress |
Other | Total | ||
---|---|---|---|---|---|---|---|
Cost | |||||||
Balance as at 1 January 2020 | 34,155 | 661,862 | 765,911 | 258,654 | 93,979 | 1,814,561 | |
Additions | - | 21 | 215 | 93,871 | 3,009 | 97,116 | |
Transfers | 2,129 | 60,560 | 42,457 | (109,611) | 4,465 | - | |
Disposals | - | (269) | (1,847) | (1,834) | (1,934) | (5,884) | |
Balance as at 31 December 2020 | 36,284 | 722,174 | 806,736 | 241,080 | 99,519 | 1,905,793 | |
Accumulated depreciation and impairment | |||||||
Balance as at 1 January 2020 | (8,210) | (300,492) | (382,871) | (43,951) | (54,136) | (789,660) | |
Depreciation charge | (467) | (11,471) | (21,162) | - | (5,414) | (38,514) | |
Impairment | (157) | (4,949) | (4,673) | (2,453) | (317) | (12,549) | |
Transfers | (101) | (2,046) | (2,209) | 4,561 | (205) | - | |
Disposals | - | 211 | 1,684 | 512 | 1,637 | 4,044 | |
Balance as at 31 December 2020 | (8,935) | (318,747) | (409,231) | (41,331) | (58,435) | (836,679) | |
Net book value as at 1 January 2020 | 25,945 | 361,370 | 383,040 | 214,703 | 39,843 | 1,024,901 | |
Net book value as at 31 December 2020 | 27,349 | 403,427 | 397,505 | 199,749 | 41,084 | 1,069,114 | |
Land and Buildings | Power trans-mission grids | Substations | Construction
in progress |
Other | Total | |
---|---|---|---|---|---|---|
Cost | ||||||
Balance as at 1 January 2019 | 31,809 | 604,748 | 725,527 | 248,566 | 81,873 | 1,692,523 |
Additions | 12 | 27,578 | 7,300 | 93,197 | 4,501 | 132,588 |
Transfers | 2,369 | 30,273 | 34,689 | (76,068) | 8,737 | - |
Reclassification to assets held for sale | - | - | - | (335) | - | (335) |
Disposals | (35) | (737) | (1,605) | (6,706) | (1,132) | (10,215) |
Balance as at 31 December 2019 | 34,155 | 661,862 | 765,911 | 258,654 | 93,979 | 1,814,561 |
Accumulated depreciation and impairment | ||||||
Balance as at 1 January 2019 | (7,617) | (285,998) | (355,758) | (56,434) | (49,919) | (755,726) |
Depreciation charge | (448) | (10,474) | (20,307) | - | (4,335) | (35,564) |
Impairment | (96) | (3,025) | (3,065) | (330) | (210) | (6,726) |
Reclassification to assets held for sale | - | - | - | 22 | - | 22 |
Transfers | (57) | (1,623) | (5,330) | 7,813 | (803) | - |
Disposals | 8 | 628 | 1,589 | 4,978 | 1,131 | 8,334 |
Balance as at 31 December 2019 | (8,210) | (300,492) | (382,871) | (43,951) | (54,136) | (789,660) |
Net book value as at 1 January 2019 | 24,192 | 318,750 | 369,769 | 192,132 | 31,954 | 936,797 |
Net book value as at 31 December 2019 | 25,945 | 361,370 | 383,040 | 214,703 | 39,843 | 1,024,901 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Borrowing costs of RR 8,687 million for the year ended 31 December 2020 were capitalised (for the year ended 31 December 2019: RR 11,143 million). A capitalisation rate of 4.65% was used for the year ended 31 December 2020 (for the year ended 31 December 2019: 6.01%).
Construction in progress is represented by the carrying amount of property, plant and equipment that has not yet been put into operation and advances to construction companies and suppliers of property, plant and equipment. As at 31 December 2020 such advances amounted to RR 14,620 million (as at 31 December 2019: RR 17,657 million).
Other property, plant and equipment include motor vehicles, computer equipment, office fixtures and other equipment. Land plots are classified together with items of property, plant and equipment located on them.
Impairment of property, plant and equipment
The Group recognises the transmission segment (Note 30) as one cash generating unit.
The majority of the Group’s property, plant and equipment is specialised in nature and is rarely sold on the open market other than as part of a continuing business. The market for similar property, plant and equipment is not active in the Russian Federation and does not provide a sufficient number of sales of comparable property, plant and equipment for using a market-based approach for determining fair value.
Consequently the recoverable amount of property, plant and equipment was primarily determined as value-in-use using discounted cashflows method.
The Group performed the impairment test of non-current assets as at 31 December 2020.
The following key assumptions were used in making the cash flow protections of Transmission segment:
Forecast period is determined as 10 years – from 2021 to 2030 (for the year ended 31 December 2019: from 2020 to 2029).
The nominal discount rate of 9.60% (31 December 2019: 9.68%) for the impairment test purposes was determined based on the weighted average cost of capital, before income tax.
Revenue projections are based on following assumptions:
Approved Regulatory Asset Base tariff for 2021-2024 (31 December 2019: 2020) were determined with use of return on investment method;
Key parameters for tariff-setting (rates of return for “old” and “new” capital (10%); normal useful live for calculation of return on capital (35 years); Net Working Capital to revenue ratio (8%) (31 December 2019: 7.9%);
Increase of operating expenses at a compound annual growth rate of 3% (31 December 2019: 3%) that is determined with reference to expected inflation rate in the Russian Federation and takes into account planned economy on controllable costs;
Fixed volume of contracted capacity from 2027 onwards.
The recoverable amount of non-current assets of the transmission segment was RR 1,066,622 million as at 31 December 2020 (as at 31 December 2019: RR 1,022,384 million).
For the year ended 31 December 2020 as a result of impairment test an impairment loss was recognised in the amount of RR 12,549 million (for the year ended 31 December 2019 – RR 8,384 million).
The sensitivity of the recoverable amount of property, plant and equipment included in the Transmission segment to changes in the key principal assumptions is as follows:
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|||
---|---|---|---|---|
Increase | Decrease | Increase | Decrease | |
---|---|---|---|---|
Discount rate (0.5% change) | (8.5%) | 10.2% | (8.4%) | 10.1% |
Terminal growth rate (1% change) | 14.4% | (9.9%) | 14.0% | (9.8%) |
Tariff growth rate (3% change) | 8.5% | (8.5%) | 8.2% | (8.2%) |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
For the year ended 31 December 2020, no reversal of the impairment loss on certain items of property, plant and equipment and construction in progress which had been earlier recognised was recognised (for the year ended 31 December 2019, the reversal of the earlier recognised impairment loss on certain items of property, plant and equipment and construction in progress amounted to RR 2,264 million).
For the year ended 31 December 2020, the impairment loss on certain items of construction in progress was not recognised (for the year ended 31 December 2019: RR 606 million).
Leased assets. As at 31 December 2020 the carrying value of property, plant and equipment leased out under operating lease was RR 9,124 million (as at 31 December 2019: RR 9,754 million).
