2014 Annual report

Assets and Liabilities

The main parameters of property of JSC IDGC of the North-West and sources of their funding are shown according to RAS data for 2010-2014.

In 2013-2014, there were the following material events that affected changes of the entire financial and business operations:

Asset structure and dynamics, mln
Indicator 2010Indicators for 2010 are shown in accordance with the annual accounting statements for 2011. 2011Indicators for 2011–2013 are shown in accordance with the annual accounting statements for 2013. 2012Indicators for 2012–2014 are shown in accordance with the annual accounting statements for 2014. 2013 2014
Intangible assets 1 1 1
Results of research and development 8 8 8
Fixed assets 30,933 33,354 37,001 39,648 40,925
Income-bearing investments in material valuables -
Long-term financial investments 70 56 39 39 393
Deferred tax assets 155 192 450 714 844
Other non-current assets 27 18 269 393 376
Non-current assets 31,186 33,620 37,767 40,802 42,547
Inventory 796 887 827 849 793
VAT on valuables acquired 42 114 109 268 167
Accounts receivable 4,629 4,446 5,929 12,279 14,877
Short-term financial investments 42 66 66 1,045
Cash 1,132 1,485 657 773 975
Other current assets 485 476 287 327 502
Current assets 7,084 7,450 7,875 14,562 18,358
Total assets 38,270 41,070 45,642 55,364 60,905

The greatest share is that of non-current assets, 96% of which are fixed assets. Such a significant prevalence of non-current assets is due to the nature of business of JSC IDGC of the North-West, which is a capital-intensive industry and requires significant investment in fixed assets. The greatest increase of fixed assets (9% annual average) was in 2011-2013 due to the post-crisis economy rise, “recharge” of the parameters of RAB regulation of branches, and the resulting increase of capital investments. In 2014, the growth rates reduced down to 3% due to worse macroeconomic conditions, liquidity shortage in the banking sector, and review of investment program funding sources.

In 2010-2014, the share of non-current assets in total assets decreased from 81% down to 70%. The greatest part of current assets of the Company (81%) is accounts receivable.

The increase of accounts receivable in 2014 amounted to RUB 2,598 million and is related to systemic impairment of payment discipline of consumers, breach of contractual liabilities, one of the reasons of which is change of the macroeconomic conditions and liquidity shortage in the banking sector.

The increase of total financial investments in 2014 was affected by the deposits made with the St. Petersburg Shareholder Commersical Bank Tavrichesky (JSC) (hereinafter referred to as the Bank) in the amount of RUB 3,000 million. Due to the fact that on 11.02.2015, external management was imposed at the Bank and the functions of temporary administration were delegated to the Deposit Insurance Agency (hereinafter referred to as DIA), which is taking a set of steps to prevent bankruptcy of the Bank. According to clause 9 of the Accounting Statute 7/98, the Company evaluates the introduction of external management as an event after the reporting date, which affects the evaluation of the book the Bank of deposits in the 2014 financial statements. In March 2015, an investor for financial rehabilitation of the Bank was selected at a tender and a plan of debt restructuring was developed, pursuant to which the Company expects a part of the deposit to be repaid in 2015, while the remaining part will be repaid after 20 years. Based on the calculated value of economic benefits from the abovementioned financial investments and the risk of their impairment, the Company established a provision for impairment of financial investments as at 31.12.2014 in the amount of RUB 1,665 million.

Dynamics and structure of liabilities, RUB mln
Indicator 2010Indicators for 2010 are shown in accordance with the annual accounting statements for 2011. 2011Indicators for 2011–2013 are shown in accordance with the annual accounting statements for 2013. 2012Indicators for 2012–2014 are shown in accordance with the annual accounting statements for 2014. 2013 2014
Authorized capital 9,579 9,579 9,579 9,579 9,579
Own shares repurchased from shareholders
Reassessment of non-current assets 16,046 16,018 15,917 15,876 15,851
Surplus capital (with no reassessment) 1,318 1,318 1,318 1,318 1,318
Reserve capital 344 344 365 368 383
Undistributed profit (uncovered loss) in the reporting year –596 –157 226 520 –166
Equity 26,691 27,102 27,404 27,661 26,965
Long-term credits and loans 4,372 6,148 10,629 13,953 14,913
Deferred tax liabilities 1,236 1,443 1,808 2,431 2,610
Assessment liabilities 0
Other long-term obligations 301 227 325 1,052 516
Long-term liabilities 5,909 7,818 12,763 17,437 18,039
Short-term credits and loans 279 80 19 2,777 3,539
Short-term accounts payable 4,854 5,094 4,278 6,526 11,764
Deferred income 46 42 38 34 31
Assessment liabilities 491 934 1,140 929 567
Other short-term liabilities 0 0
Short-term liabilities 5,670 6,150 5,475 10,266 15,901
Total liabilities 38,270 41,070 45,642 55,364 60,905

Following performance in 2014, the Company’s assets did not undergo any significant structural change, but in the examined period (2010-2014), the ratio shifted towards borrowed sources and short-term liabilities and redistributed as follows:

The structural changes and dynamics of the Company’s liabilities depend directly on the changes in the asset part of the balance sheet. The increase of accounts receivable of consumers causes an increase of accounts payable to counterparties and extra borrowings.

