GAZPROM’S POWER GENERATION STRATEGY Denis Fyodorov Directorate Head, Gazprom Director General, Gazprom Energoholding PRESS CONFERENCE AS PART OF GAZPROM’S ANNUAL GENERAL SHAREHOLDERS MEETING
Gazprom Energoholding: 2015 Highlights Operating activities Financial results 152.2 bln kWh RUB bln 145.0 454.3 454.7 Electricity output decreased by Revenues under RAS changed 4.7% versus 2014 insignificantly versus 2014 2014 2015 2014 2015 120.2 111.9 RUB bln mln Gcal 63.5 Heat supply* dropped by EBITDA under RAS rose by 20% 52.9 6.9% versus 2014 versus 2014 +20% *Including MOEK output 2014 2015 2014 2015 Investments Major events New units commissioned under CSAs: Dividend payouts grew to 35% of net profit Combined cycle gas turbine units at Serov SDPP operated Gazprom Energoholding assumed functions of sole executive by OGK-2 (420 MW), CHPP-12 operated by Mosenergo body in Mosenergo and MOEK (220 MW), and CHPP-20 operated by Mosenergo (420 MW) Stock prices have been growing since early 2016 Reconstructed steam turbine unit, with its capacity increased to 330 MW, at Ryazan SDPP operated by OGK-2 Gazprom Energoholding and Tsentrenergoholding have sold By late 2015, investment program was implemented to 84% in non-core assets in 2015 and 2016 physical terms and 87% in monetary terms GAZPROM’S POWER GENERATION STRATEGY 2
Production Results in 2015 Electricity output 166.9 159.0 152.2 145.0 Generation by Mosenergo decreased by 3.4% in 2015 versus bln kWh 2014. Heat supply by Mosenergo plants increased by 1.9% in 2015 versus 2014 mostly because of transferring control over several MOEK-owned boiler houses to Mosenergo. Changes 2012 2013 2014 2015 2015/2014 Mosenergo (3.4%) 61.3 58.6 56.7 54.7 TGC-1 30.4 29.3 26.4 25.8 (2.3%) Electricity generation by TGC-1 (including Murmansk CHPP) dropped by 2.3% versus 2014 due to stagnating electricity OGK-2 75.2 70.7 68.7 64.4 (6.3%) consumption and optimized generation process. MOEK* (70.5%) – 0.4 0.4 0.1 Heat supply by TGC-1 (including Murmansk CHPP) fell by 5.4% versus 2014 due to higher mean temperature during heating Heat supply period. 120.2 111.9 108.0 mln Gcal 101.1 Changes 2012 2013 2014 2015 2015/2014 Generation by OGK-2 reduced by 6.3% versus 2014 after adoption of strategy for optimizing capacity utilization of Mosenergo 68.4 67.6 70.3 71.7 1.9% inefficient units (such as Stavropol SDPP, Pskov SDPP, etc.) TGC-1 26.4 25.3 24.3 23.0 (5.4%) Heat supply by OGK-2 plants declined by 8% versus 2014 OGK-2 6.3 6.8 7.1 6.5 (8.0%) mostly owing to abnormally warm winter in Russia MOEK* – 8.3 18.3 10.7 (41.5%) *MOEK data consolidated since 2013 GAZPROM’S POWER GENERATION STRATEGY 3
Financial Results (RAS*) Gazprom Energoholding’s revenues of 2015 stood at almost RUB MOEK OGK-2 TGC-1 Mosenergo 455 bln inclusive of MOEK results. Revenues Gazprom Energoholding’s EBITDA was RUB 63.5 bln showing RUB bln 20% rise versus 2014. 454.3 454.7 Main growth drivers: ― commissioning of new efficient capacities at CHPP-12 and 338.2 324.0 158.8 164.5 CHPP-16 of Mosenergo, cost optimization, and mitigation of losses from revaluation of foreign currency loans; 154.1 70.6 71.2 155.4 ― higher performance of TGC-1 thanks to optimizing use of fuel 116.0 112.1 and reducing utilization of inefficient units; 72.5 64.5 ― cutting of operating costs in MOEK and income growth from 111.6 104.1 108.8 106.8 asset sale and disposal. 2012 2013 2014 2015 EBITDA Net profit 15.8 15.2 RUB bln RUB bln 3.8 11.7 63.5 8.0 7.8 1.4 6.4 52.9 3.5 47.4 3.2 43.1 3.4 24.1 2.8 5.7 16.1 4.5 4.0 3.0 22.7 21.2 13.8 13.3 -0.5 -6.9 8.5 13.9 11.8 11.8 17.1 10.1 10.8 11.7 2012 2013 2014 2015 2012 2013 2014 2015 * TGC-1 results under RAS include Murmansk CHPP results (revenues – RUB 6.1 bln, EBITDA – RUB 0.6 bln, net profit – RUB 81 mln) GAZPROM’S POWER GENERATION STRATEGY 4
Gazprom Energoholding’s Debt Burden In 2015 aggregate debt of Gazprom Energoholding’s companies amounted to RUB 160.6 bln, thus surpassing 2014 level by 5.2% Rise in debt burden was mainly caused by acquisition of loans for OGK-2 Debt (RAS) 160.6 152.6 RUB bln 92.8 78.7 Changes 2012 2013 2014 2015 2015/2014 Mosenergo 1.2% 18.1 24.9 48.6 49.2 TGC-1* (4.7%) 37.3 33.4 30.3 28.8 OGK-2 31.6% 23.3 34.6 47.1 61.9 MOEK (22.5%) 26.7 20.7 Total debt 78.7 92.8 152.6 160.6 5.2% Debt/EBITDA 1.8x 2.0x 2.9 х 2.5 х Loans were acquired for investment program and will be paid off in parallel to completion of construction projects under CSAs * TGC-1 results under RAS include Murmansk CHPP results (debt – RUB 2.9 bln as of December 31, 2015) GAZPROM’S POWER GENERATION STRATEGY 5
Execution of CSA Investment Program Total budget of CSA program exceeds RUB 400 bln, with 87% of it already funded Total capacity of newly commissioned facilities is over 7 GW (84% of investment program), around 1 GW of capacities will be put in operation in 2016 at Novocherkassk SDPP and Troitsk SDPP of OGK-2 as well as at Tsentralnaya CHPP of TGC-1 CSA program for capacities CSA program for financing, Unused funds from CSA program, Facilities commissioned commissioning, progress as of progress as of December 31, 2015 RUB bln incl. VAT in 2015 December 31, 2015 0 3% Combined cycle 7 420 MW gas turbine unit at CHPP-20 2 Combined cycle 100% Commissioned 97% 220 MW gas turbine unit at Planned 2015 2016 2017 CHPP-12 7% 5% 5 4 95% 93% Commissioned Planned 2015 2016 2017 25 Reconstruction of 24% +60 MW steam turbine unit 31% 15* at Ryazan SDPP Combined cycle Commissioned 420 MW gas turbine unit at 76% Planned 69% 2015 2016 2017 Serov SDPP *Exclusive of funds for CCGTU-420 at Grozny TPP GAZPROM’S POWER GENERATION STRATEGY 6
Gazprom Energoholding’s Dividends Dividend calculation principle at Gazprom Energoholding Keeping balance between debt servicing and dividend payout. Income growth upon completion of CSAs Debt burden Investment program Gazprom Energoholding accounts for investments to be made within next 2 to 3 years Dividends: history / debt burden of Gazprom Energoholding 2,244 1,584 Dividend amount, 6.9% 5.8% 4.9% 4.9% 1,188 1,188 RUB mln 4.6% 937 861 869 600 644 396 469 2.5% 188 2.3% 2.4% 1.6% 57 0 0 Dividend yield 1.8% 1.8% 0.1% 0.5% (with regard to 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 MCap at year-end) 35% 35% 28% 25% 20% 20% Net profit share 20% 15% 14% 15% 11% under RAS 5% 5% earmarked for 0% 0% dividend payout 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Debt/EBITDA 2.0x 2.0x 7.3x (2015) Net profit share under RAS earmarked for dividend payout is growing annually GAZPROM’S POWER GENERATION STRATEGY 7
Execution of Cost Reduction Programs In order to boost value of its power generating assets, Gazprom Group takes steps to raise their operating efficiency and runs cost reduction programs meant to improve financial performance Optimization measures Optimization effect RUB mln 5,958 Enhancement of asset efficiency 653 4,979 Cost reduction 906 Mosenergo 461 1,685 Investment spending cuts TGC-1 Import substitution OGK-2 899 466 MOEK 1,576 Sale of non-core assets 3,938 498 1,929 Additional initiatives 730 348 2014 2015 2016P GAZPROM’S POWER GENERATION STRATEGY 8
Stock Price Growth Stock prices of all generating companies of Gazprom Energoholding demonstrate growth since early 2016 Price as of January 4, 2016 Company Price as of April 26, 180% 2016 Mosenergo: +77% Mosenergo RUB 0.8210 RUB 1.4465 160% TGC ‐ 1 RUB 0.0042 RUB 0.0051 OGK ‐ 2 RUB 0.2283 RUB 0.2900 140% OGK-2: +30% 120% TGC-1 +23% 100% 80% 60% January 1, January 15, January 29, February 12, February 26, March 11, March 25, April 8, 2016 2016 2016 2016 2016 2016 2016 2016 Source: Bloomberg GAZPROM’S POWER GENERATION STRATEGY 9
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