Note 7. Right-of–use assets
Land and buildings | Power trans-
mission grids |
Substations | Other | Total | Lease liabilities | |
---|---|---|---|---|---|---|
Balance as at 1 January 2020 | 9,378 | 768 | 1,229 | 1,344 | 12,719 | 12,824 |
Additions | 2,823 | - | - | 71 | 2,894 | 2,894 |
Depreciation charged to profit or loss | (719) | (15) | (209) | (147) | (1,090) | - |
Depreciation charged to construction in progress | (307) | (307) | - | |||
Interest expense | - | - | - | - | - | 1,405 |
Payments | - | - | - | - | - | (2,597) |
Balance as at 31 December 2020 | 11,175 | 753 | 1,020 | 1,268 | 14,216 | 14,526 |
Land and buildings | Power trans-
mission grids |
Substations | Other | Total | Lease liabilities | |
---|---|---|---|---|---|---|
Balance as at 1 January 2019 | 8,347 | 783 | 1,428 | 1,063 | 11,621 | 11,350 |
Additions | 1,896 | 1 | 20 | 340 | 2,257 | 2,257 |
Depreciation charged to profit or loss | (605) | (16) | (219) | (59) | (899) | - |
Depreciation charged to construction in progress | (260) | - | - | - | (260) | - |
Interest expense | - | - | - | - | - | 1,217 |
Payments | - | - | - | - | - | (2,000) |
Balance as at 31 December 2019 | 9,378 | 768 | 1,229 | 1,344 | 12,719 | 12,824 |
For the purposes of the impairment test, right-of-use specialized assets (including leased land and leased specialized properties) are attributed to CGU assets in the same way as own non-current assets. The value in use of the right-of-use assets is determined using the discounted cash flow method. Information on the impairment test conducted as at 31 December 2020 is disclosed in Note 6.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Software | Other intangible
assets |
Total | |
---|---|---|---|
Cost as at 1 January 2020 | 13,456 | 5,941 | 19,397 |
Accumulated amortisation | (9,778) | (3,010) | (12,788) |
Carrying value as at 1 January 2020 | 3,678 | 2,931 | 6,609 |
Additions | 1,361 | 1,089 | 2,450 |
Disposals – cost | (4) | (13) | (17) |
Disposals - accumulated amortisation | - | 2 | 2 |
Amortisation charge | (775) | (585) | (1,360) |
Carrying value as at 31 December 2020 | 4,260 | 3,424 | 7,684 |
Cost as at 31 December 2020 | 14,813 | 7,017 | 21,830 |
Accumulated amortisation | (10,553) | (3,593) | (14,146) |
Carrying value as at 31 December 2020 | 4,260 | 3,424 | 7,684 |
Software | Other intangible
assets |
Total | |
---|---|---|---|
Cost as at 1 January 2019 | 12,195 | 6,020 | 18,215 |
Accumulated amortisation | (8,811) | (2,766) | (11,577) |
Carrying value as at 1 January 2019 | 3,384 | 3,254 | 6,638 |
Additions | 1,445 | 750 | 2,195 |
Transfers | 122 | (122) | - |
Transfers to property, plant and equipment | (139) | (524) | (663) |
Disposals – cost | (167) | (183) | (350) |
Disposals - accumulated amortisation | 162 | 32 | 194 |
Amortisation charge | (1,129) | (276) | (1,405) |
Carrying value as at 31 December 2019 | 3,678 | 2,931 | 6,609 |
Cost as at 31 December 2019 | 13,456 | 5,941 | 19,397 |
Accumulated amortisation | (9,778) | (3,010) | (12,788) |
Carrying value as at 31 December 2019 | 3,678 | 2,931 | 6,609 |
The software consists of several IT aplications and related licences. Software includes development costs of RR 731 million as at 31 December 2020 (as at 31 December 2019: RR 1,861 million).
Note 9. Investments in associates and joint ventures
As at 31 December 2020, the investments in associates and joint ventures comprise an investment in joint venture JSC UES «SakRusEnergo» of RR 1,481 million (as at 31 December 2019: RR 1,296 million).
The movements in the carrying value of investments in associates and joint ventures are as follows:
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|
---|---|---|
Carrying value as at 1 January | 1,296 | 1,442 |
Share of profit of associates and joint ventures | 142 | 144 |
Disposal of an associate | - | (62) |
Translation difference | 43 | (228) |
Carrying value as at 31 December | 1,481 | 1,296 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|
---|---|---|
Financial assets measured at fair value through other comprehensive income | ||
Financial investments into shares | 48,305 | 45,711 |
Financial assets measured at amortised cost | ||
Deposits (JSC "Rosselkhozbank") | 10,020 | - |
Federal loan bonds (OFZ) of the Russian Federation | 4,151 | - |
Total | 62,476 | 45,711 |
Valuation of financial investments into shares of PJSC “INTER RAO UES” and PJSC “ROSSETI” is made on a recurring basis using quoted market prices (Level 1 inputs) at the end of each reporting period.
1 January 2020 | Change in fair
value |
31 December 2019 | |
---|---|---|---|
PJSC “INTER RAO UES” | 45,105 | 2,420 | 47,525 |
PJSC “ROSSETI” | 495 | 173 | 669 |
Other | 111 | - | 111 |
Total | 45,711 | 2,593 | 48,305 |
1 January 2019 | Change in fair
value |
Disposals | 31 December 2019 | |
---|---|---|---|---|
PJSC “INTER RAO UES” | 37,419 | 9,852 | (2,166) | 45,105 |
PJSC “ROSSETI” | 426 | 69 | - | 495 |
Other | 111 | - | - | 111 |
Total | 37,956 | 9,921 | (2,166) | 45,711 |
Note 11. Trade and other accounts receivable
31 December 2020 | 31 December 2019 | |
---|---|---|
Non-current trade and other receivables | ||
Trade receivables | ||
(net of allowance for expected credit losses of RR 18 million as at 31 December 2020 and RR 207 million as at 31 December 2019) | 64,943 | 71,685 |
Other receivables | ||
(net of allowance for expected credit losses of RR 223 million as at 31 December 2020 and RR 77 million as at 31 December 2019) | 2,514 | 170 |
Promissory notes | 157 | 229 |
Total non-current trade and other receivables | 67,614 | 72,084 |
31 December 2020 | 31 December 2019 | |
---|---|---|
Current trade and other receivables | ||
Trade receivables | ||
(net of allowance for expected credit losses of RR 7,350 million as at 31 December 2020 and RR 7,836 million as at 31 December 2019) | 36,138 | 38,393 |
Other receivables | ||
(net of allowance for expected credit losses of RR 5,988 million as at 31 December 2020 and RR 5,937 million as at 31 December 2019) | 2,908 | 3,254 |
Promissory notes | 101 | 62 |
Total current trade and other receivables | 39,147 | 41,709 |
Non-current trade receivables mainly relate to the contracts of technological connection services that imply payment deferral and restructured receivable balances for transmission services that are expected to be settled within the period exceeding 12 months from the period end.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
As at 31 December 2020 non-current trade receivables in the amount of RR 61,293 million (as at 31 December 2019: RR 69,166 million) relate to the contracts of technological connection, being paid in equal semi-annual installments with an interest accrued on the actual outstanding balances at the rate of 6% per annum. Fair value of consideration receivable for these contracts at the date of initial recognition has been determined using present value technique based on estimated future cash flows and the discount rates of 6.91–9.63%.
As at 31 December 2020 non-current trade receivables in the amount of RR 3,245 million (as at 31 December 2019: RR 733 million) represent restructured balances for transmission services receivable from related parties for which debt restructuring agreements were signed in 2016-2020 with a payment in 2021–2023 years and an interest rate varying from the Central bank of the RF key interest rate to 11%.
As at 31 December 2020 the fair value of non-current trade and other receivables amounted to RR 73,380 million (as at 31 December 2019: RR 71,860 million). The fair value (Level 3) of non-current trade and other receivables has been determined using present value technique based on estimated future cash flows and the discount rates of 6.08–6.53% (as at 31 December 2019: 6.91–9.17%).