As at 31.12.2014, the equity of JSC IDGC of the North-West amounted to RUB 26,965 million, which is a 696 million less than the same value in 2013. The main reason for the change of the Company’s equity is the negative change of the financial result on the results of 2014, which was caused by the establishment of the provision for impairment of financial investments in the amount of RUB 1,665 million based on the conditions of measures for preventing the bankruptcy of Bank Tavrichesky that are being taken by the Central Bank of Russia.

Dynamics and structure of liabilities in 2010–2014, mln
Название графика
Structure of accounts receivable, RUB mln
Indicator 2010 2011 2012 2013 2014
Accounts receivable 4,629 4,446 5,929 12,279 14,877
Accounts receivable (payments are expected in over 12 months after the reporting date) 203 148 95 56 255
trade receivables (buyers and customers) 32 28 19 16 201
debt of subsidiaries and affiliates 1 1 0
advances paid 171 119 75 40 55
Accounts receivable (payments are expected within 12 months after the reporting date) 4,426 4,298 5,834 12,223 14,621
trade receivables (buyers and customers) 3,697 3,539 5,036 11,460 13,696
debt of subsidiaries and affiliates 82 106 94 248 205
advances paid 647 653 704 515 720

As at 31.12.2014, the accounts receivable of the Company amounted to RUB 14,877 million and its change over the periods had the following dynamics:

In five years, the composition of accounts payable has not changed much, and buyers and customers are still its main components; in addition, their share in the total accounts receivable increased from 80% to 93%.

In the structure of buyers and customers, 97% of the debt is distributed as follows: 73%, electricity transfer services (GS, TGCo, direct consumers), 24% sale and resale of electricity (end consumers), while the remaining 3% are buyers and customers on miscellaneous activities.

In 2010-2014, the debt of buyers and customers increased from RUB 3,729 million to RUB 13,897 million. Most of the increase occurred in 2013 and was due to two main factors, namely, the acquisition of guaranteed supplier functions and breach of liabilities by major consumers including JSC Arkhangelsk Sales Company, JSC Vologda Sales Company (managed by JSC Mezhregionsoyuzenergo) and JSC Severstal (the biggest direct consumer in the Vologda Region). In 2014, the debts continued growing, but the implemented debt recovery measures made it possible to slow it down. Macroeconomic problems and difficulties in the banking sector added to the default growth, also at the account of consumers that had no long-overdue payments before.

As at 31.12.2014, the Company had established a bad debt provision in the amount of RUB 2,096 million including RUB 1,662 million for electricity transfer services. The reserved amount of bad debts covers 14% of the total accounts receivable and is shown in the balance sheet as its decrease.

Dynamics of accounts receivable in 2010-2014
Название графика

The Company is implementing a whole set of steps for reducing the accounts receivable, in particular:

In addition to the above, a number of steps have been taken to raise the efficiency of operations as adopted by the Order of JSC IDGC of the North-West of January 12, 2015 No.1. In the framework of this Order, regional commissions on monitoring of the situation with payments for electricity and electricity transfer services are operating, the objective of which is improving the payment discipline of consumers and settling mutual claims between participants of the sector of electricity production, consumption, and transmission.

Structure of accounts payable, RUB mln
Indicator 2010 2011 2012 2013 2014
Accounts payable 5,155 5,321 4,604 7,578 12,281
Other long-term obligations (without taking into account credits and loans) 301 227 325 1,052 516
Trade payables (suppliers and contractors) 2 9 29 69 73
Other long-term obligations 299 218 296 983 443
Accounts payable (without taking into account credits and loans) 4,854 5,094 4,279 6,526 11,765
trade payables (suppliers and contractors) 2,074 2,390 2,075 3,649 7,628
wages payable to employees 270 298 296 336 344
debt to state and non-budgetary funds 65 99 119 142 141
debts with regard to taxes and levies 535 274 190 670 810
advances received 1,783 1,868 1519 1542 2565
Other creditors 127 165 80 188 276
Dynamics of accounts payable in 2010-2014
Название графика

On the results of 2014, the accounts payable amounted to RUB 12,281 million and increased by RUB 4,703 million.

The structure of the total accounts payable in the examined period was presented by the following three main components, namely, the debt to suppliers and contractors, advances received, and miscellaneous liabilities. On the results of 2014, the following changes occurred:

The increase of debt to suppliers and contractors in 2014 was due to unstable payment discipline of the main consumers and difficulties in the banking sector, which in is turn caused a delay of payment of liabilities to creditors.

Advanced received increased at the account of advance payments for services of grid connection to grids. The greatest applicants for grid connection to the Company on the results of 2014 were as follows:

In essence, advances for technical are not liabilities payable but a source of funding non-current assets and expanding production capacities for connecting consumers to distribution grids and will be repaid (set off) after full discharge of the parties’ liabilities and the fact of grid connection of the consumer to the grid.

The main factor affecting the amount of accounts payable is the amount of payments f accounts receivable. Payments of accounts receivable and subsequence payments of accounts payable depending on the amount of claimed debts and on the timeliness of claims.

For the Company’s debtors and creditors, 2014 was marked by macroeconomic changes and financial and economic consequences of tension in the national banking sector. Despite all the difficulties, the Company management aims to comply with all of its liabilities and preventing any increase of debt to creditors, which is achieved by organization of settlements between its counterparties by the following steps: