OREANDA-NEWS. December 26, 2016. A meeting of the Companys Board of Directors was held on 20 December 2016, which approved the Companys Business Plan, including the Investment Program for 2017.

The Business Plan for 2017 is formed taking into account the forecast of socio-economic development of the Russian Federation for 2017-2019 (hereinafter the Forecast), prepared by the Ministry of Economic Development of Russia. Scenario conditions for the formation of the Business Plan for 2017 in most branches provide for growth of an average joint operation tariff for electricity transmission services within the Forecast parameters. According to the Business Plan by the end of 2017 operating costs per unit of electrical equipment operation and maintenance in line with the Strategy of Development of electric grid facilities of the Russian Federation should be reduced by at least 25%, adjusted for inflation to the level of 2012.

Indicators of the Companys Business Plan for 2017:

Data in bln RUB, unless specified otherwise

Indicators

Expected fact for 2016

Planned for 2017

Change, %

Revenue (total), including:

85,3

86,8

1,8%

Revenue from electric energy transmission

83,1

84,5

1,7%

Revenue from grid connection

1,3

1,3

0,0%

Other revenue

0,9

1,0

11,1%

Cost of sales

75,8

76,6

1,1%

Sales profit1

9,5

8,1

-14,7%

EBITDA2

16,5

17,4

5,5%

Net profit

1,1

1,4

27,3%

Amount of electric energy transmitted, billion kWh

55,2

50,6

-8,3%

Electric energy losses, %

9,49%

10,21%

0,72 p.p.

Electric energy losses (in comparable conditions of 2016), %

9,49%

9,30%

- 0,19 p.p.

Indicators

Expected fact at 31.12.2016

Planned for 31.12.2017

Change, %

Loans and credits

43,9

42,8

-2,5%

Net debt3

43,4

42,3

-2,5%

Net debt/EBITDA

2,6

2,4

-7,7%

[1] Revenue net of costs, selling and administrative expenses

[2] EBITDA is calculated as follows: net profit + profit tax and other similar mandatory payments + interest payable + depreciation charges

[3] Net debt is calculated as follows: long-term debt + short-term debt cash and cash equivalents short-term financial investments

Planned revenues for electric energy transmission services in the framework of the Business Plan for 2017 is 1.8% above the expected level by the end of 2016, due to increase of tariffs for electric energy transmission services from 1 July 2017, with termination of "last mile" contracts in the framework of the current legislation as a negative factor for the companys revenues. Planned value of grid connection revenues allows for growth in 2017 in the volume of connected capacity by 14% of the expected fact in 2016. The connected capacity volume growth is expected due to planned execution of large grid connection contracts in the Voronezh, Smolensk and Belgorod regions.

The increase of cost of sales relative to the expected fact in 2016 has been recorded significantly below the forecast inflation rate for 2017. This was achieved thanks to tight control over the level of operating expenses. Pursuant to the Russian Federation Government Directive of 29.03.2016 2073p-P13, in 2017 decrease in operating expenses (costs) will be provided by not less than 3%, adjusted for inflation to the level of 2016.

Earnings before interest, taxes, depreciation and amortization (EBITDA) is projected at 5.5% higher than the expected outcome in 2016 and will amount to 17.4 billion RUB. Implementation of the risk of increasing arrears for services rendered by the company can provide negative impact on the financial result. A positive factor for the company should be a reduction in the weighted average borrowing rate. Net profit for 2017 is projected at 1.4 billion RUB.

The projected value of the volume of electric energy transmission services according to the Business Plan for 2017 will decrease by 8.3% and will be 50.6 billion kWh. The main reason for a significant change in the indicator is the termination of "last mile" contracts in the Belgorod, Lipetsk and Kursk regions. The size of planned relative value of losses, calculated in comparable conditions of 2016, is lower than the expected fact in 2016 by 0.19 p.p. and is 9.30%.

The approved Business Plan for 2017 is fully consistent with the companys facing problems and challenges. Despite the presence of risk factors beyond the management control, the company will continue uninterrupted work aimed at improving the quality and reliability of electricity supply, while maintaining financial stability, and making every effort to maintain dividend payments to its shareholders.