The movements of the allowance for expected credit losses are shown below:
Non-current | Current | ||
---|---|---|---|
Year ended
31 December 2020 |
Trade receivables | Other receivables | Trade receivables | Other receivables | Total |
---|---|---|---|---|---|
As at 1 January | 207 | 77 | 7,836 | 5,937 | 14,057 |
Allowance accrual | 11 | 166 | 378 | 360 | 915 |
Allowance reversal | - | - | (1,044) | (117) | (1,161) |
Debt written-off | - | - | (21) | (211) | (232) |
Transfers | (200) | (20) | 201 | 19 | - |
As at 31 December | 18 | 223 | 7,350 | 5,988 | 13,579 |
Non-current | Current | ||
---|---|---|---|
Year ended
31 December 2019 |
Trade receivables | Other receivables | Trade receivables | Other receivables | Total |
---|---|---|---|---|---|
As at 1 January | 24 | 64 | 10,725 | 4,250 | 15,063 |
Allowance accrual | 200 | 20 | 1,035 | 1,899 | 3,154 |
Allowance reversal | (17) | (7) | (1,374) | (133) | (1,531) |
Debt written-off | - | - | (2,550) | (79) | (2,629) |
As at 31 December | 207 | 77 | 7,836 | 5,937 | 14,057 |
The aging analysis of the trade and other receivables is presented in the table below:
31 December 2020 | 31 December 2019 | |
---|---|---|
Not overdue | 32,421 | 33,408 |
Past due: | ||
Less than 3 months | 1,625 | 2,602 |
3 to 6 months | 1,447 | 2,081 |
6 to 12 months | 1,811 | 1,881 |
More than 1 year | 1,742 | 1,675 |
Total | 39,046 | 41,647 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
31 December 2019 | 31 December 2018 | |
---|---|---|
Long–term advances given and other non-current assets | ||
Advances given | 26 | 8 |
VAT recoverable | 1,843 | 1,696 |
Other non-current assets | 492 | 403 |
Total long-term advances given and other non-current assets | 2,361 | 2,107 |
Short–term advances given and other current assets | ||
Advances given | ||
(net of impairment of RR 388 million as at 31 December 2020 and RR 474 million as at 31 December 2019) | 4,986 | 1,811 |
VAT recoverable | 4,041 | 654 |
Tax prepayments, other than income tax | 322 | 111 |
Total short-term advances given and other non-current assets | 9,349 | 2,576 |
Note 13. Cash and cash equivalents
31 December
2020 |
31 December
2019 |
|
---|---|---|
Cash at bank and in hand | 24,761 | 15,531 |
Cash equivalents | 5,335 | 21,546 |
Total cash and cash equivalents | 30,096 | 37,077 |
Cash at bank and in hand | Rating | Rating agency | 31 December 2020 | 31 December 2019 |
---|---|---|---|---|
JSC “Gazprombank” | BB+ | Standard & Poor's | 15,401 | 6,350 |
PJSC “Sberbank” | BBB | Fitch Ratings | 4,107 | 1,788 |
Federal Treasury Department | - | - | 3,000 | 442 |
JSC “Alfa-Bank” | Ba1 | Moody’s | 1,347 | 1,165 |
PJSC “VTB Bank” | BBB- | Standard & Poor's | 448 | 2,803 |
PJSC "RNCB Bank" | ruA | Expert RA | 394 | 2,548 |
PJSC "Bank “ROSSIYA” | ruAA | Expert RA | 54 | 421 |
Cash in hand | 10 | 14 | ||
Total cash at bank and in hand | 24,761 | 15,531 |
Cash equivalents mainly include short-term investments in bank deposits:
Bank deposits | Interest Rate | Rating | Rating agency | 31 December 2020 | 31 December 2019 |
---|---|---|---|---|---|
JSC "Russian regional development bank" | 4.17-5.95% | AA (RU) | Acra | 3,600 | 3,606 |
JSC “Gazprombank” | 3.50-6.00% | BB+ | Standard & Poor's | 1,015 | 16,222 |
PJSC “VTB Bank” | 3.65-5.80% | BBB- | Standard & Poor's | 416 | 422 |
PJSC “Sberbank” | 2.25-5.00% | BBB | Fitch Ratings | 229 | 460 |
JSC "Rosselkhozbank" | 0 | BBB- | Fitch Ratings | 65 | - |
JSC “Alfa-Bank” | 0 | Ba1 | Moody’s | - | 667 |
Total bank deposits | 5,325 | 21,377 |
As at 31 December 2020 cash and cash equivalents include amounts denominated in foreign currency totalling RR 97 million (as at 31 December 2019: RR 78 million).
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 14. Other financial assets
Interest Rate | Rating | Rating agency | 31 December 2020 | 31 December 2019 | |
---|---|---|---|---|---|
Bank deposits | |||||
JSC “Gazprombank” | 4.32-5.27% | BB+ | Standard & Poor's | 6,446 | - |
JSC "Rosselkhozbank" | 6.50-7.20% | BBB- | Fitch Ratings | - | 15,228 |
PJSC “VTB Bank” | 5.82-7.35% | BBB- | Standard & Poor's | - | 10,490 |
JSC “Alfa-Bank” | 0 | Ba1 | Moody’s | - | 71 |
Total bank deposits | 6,446 | 25,789 | |||
PJSC “ROSSETI” bonds | 10,084 | - | |||
Loans given | 113 | 114 | |||
Total other financial assets | 16,643 | 25,903 |
The Group's exposure to financial risks and fair values of other financial assets are disclosed in Note 29 "Financial Instruments and Financial Risks".
There were no bank deposits denominated in foreign currency as at 31 December 2020 and 31 December 2019.
Note 15. Inventories
31 December 2020 | 31 December 2019 | |
---|---|---|
Raw materials and suppliers | ||
(net of allowance for impairment of RR 229 million as at 31 December 2020 and RR 305 million as at 31 December 2019) | 11,936 | 11,340 |
Work in progress | 534 | 622 |
Other inventories | 5,056 | 5,006 |
Total inventories | 17,526 | 16,968 |
As at 31 December 2020 and 31 December 2019 the Group had no inventories pledged as security under loan and other agreements.
Note 16. Equity
Share capital
Number of shares issued and fully paid, psc. | Share capital | |
---|---|---|
31 December 2020 | 31 December 2019 | 31 December 2020 | 31 December 2019 | |
---|---|---|---|---|
Ordinary shares | 1,274,665,323,063 | 1,274,665,323,063 | 637,333 | 637,333 |
As at 31 December 2020 the authorised share capital comprised 1,346,805,824 thousand ordinary shares with a nominal value of RR 0.5 per share.
Treasury shares. As at 31 December 2020 the Group held through a subsidiary 13,727,165 thousand ordinary shares in treasury at the total cost of RR 4,719 million (as at 31 December 2019: RR 4,719 million).
Reserves. Reserves included Revaluation reserve for financial investments, foreign currency translation reserve and remeasurement reserve for retirement benefit obligations. The Foreign currency translation reserve relates to the exchange differences arising on translation of net assets of a foreign associate.
Reserves comprised the following:
31 December 2020 | 31 December 2019 | |
---|---|---|
Revaluation reserve for financial investments (Note 10) | 36,222 | 33,978 |
Remeasurement reserve for retirement benefit obligations (Note 19) |
(3,783) | (3,314) |
Foreign currency translation reserve (Note 9) | 316 | 273 |
Total reserves | 32,755 | 30,937 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Reserves for the year ended 31 December 2020 (net of tax):
Revaluation reserve for financial investments (Note 10) | Remeasure-ment reserve for retirement benefit obligations (Note 19) | Foreign currency translation reserve (Note 9) | Total reserves | |
---|---|---|---|---|
As at 1 January 2020 | 33,978 | (3,314) | 273 | 30,937 |
Change in fair value of financial investments | 2,244 | - | - | 2,244 |
Remeasurements of retirement benefit obligations | - | (469) | - | (469) |
Foreign currency translation difference | - | - | 43 | 43 |
As at 31 December 2020 | 36,222 | (3,783) | 316 | 32,755 |
Reserves for the year ended 31 December 2019 (net of tax):
Revaluation reserve for financial investments (Note 10) | Remeasure-ment reserve for retirement benefit obligations (Note 19) | Foreign currency translation reserve (Note 9) | Total reserves | |
---|---|---|---|---|
As at 1 January 2019 | 27,092 | (2,426) | 501 | 25,167 |
Change in fair value of financial investments | 8,555 | - | - | 8,555 |
Sale of financial investments | (1,669) | - | - | (1,669) |
Remeasurements of retirement benefit obligations | - | (888) | - | (888) |
Foreign currency translation difference | - | - | (228) | (228) |
As at 31 December 2019 | 33,978 | (3,314) | 273 | 30,937 |
Dividends. The source of payment of dividends is the net profit of FGC UES as determined in accordance with the regulations applicable in the Russian Federation.
The General Shareholders Meeting of 15 May 2020 approved distribution of dividends for 2019 of RR 12,102 million, or RR 0.009494338212 per ordinary share.
The Extraordinary General Shareholders Meeting of 30 December 2019 approved distribution of dividends for the nine months of 2019 of RR 11,229 million, or RR 0.00880960765 per ordinary share. The total dividends for 2019 amounted to RR 23,331 million.
The General Shareholders Meeting of 26 June 2019 approved distribution of dividends for 2018 of RR 20,449 million, or RR 0.016042926012 per ordinary share.
Note 17. Income tax
Income tax expense comprises the following:
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|
---|---|---|
Current income tax charge | (6,686) | (7,219) |
Deferred income tax charge | (9,670) | (15,839) |
Total income tax expense | (16,356) | (23,058) |
During the years ended 31 December 2020 and 31 December 2019 the Company and its principal subsidiaries were subject to tax rate of 20 percent on taxable profit.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Profit before income tax for financial reporting purposes is reconciled to income tax expenses as follows:
Year ended
31 December 2020 |
Year ended
31 December 2019 |
|
---|---|---|
Profit before income tax | 75,746 | 109,696 |
Theoretical income tax charge at the statutory tax rate of 20 percent | (15,149) | (21,939) |
Tax effect of items which are not deductible for taxation purposes | (1,483) | (1,165) |
Movement in unrecognised deferred tax assets | 276 | 46 |
Total income tax expense | (16,356) | (23,058) |
Deferred income tax. As at 31 December 2020 and as at 31 December 2019 deferred income tax assets and liabilities were measured at 20 percent, the rates expected to be applicable when the asset or liability will reverse, except for deferred income tax assets and liabilities related to financial investments which are measured at 13 percent (31 December 2019: 13 percent).
Deferred income tax assets and liabilities for the year ended 31 December 2020:
Movements for the year | ||
---|---|---|
1 January
2020 |
Recognized in profit or loss | Recognised in other comprehensive income | 31 December
2020 |
|
---|---|---|---|---|
Deferred income tax liabilities | ||||
Property, plant and equipment | 52,479 | 10,833 | - | 63,312 |
Right-of-use assets | 2,543 | 300 | - | 2,843 |
Intangible assets | - | 674 | - | 674 |
Financial investments | 3,556 | - | 349 | 3,905 |
Other (including asset held for sale) | 1,190 | (1,156) | - | 34 |
Less: deferred tax liabilies offset | (12,897) | (532) | - | (13,429) |
Total deferred income tax liabilities | 46,871 | 10,119 | 349 | 57,339 |
Deferred income tax assets | ||||
Property, plant and equipment | (970) | 77 | - | (893) |
Long-term promissory notes | (4,066) | 73 | - | (3,993) |
Accounts receivable and prepayments | (4,320) | (996) | - | (5,316) |
Intangible assets | (311) | 311 | - | - |
Retirement benefit obligation | (357) | 37 | (57) | (377) |
Current and non-current debt | (2,565) | (340) | - | (2,905) |
Trade and other accounts payable | (1,159) | 671 | - | (488) |
Provisions | (240) | (478) | - | (718) |
Other | (360) | (127) | - | (487) |
Tax losses | (654) | 67 | - | (587) |
Less: deferred tax assets offset | 12,897 | 532 | - | 13,429 |
Unrecognised deferred tax assets | 1,830 | (276) | - | 1,554 |
Total deferred income tax assets | (275) | (449) | (57) | (781) |
Deferred income tax liabilities, net | 46,596 | 9,670 | 292 | 56,558 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 17. Income tax (continued)
Deferred income tax assets and liabilities for the year ended 31 December 2019:
Movements for the year | ||
---|---|---|
31 December
2019 |
Recognized in profit or loss | Recognised in other comprehensive income | 1 January
2019 |
|
---|---|---|---|---|
Deferred income tax liabilities | ||||
Property, plant and equipment | 34,757 | 17,722 | - | 52,479 |
Right-of-use assets | - | 2,543 | - | 2,543 |
Investments in associates and joint ventures | 13 | (13) | - | - |
Financial investments | 2,190 | - | 1,366 | 3,556 |
Other | 986 | 141 | - | 1,127 |
Asset held for sale | 4,293 | (4,230) | - | 63 |
Less: deferred tax liabilies offset | (12,653) | (244) | (12,897) | |
Total deferred income tax liabilities | 29,586 | 15,919 | 1,366 | 46,871 |
Deferred income tax assets | ||||
Property, plant and equipment | (1,056) | 86 | - | (970) |
Long-term promissory notes | (4,074) | 8 | - | (4,066) |
Accounts receivable and prepayments | (6,678) | 2,358 | - | (4,320) |
Intangible assets | (325) | 14 | - | (311) |
Retirement benefit obligation | (397) | 28 | 12 | (357) |
Current and non-current debt | (42) | (2,523) | - | (2,565) |
Trade and other accounts payable | (1,184) | 25 | - | (1,159) |
Provisions | (137) | (103) | - | (240) |
Other | (174) | (186) | - | (360) |
Tax losses | (669) | 15 | - | (654) |
Less: deferred tax assets offset | 12,653 | 244 | 12,897 | |
Unrecognised deferred tax assets | 1,876 | (46) | - | 1,830 |
Total deferred income tax assets | (207) | (80) | 12 | (275) |
Deferred income tax liabilities, net | 29,379 | 15,839 | 1,378 | 46,596 |
The Group makes certain estimates and assumptions when determining future taxable income and an amount of possible tax deductions and also when determining the capacity of certain Group' loss-making subsidiaries to gain taxable income which is sufficient to utilise tax deductions, and the period when these tax deductions can be utilised. As at 31 December 2020, the unrecognised deferred tax assets that include tax losses carried forward and deferred tax assets on temporary differences for such subsidiaries amounted to RR 1,544 million (as at 31 December 2019: RR 1,830 million).
Note 18. Non-current debt
Effective interest rate | Due | 31 December 2020 |
31 December 2019 |
|
---|---|---|---|---|
Interest-bearing non-convertible bonds: |
||||
with fixed rates | 5.00-9.35% | 2021-2052 | 77,762 | 75,476 |
with variable rates | CPI+1-2.5% | 2022-2047 | 151,171 | 151,278 |
Non-bank borrowings | 0.1-3% | 2025-2026 | 160 | 209 |
Lease liabilities | 7.07-10.38% | 2021-2069 | 14,526 | 12,824 |
Total debt | 243,619 | 239,787 | ||
Less: current portion of non-current bonds | (22,514) | (30,335) | ||
Less: current portion of non-bank borrowings | (5) | (6) | ||
Less: current portion of lease liabilities | (1,250) | (1,103) | ||
Total non-current debt | 219,850 | 208,343 |
All debt instruments are denominated in RR.
Reconciliation between carrying and fair values of financial liabilities is presented below. Fair value of level 1 bonds are determined based on quoted market prices at the Moscow Stock Exchange and the Irish Stock Exchange.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 18. Non-current debt (continued)
31 December 2020 | 31 December 2019 | ||||
---|---|---|---|---|---|
Level | Fair value | Carrying value |
Fair value | Carrying value |
|
Non-convertible bonds with fixed rates (including current portion of bonds) | 1 | 79,365 | 77,762 | 76,284 | 75,476 |
Non-convertible bonds with variable rates | 1 | 10,005 | 10,234 | 9,930 | 10,319 |
Total debt classified into fair value hierarchy level 1 | 89,370 | 87,996 | 86,214 | 85,795 |
Certified interest-bearing non-convertible bonds with variable rates classified into fair value hierarchy level 3 represent non-quoted non-convertible bearer bonds with variable rate aligned to inflation with a premium of 1%, which is a unique instrument with specific market. Hence, the management believes carrying amount of these instruments approximates its fair value.
Reconciliation of changes in liabilities to cash flows arising from financing activities is presented below.
Non-current debt |
Current debt and current portion of non-current debt |
Finance lease liabilities |
Dividend payable |
|
---|---|---|---|---|
Balance at 1 January 2020 | 196,622 | 30,341 | 12,824 | 11,388 |
Changes from financing cash flows | ||||
Proceeds from borrowings | 30,000 | - | - | - |
Repayment of borrowings | - | (27,415) | - | - |
New leases | - | - | 2,894 | - |
Payment of lease liabilities | - | - | (1,192) | - |
Interest paid | - | (13,040) | (1,405) | - |
Dividends paid | - | - | - | (23,042) |
Total changes from financing cash flows | 30,000 | (40,455) | 297 | (23,042) |
Reclassification | (20,048) | 20,048 | - | - |
Other changes | ||||
Capitalised borrowing costs | - | 8,410 | 276 | - |
Interest expense | - | 4,175 | 1,129 | - |
Dividends accrued | - | - | - | 11,989 |
Total other changes | - | 12,585 | 1,405 | 11,989 |
Balance at 31 December 2020 | 206,574 | 22,519 | 14,526 | 335 |
Non-current debt |
Current debt and current portion of non-current debt |
Finance lease liabilities |
Dividend payable |
|
---|---|---|---|---|
Balance at 1 January 2019 | 224,463 | 22,137 | 11,350 | 213 |
Changes from financing cash flows | ||||
Proceeds from borrowings | - | 22 | - | - |
Repayment of borrowings | (14) | (19,429) | - | - |
New leases | - | - | 2,257 | - |
Payment of lease liabilities | - | - | (783) | - |
Interest paid | - | (15,196) | (1,217) | - |
Dividends paid | - | - | - | (20,205) |
Total changes from financing cash flows | (14) | (34,603) | 257 | (20,205) |
Reclassification | (27,827) | 27,827 | - | - |
Other changes | ||||
Capitalised borrowing costs | - | 10,881 | 262 | - |
Interest expense | - | 4,099 | 955 | - |
Dividends accrued | - | - | - | 31,380 |
Total other changes | - | 14,980 | 1,217 | 31,380 |
Balance at 31 December 2019 | 196,622 | 30,341 | 12,824 | 11,388 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 19. Retirement benefit obligations
The Group’s post-employment benefits policy includes the employee pension scheme and other various post-employment, retirement and jubilee payments. The post-employment and retirement benefit system is a defined benefit program as part of which every participating employee receives benefits calculated in accordance with certain formula or rules. The program’s core element is the corporate pension scheme implemented by the Group in cooperation with the Non-State Pension Fund of Electric Power Industry.
The Group also pays various other long-term post-employment benefits, including lump sum benefits in case of death of employees or former employees receiving pensions, lump sum benefits upon retirement and in connection with jubilees.
Additionally, financial aid in the form of defined benefits is provided to former employees who have state, industry or corporate awards. Such financial aid is provided both to employees entitled and not entitled to non-state pensions.
The most recent actuarial valuation was performed as at 31 December 2020.
The tables below provide information about benefit obligations and actuarial assumptions as at 31 December 2020 and 31 December 2019.
The amounts recognised in the Consolidated Statement of Financial Position are determined as follows:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Present value of defined benefit obligation | 7,087 | 6,501 |
Present value of other long-term employee benefit obligation | 444 | 454 |
Total net defined benefit liability | 7,531 | 6,955 |
The movement in the net defined benefit obligation over the year is as follows:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Defined benefit obligations at 1 January | 6,955 | 5,950 |
Included in profit or loss | ||
Current service cost | 321 | 248 |
Past service cost | (179) | (147) |
Interest expense | 424 | 466 |
566 | 567 | |
Included in other comprehensive income | ||
Remeasurements: | ||
Loss/(gain) from change in demographic assumptions | 340 | (107) |
Loss from change in financial assumptions | 136 | 1,461 |
Experience loss/(gain) | 22 | (472) |
498 | 882 | |
Benefits paid | (487) | (444) |
Defined benefit obligations at 31 December | 7,532 | 6,955 |
Amounts recognised in profit or loss:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Service cost | 142 | 101 |
Remeasurements of other long-term employee benefit obligations | (29) | 6 |
Interest expense | 424 | 466 |
Total | 537 | 573 |
Amounts recognised in other comprehensive income:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
(Gain)/Loss from change in demografic assumptions | 323 | (104) |
Loss/(Gain) from change in financial assumptions | 121 | 1,401 |
Experience (Gain)/Loss | 82 | (421) |
Total | 526 | 876 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 19. Retirement benefit obligations (continued)
The movement of remeasurements in other comprehensive income are as follows:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
At 1 January | 3,936 | 3,060 |
Remeasurements | 526 | 876 |
At 31 December | 4,462 | 3,936 |
The key actuarial assumptions are as follows:
Financial actuarial assumptions:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Discount rate (nominal) | 6.60% | 6.50% |
Inflation rate | 4.00% | 4.00% |
Future salary increases (nominal) | 4.50% | 4.00% |
Financial assumptions are based on market expectations, at the end of the reporting period, for the period over which the obligations are to be settled. The average duration period of the Group obligations is 13 years.
Demographic actuarial assumptions:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Expected retirement age | ||
Male | 65 | 65 |
Female | 60 | 60 |
Employee turnover | 4.8% | 5.0% |
Mortality table | 2017_adjusted | 2017_adjusted |
The sensitivity of the defined benefit obligation to changes in the key assumptions as at 31 December 2020 is as follows:
Change in assumption | Impact on defined benefit liability | |
---|---|---|
Discount rate | Increase/decrease by 0.5% | Decrease/increase by 5.76% |
Future salary increases (nominal) | Increase/decrease by 0.5% | Increase/decrease by 3.17% |
Future pension increases (nominal) | Increase/decrease by 0.5% | Increase/decrease by 2.75% |
Employee turnover | Increase/decrease by 10% | Decrease/increase by 2.39% |
Mortality level | Increase/decrease by 10% | Decrease/increase by 1.44% |
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as to the calculation the pension liability recognised within the consolidated statement of financial position.
Note 20. Current debt and current portion of non-current debt
Year ended 31 December 2019 |
Year ended 31 December 2018 |
|
---|---|---|
Current portion of non-current debt (Note 18) | 23,769 | 31,444 |
Total current debt and current portion of non-current debt | 23,769 | 31,444 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 21. Trade and other payables
31 December 2020 | 31 December 2019 | |
---|---|---|
Non-current trade and other accounts payable | ||
Accounts payable to construction companies and suppliers of property, plant and equipment |
5,160 | 13,077 |
Trade payables | 703 | 1,044 |
Total long-term trade and other payables | 5,863 | 14,121 |
Current trade and other accounts payable | ||
Accounts payable to construction companies and suppliers of property, plant and equipment | 27,897 | 23,585 |
Trade payables | 9,539 | 12,375 |
Accounts payable to employees | 3,189 | 2,982 |
Other creditors | 1,530 | 2,638 |
Total | 42,155 | 41,580 |
As at 31 December 2020 non-current accounts payable to construction companies and suppliers of property, plant and equipment includes RR 161 million (as at 31 December 2019: RR 3,176 million) of guarantee deposits made to suppliers of property, plant and equipment refundable in 2022–2037. Fair value of consideration payable for these deposits at the date of initial recognition has been determined using present value technique based on estimated future cash flows and the discount rates of 4.95–5.68%.
As at 31 December non-current accounts payable to construction companies and suppliers of property, plant and equipment includes RR 1,773 million (as at 31 December 2019: RR 7,988 million) related to purchase of property, plant and equipment. Amounts are payable in installments in 2022–2025. Fair value of consideration payable at the date of initial recognition has been determined using present value technique based on estimated future cash flows and the discount rate of 8.75%.
As at 31 December 2020 fair value of non-current trade and other payables amounted to RR 6,262 million (as at 31 December 2019: RR 14,569 million). The fair value (Level 3) of non-current trade and other payables has been determined using present value technique based on estimated future cash flows and the discount rate of 5.22% (31 December 2019: 5.48%).
Note 22. Provisions
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Carrying amount at 1 January | 1,202 | 683 |
Charge for the year | 3,678 | 1,118 |
Unused amounts reversed | (272) | (255) |
Use of provision | (966) | (344) |
Carrying amount at 31 December | 3,642 | 1,202 |
Provisions relate mainly to legal proceedings and claims against the Group in the ordinary course of business.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 23. Revenues and other operating income
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Transmission fee | 221,849 | 222,382 |
Technological connection services | 5,670 | 17,190 |
Construction services | 3,155 | 4,391 |
Grids repair and maintenance services | 2,133 | 1,780 |
Electricity sales | 1,749 | 1,676 |
Communication services | 792 | 777 |
Design works | 478 | 388 |
Research and development services | 256 | 140 |
Other revenues | 184 | 7 |
Total revenue from contracts with customers | 236,266 | 248,731 |
Rental income | 1,038 | 880 |
Total revenue | 237,304 | 249,611 |
Other operating income
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Penalties and fines receivable | 3,198 | 5,452 |
Insurance compensation | 667 | 339 |
Other income | 995 | 500 |
Total other operating income | 4,860 | 6,291 |
Note 24. Operating expenses
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Depreciation of property, plant and equipment | 38,514 | 35,564 |
Purchased electricity for production needs | 36,777 | 37,737 |
Employee benefit expenses and payroll taxes | 32,940 | 32,066 |
Taxes, other than on income | 13,619 | 13,426 |
Other materials | 4,521 | 4,412 |
Repairs and maintenance | 3,835 | 3,885 |
Electricity grids usage fee | 3,264 | 1,969 |
Electricity transit | 2,639 | 1,807 |
Subcontract works for construction contracts | 2,614 | 3,132 |
Provisions | 2,350 | 863 |
Business trips and transportation expenses | 2,217 | 2,391 |
Consulting, legal and auditing services | 1,995 | 1,783 |
Security services | 1,601 | 1,615 |
Loss on disposal/(sale) of property, plant and equipment | 1,561 | 1,094 |
Other subcontract works | 1,402 | 1,441 |
Amortisation of intangible assets | 1,360 | 1,405 |
Information system maintenance | 1,173 | 1,014 |
Depreciation of right-of-use assets | 1,090 | 899 |
Insurance | 946 | 955 |
Utilities and maintenance of buildings | 881 | 882 |
Telecommunication service | 483 | 520 |
Rent | 366 | 2,482 |
Materials for construction contracts | 262 | 165 |
Fuel for mobile gas-turbine electricity plants | 202 | 68 |
Other expenses | 3,512 | 3,707 |
Total | 160,124 | 155,282 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 24. Operating expenses (continued)
Employee benefit expenses and payroll taxes include the following:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Wages and salaries | 25,905 | 25,250 |
Social security contributions to the Pension Fund | 5,032 | 4,864 |
Social security contributions to other state non-budgetary funds | 1,890 | 1,845 |
Pension costs – defined benefit plans | 113 | 107 |
Total employee benefit expenses and payroll taxes | 32,940 | 32,066 |
Note 25. Finance income
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Unwinding of discount on financial assets | 7,151 | 8,656 |
Interest income on bank deposits and cash on bank accounts | 4,245 | 3,276 |
Dividend income | 1,578 | 1,463 |
Foreign currency exchange differences | 34 | 22 |
Other finance income | 91 | 379 |
Total finance income | 13,099 | 13,796 |
Note 26. Finance costs
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Interest expenses on financial liabilities measured at amortized cost | 13,108 | 15,776 |
Interest expense on lease contracts | 1,405 | 1,217 |
Net interest expense on defined benefit liability | 424 | 466 |
Foreign currency exchange differences | 307 | 115 |
Other finance costs | 674 | 465 |
Total finance costs | 15,918 | 18,039 |
Less capitalised interest expenses on borrowings related to qualifying assets (Note 6) | (8,686) | (11,143) |
Total finance costs recognised in profit or loss | 7,232 | 6,896 |
Note 27. Earnings per share
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Weighted average number of ordinary shares | 1,260,938 | 1,260,938 |
(millions of shares) | ||
Profit attributable to shareholders of FGC UES | 59,379 | 86,598 |
(millions of RR) | ||
Weighted average earnings per share – basic and diluted (in RR) | 0.047 | 0.069 |
The Group has no dilutive potential ordinary shares; therefore, the diluted earnings per share equal to the basic earnings per share.
Note 28. Contingencies and commitments
Insurance.The Group has unified requirements in respect of the volume of insurance coverage, reliability of insurance companies and procedures of insurance protection organization. The Group maintains insurance of assets, civil liability and other insurable risks. The main business assets of the Group have insurance coverage, including coverage in case of damage or loss of assets. However, there are risks of negative impact on the operations and the financial position of the Group in case of damage caused to third parties, and also as a result of damage or loss of assets, insurance protection of which is non-existent or not fully implemented.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 28. Contingencies, commitments and operating risks (continued)
Legal proceedings. In the normal course of business, the Group entities may be a party to certain legal proceedings. As at 31 December 2020 claims made by suppliers of property, plant and equipment and other counterparties to the Group amounted to RR 5,036 million.
For the year ended 31 December 2019, as pursuant to the court rulings of the Moscow Arbitration Court for case No A40-45189/2018 and for case No A40-173223/2018 which have entered into legal force, the Group recognised income from settlement of the liabilities of suppliers with means of cash received under the guarantees provided by PJSC “Bank Otkritie Financial Corporation” (as a reversal of the earlier recognised impairment loss on certain items of the property, plant and equipment and construction in progress). On 13 January 2021, the Moscow Arbitration Court made a decision to case No A40-108510/20-90-785 on dismissal of an action from PJSC “Bank Otkritie Financial Corporation” against the Company on cost recovery of RR 2,258 million since the Claimant has failed to prove the Company's actions as wrongful. Therefore, there are no grounds to allow the claim of the Claimant. The case was sent to the appeals court on 18 February 2021. In the management's opinion, the probability of unfavourable final decision of the litigation for the Group is not high.
Management belives the likelyhood of negative outcome for the Group and the respecive outflow of financial resources to settle such claims, if any, is not probable and, consequently, no provision has been made in these financial statements.
Tax contingency. Russian tax legislation is subject to varying interpretations regarding the operations and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by the relevant regional and federal authorities. Russian tax administration is gradually strengthening.
In particular, there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of decision to perform tax review. Under certain circumstances reviews may cover longer periods.
The Russian tax authorities are entitled to charge additional tax and penalty in accordance with procedures set forth by transfer pricing regulations (TPR) in case prices/return in controlled transactions differ from the those on the market. The list of controlled transactions comprises mainly transactions between related parties.
Since 1 January 2019, control over transfer prices for the major domestic Russian transactions has been cancelled. However, exemption from control over prices can be applied to certain domestic transactions only. At this, in case of additional tax charge, a correlative adjustment mechanism can be used to tax liabilities if certain legal requirements are met. Intra-group transactions that have been beyond the control of TPR since 2019 may, however, can be subject to inspection from territorial tax authorities with regard to unjustified tax income and the TRP principles can be applied to determine the additional tax payable. The federal executive body responsible for control and supervision over taxes and charges can inspect prices/return in controlled transactions and, if disagreeing with the Group's prices applied in the transactions, can charge additional tax unless the Group can justify the marketing nature of pricing in the transaction with documents on transfer pricing that are in compliance with the legal regulations.
Depending on the further practice of applying the property tax rules by the tax authorities and courts the classification of moveable and immoveable property set by the Group could be argued. The Group’s management does not exclude the risk of resources outflow and its impact can not be sufficiently estimated.
Management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax positions will be sustained.
Environmental matters. The Group has been operating in the electric transmission industry in the Russian Federation for many years. The legislation on environmental protection in the Russian Federation continues to develop, the duties of the authorized state bodies to monitor its compliance are reviewed. Potential liabilities arising as a result of a change in interpretation of existing regulations, civil litigation or changes in legislation cannot be estimated under the existing legislation, management believes that there are no probable liabilities, which will have a material adverse effect on the Group’s financial position, results of operations or cash flows.
Capital commitments related to construction of property, plant and equipment. Future capital expenditures for which contracts have been signed amount to RR 139,314 million as at 31 December 2020 (as at 31 December 2019: RR 120,227 million) including VAT.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 29. Financial instruments and financial risks
Financial risk factors. The Group’s ordinary financial and business activities expose it to a variety of financial risks, including but not limited to the following: market risk (foreign exchange risk, interest rate risk and price risk), credit risk, and liquidity risk. Such risks give rise to the fluctuations of profit, reserves and equity and cash flows from one period to another. The Group’s financial management policy aims to minimise or eliminate possible negative consequences of the risks for the financial results of the Group. The Group could use derivative financial instruments from time to time for such purposes as part of its risk management strategy.
(а) Market risk
(i) Foreign exchange risk. The majority of the Group’s revenues and expenditures, monetary assets and liabilities are nominated in RR. Changes in exchange rates do not have a significant impact on the Group’s revenue and expenditures.
(ii) Interest rate risk. Changes in interest rates mainly affect loans and borrowings, as they change either their fair value (for loans and borrowings with a fixed rate) or future cash flows (for loans and loans with a floating rate). The management of the Group does not adhere to any established rules in determining the relationship between loans and borrowings at fixed and floating rates. At the same time, at the time of attracting new loans, management, based on its judgment, decides whether the rate, fixed or floating, will be most beneficial for the Group for the entire settlement period until the debt repayment period.
(iii) Price risk. Equity price risk arises from financial investments. Management of the Group monitors its investment portfolio based on market indices. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are taken by the management of the Group.
As at 31 December 2020, the total amount of financial investments into shares exposed to the market risk equals RR 48,194 million (as at 31 December 2020: RR 45,600 million). If equity prices at that date had been 10% higher (lower), with all other variables held constant, the Group’s other comprehensive income would increase (decrease) by RR 4,819 million.
(b) Credit risk.
Сredit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge a contractual obligation in full and on time. Credit risk is mainly associated with the Group's receivables, bank deposits, cash and cash equivalents. The carrying amount of financial assets represents the maximum amount exposed to credit risk.
As at 31 December 2020 the amount of financial assets, which were exposed to credit risk, was as follows:
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Non-current trade and other receivables (Note 11) | 67,614 | 72,084 |
Non-current bank deposits (Note 10) | 10,020 | - |
Federal bonds of the RF (Note 10) | 4,151 | - |
Current trade and other receivables (Note 11) | 39,147 | 41,709 |
Current bank deposits (Note 14) | 6,445 | 25,789 |
Loans given (Note 14) | 10,197 | 114 |
Cash and cash equivalents (Note 13) | 30,096 | 37,077 |
Total | 167,670 | 176,773 |
Deposits with an initial maturity of more than three months, cash and cash equivalents are placed in financial institutions that have minimal risk of default, are considered reliable counterparties with a stable financial position in the financial market of the Russian Federation.
The Group's debtors are quite similar in the level of creditworthiness and credit risk concentration, primarily comprised of large, reputable customers. The key customers are subsidiaries of the parent company PJSC "Rosseti" (grid distribution companies), retail suppliers of electric energy, certain large private consumers.
Given the structure of the Group's debtors, the Group's exposure to credit risk mainly depends on the individual characteristics of each counterparty. The Group creates an allowance for expected credit losses on trade and other receivables, the estimated value of which is determined on the basis of the model of expected credit losses, weighted by the degree of probability of default, and can be adjusted both up and down. To this end, the Group analyzes the creditworthiness of counterparties, the dynamics of debt repayment, takes into account changes in the terms of payment, the availability of third-party guarantees, bank guarantees, current general economic conditions. Although the repayment of receivables is subject to economic and other factors, the Group believes that there is no significant risk of losses in excess of the created allowance.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 29. Financial instruments and financial risks (continued)
(c) Liquidity risk.
Management of liquidity risk involves maintaining sufficient cash and the availability of financial resources by attracting credit lines. The Group adheres to a balanced model of financing working capital by using both short-term and long-term sources. Free funds are invested in the short-term financial instruments such as bank deposits. The Group’s approach to managing liquidity is to ensure, that it will always have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group’s reputation. This approach is used to analyse payment dates associated with financial assets, and also to forecast cash flows from operating activities.
The amount of free limit on open but unused credit lines of the Group was RR 100,021 million at 31 December 2020 (31 December 2019: RR 106,500 million). The Group has opportunity to attract additional financing within the corresponding limits, including for the purpose of execution of short-term liabilities.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows including estimated interest payments.
Less than 1 year |
1 to 2 years |
2 to 5 years |
Over 5 years |
Total | |
---|---|---|---|---|---|
As at 31 December 2020 | |||||
Non-current and current debt and interest payable (Notes 18, 20) | 35,551 | 30,368 | 55,317 | 310,426 | 431,662 |
Lease liabilites (Notes 18, 20) | 2,343 | 2,119 | 4,453 | 52,413 | 61,328 |
Dividends payable | 335 | - | - | - | 335 |
Trade and other accounts payable (Note 21) | 42,401 | 471 | 5,254 | 1,862 | 49,988 |
Total as at 31 December 2020 | 80,630 | 32,958 | 65,024 | 364,701 | 543,313 |
As at 31 December 2019 | |||||
Non-current and current debt and interest payable (Notes 18, 20) | 39,039 | 31,075 | 61,051 | 293,681 | 424,846 |
Lease liabilites (Notes 18, 20) | 2,215 | 1,972 | 4,741 | 43,376 | 52,304 |
Dividends payable | 11,388 | - | - | - | 11,388 |
Trade and other accounts payable (Note 21) | 41,580 | 8,183 | 657 | 5,382 | 55,802 |
Total as at 31 December 2019 | 94,222 | 41,230 | 66,449 | 342,439 | 544,340 |
Capital management
The main goal of capital management for the Group is to maintain a consistently high level of capital that allows investors, creditors and market participants to retain trust and ensure sustainable business development in the future.
The Group monitors the structure and return on equity using coefficients calculated on the basis of the consolidated financial statements in accordance with IFRS, management statements and statements prepared in accordance with RAS. The Group analyses the dynamics of the indicators of total debt and net debt, the structure of debt, as well as the ratio of equity and debt capital. The Group manages its debt position by implementing a credit policy aimed at improving financial stability, optimizing its debt portfolio and building long-term relationships with debt capital market participants. To manage the debt position, the Group applies limits, including the categories of financial leverage, debt coverage, and debt service coverage. The initial data for calculating the limits are the RAS reporting indicators.
Fair value. Management believes that the fair value of financial assets and liabilities carried at amortised cost is not significantly different from their carrying amounts (unless otherwise stated in the Notes to these Consolidated Financial Statements). The carrying value of short-term trade payables and trade receivables less allowance for expected credit losses is assumed to approximate their fair value due to their short-term nature. The financial instruments of the Group carried at fair value represent financial investments (Note 10). The fair value of the financial investments is determined by the quoted prices (Level 1 inputs) in active markets. There are no significant unobservable inputs used in measuring fair values of financial assets and liabilities.
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 29. Financial instruments and financial risks (continued)
Carrying value of financial instruments by categories:
31 December 2020 | Financial assets measured at amortised cost | Financial assets measured at fair value through other comprehensive income | Financial liabilities measured at amortised cost | Total |
---|---|---|---|---|
Financial assets | ||||
Other non-current financial assets (Note 10) | 14,171 | 48,305 | - | 62,476 |
Non-current trade and other receivables (Note 11) | 67,614 | - | - | 67,614 |
Current trade and other receivables (Note 11) | 39,147 | - | - | 39,147 |
Cash and cash equivalents (Note 13) | 30,096 | - | - | 30,096 |
Other financial assets (Note 14) | 16,643 | - | - | 16,643 |
Total financial assets | 167,671 | 48,305 | - | 215,976 |
Financial liabilities | ||||
Non-current debt (Note 18) | - | - | 219,850 | 219,850 |
Non-current trade and other payables (Note 21) | - | - | 5,863 | 5,863 |
Dividends payable | - | - | 335 | 335 |
Current debt and current portion of non-current debt (Note 20) | - | - | 23,769 | 23,769 |
Current trade and other payables (Note 21) | - | - | 42,155 | 42,155 |
Total financial liabilities | - | - | 291,972 | 291,972 |
31 December 2019 | Financial assets measured at amortised cost | Financial assets measured at fair value through other comprehensive income | Financial liabilities measured at amortised cost | Total |
---|---|---|---|---|
Financial assets | ||||
Other non-current financial assets (Note 10) | - | 45,711 | - | 45,711 |
Non-current trade and other receivables (Note 11) | 72,084 | - | - | 72,084 |
Current trade and other receivables (Note 11) | 41,709 | - | - | 41,709 |
Cash and cash equivalents (Note 13) | 37,077 | - | - | 37,077 |
Other financial assets (Note 14) | 25,903 | - | - | 25,903 |
Total financial assets | 176,773 | 45,711 | - | 222,484 |
Financial liabilities | ||||
Non-current debt (Note 18) | - | - | 208,343 | 208,343 |
Non-current trade and other payables (Note 21) | - | - | 14,121 | 14,121 |
Dividends payable | - | - | 11,388 | 11,388 |
Current debt and current portion of non-current debt (Note 20) | - | - | 31,444 | 31,444 |
Current trade and other payables (Note 21) | - | - | 41,580 | 41,580 |
Total financial liabilities | - | - | 306,876 | 306,876 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 30. Segment information
The Group operates within one operating segment. The Group’s single primary activity is provision of electricity transmission services within the Russian Federation which is represented as Transmission segment.
The Board of Directors of the Company has been determined as chief operating decision maker (the “CODM”) of the Group which generally analyses information relating to Transmission segment. The Board of Directors does not evaluate financial information of other components of the Group to allocate resources or assess performance and does not determine these components as segments. The key indicator of the transmission segment performance is return on equity ratio (ROE). Accordingly, the measure of transmission segment profit or loss analysed by the CODM is net profit of segment based on the statutory financial statements prepared according to RAS. The other information provided to the CODM is also based on statutory financial statements prepared according to RAS.
Transmission segment – based on statutory financial statements prepared according to RAS |
||
---|---|---|
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Revenue from external customers | 231,691 | 243,848 |
Intercompany revenue | 378 | 376 |
Total revenue | 232,069 | 244,224 |
Depreciation and amortisation | 79,016 | 79,205 |
Interest income | 11,339 | 10,310 |
Interest expenses | 4,730 | 4,941 |
Current income tax | 6,574 | 6,679 |
Profit for the year | 40,034 | 57,836 |
Capital expenditure | 104,005 | 134,442 |
31 December 2020 | 31 December 2019 | |
---|---|---|
Total reportable segment assets | 1,578,076 | 1,543,924 |
Total reportable segment liabilities | 432,631 | 421,167 |
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Total revenue from segment (RAS) | 232,069 | 244,224 |
Reclassification between revenue and other operating income | (1,002) | (1,487) |
Non-segmental revenue | 6,344 | 8,489 |
Elimination of intercompany revenue | (378) | (376) |
Recognition of revenue from connection services based on fair value | - | (832) |
Revenue adjustments | 271 | (407) |
Total revenue (IFRS) | 237,304 | 249,611 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 30. Segment information (continued)
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Profit for the year (RAS) | 40,034 | 57,836 |
Property, plant and equipment | ||
Adjustment to the carrying value of property, plant and equipment | 38,662 | 42,190 |
Gain on disposal of assets | - | 10,444 |
Impairment of property, plant and equipment | (12,549) | (6,726) |
Financial instruments | ||
Re-measurement of financial investments through other comprehensive income | (2,715) | (10,351) |
Discounting of long-term trade and other receivables | 1,752 | 3,296 |
Discounting of long-term trade and other payables | (493) | (71) |
Discounting of promissory notes | 34 | 32 |
Consolidation | ||
Impairment of investments in subsidiaries | 2,063 | (11) |
Other | ||
Adjustment to allowance for expected credit losses | (275) | (2,154) |
Right-of-use assets | (481) | (760) |
Accrual of retirement benefit obligations | 64 | (230) |
Non-recognised revenue and other income | 364 | (430) |
Write-off of research and development costs to expenses | 58 | 70 |
Share of profit of associates and joint ventures | 142 | 144 |
Disposal of associate | - | (62) |
Adjustment to provisions | - | 52 |
Deferred income tax adjustment | (6,387) | (5,389) |
Other adjustments | 596 | (88) |
Non-segmental other operating loss | (1,479) | (1,154) |
Profit for the year (IFRS) | 59,390 | 86,638 |
Year ended 31 December 2020 |
Year ended 31 December 2019 |
|
---|---|---|
Total reportable segment liabilities (RAS) | 432,631 | 421,167 |
Netting of VAT recoverable and payable | (3,265) | (5,653) |
Accrual of retirement benefit obligations | 7,175 | 6,561 |
Adjustment to recognise lease liabilities | 12,991 | 11,028 |
Deferred tax liabilities adjustment | (39,755) | (23,614) |
Accrual of payables recognised in another accounting period | (25) | (112) |
Discounting of long-term trade and other payables | (1,119) | (1,612) |
Other adjustments | (37) | - |
Non-segmental liabilities | 17,911 | 14,080 |
Elimination of intercompany balances | (37,335) | (33,288) |
Total liabilities (IFRS) | 389,172 | 388,557 |
Notes to the Consolidated Financial Statements
(in millions of Russian Rouble unless otherwise stated)
Note 30. Segment information (continued)
31 December 2020 | 31 December 2019 | |
---|---|---|
Total reportable segment assets (RAS) | 1,578,076 | 1,543,924 |
Property, plant and equipment | ||
Adjustment to the carrying value of property, plant and equipment | 66,637 | 58,212 |
Impairment of property, plant and equipment, net | (283,608) | (282,302) |
Financial instruments | ||
Adjustment to cost of investments in associates | 779 | 595 |
Adjustment to cost of financial investments | (38) | 84 |
Discounting of promissory notes | (182) | (215) |
Discounting of long-term trade and other receivables | (7,235) | (6,379) |
Consolidation | ||
Reversal of impairment of investments in subsidiaries | 10,775 | 8,712 |
Reversal of impairment of promissory notes | 18,825 | 18,826 |
Unrealised profit adjustment | (10,931) | (10,015) |
Elimination of investments in subsidiaries | (25,657) | (25,657) |
Elimination of intercompany balances | (39,268) | (33,292) |
Other | ||
Adjustment to recognise right-of-use assets | 11,678 | 10,191 |
Non-recognised revenue and other income | (12,806) | (9,002) |
Write-off of research and development costs to expenses | (1,345) | (2,082) |
Adjustment to allowance for expected credit losses | 12,180 | 9,309 |
Deferred income tax assets adjustment | (105) | (1,811) |
Netting of VAT recoverable and payable | (3,265) | (5,653) |
Other adjustments | (172) | (5,031) |
Non-segmental assets | 25,820 | 21,927 |
Total assets (IFRS) | 1,340,158 | 1,290,341 |
The major customers of the Group are government-related entities. The amounts of revenue from such entities are disclosed in Note 5. The Group has no other major customers with the revenue over 10 percent of the Group revenue.
Note 31. Gain on disposal of assets
On 26 December 2018, as a part of the UNEG asset consolidation process, the Group concluded the exchange contract with JSC “Far Eastern Energy Management Company” (goverment-controlled entity). The Group transferred property, plant and equipment, accounts receivable, and a promise to pay cash in installments up to 2024 in exchange for UNEG property plant and equipment. The exchange was completed on 1 January 2019.
For the year ended 31 December 2019, the Group recognised gain on disposal of the assets amounted to RR 10,444 million in the consolidated statement of profit and loss and other comprehensive income.