Annual report 2014

RU Go to Lenenergo

The Company’s position in the industry

The strategy of Lenenergo is aimed at ensuring reliable, high-quality and affordable power supply of consumers, shaping and developing grid infrastructure, maintaining a high level of efficiency, developing scientific and innovation capacity, and increasing investment appeal of the Company.

Major trends in the global economy and macroeconomic situation in Russia

According to IMF, global growth in 2014 remained at the level of 2013 amounting to 3.3%. However, GDP of advanced market economies increased up to 1.8% (in 2013 to 1.3%), and GDP of emerging market economies decreased to 4.4% (in 2013 to 4.7%). The growth in world trade volumes declined from 3.4% in 2013 to 3.1% in 2014.

Macroeconomic conditions in Russia significantly worsened in 2014: GDP growth slowed to 0.6% compared with 1.3% in 2013. See World Economic Outlook (Cross Currents), January 2015 low rates of economic growth have not been noted since 2009.

Multidirectional dynamics was marked on other significant macroeconomic indicators. According to the Federal State Statistics Service.The growth of industrial production, the factor defining electricity demand, accounted for 1.7% in 2014 versus 0.4% in 2013. Fixed capital expenditures in 2014 increased by almost 0.6% to RUB 13,527.6 bn compared to the level of 2013.

Throughout the year, there was a slowdown in consumer demand, resulting in the growth of retail sales in 2014 slowed to 2.5% compared to 3.9% Key indicators of social and economic development of Russia (according to the Ministry of Economic Development) 2013. The volume of Russian export decreased by 5.8% y-o-y.

Dynamics of key macroeconomics indicators in five years

GDP at current prices, RUB bn

GDP at current prices, RUB bn

IPI, % y-o-y

IPI, % y-o-y

Fixed capital expenditures, RUB bn

Fixed capital expenditures, RUB bn

CPI, % december-on-december

CPI, % december-on-december

Data of the Federal State Statistics Service, World Economic Outlook (Cross Currents) by the International Monetary Fund for January 2015, monitoring of the Ministry of Economic Development of the Russian Federation (Key indicators of social and economic development of Russia, February 2015) and Appendices hereto were used when writing the content of the Annual Report

Change of macroeconomic indicators of Russia in 2013-2014
Actual gross payroll According to preliminary data of the Federal State Statistics Service+1,3
Real income According to preliminary data in materials of the Ministry of Economic Development.–0,7
Goods intended for sales in domestic market (December 2014 in % to December 2013).PPI (Producer Price Index) +2,2 п. п.
December 2014 in % to December 2013CPI (Consumer Price Index) +4,9 p. p.
Import –5,8
Export –9,2
Retail sales +2,5
Fixed capital expenditures +0,57
Agricultural production index According to preliminary data. Production indexes across the Russian Federation with a view of ensuring comparability are calculated without data on the Republic of Crimea and the city of Sevastopol.-2,1 p. p.
IPI (Industrial Production Index) Aggregated index of production by types of economic activities: Mining, Processing productions, Production and distribution of electric power, gas and water (including amendments on informal activity).+1,3 p. p.
GDP at current prices According to the Federal Service of State Statistics. Data for 2014 are presented including data on the Crimean Federal district.+7.9
GDP at constant prices According to the Federal Service of State Statistics. Data for 2014 are presented including data on the Crimean Federal district.+0,6
Structure of the electric power industry in Russia

The electric power complex of Russia at present includes about 700 power plants with a unit capacity of over 5 MW constituting the Unified energy system.

Structure of the electric power industry in Russia

1 Backbone electricity generators.

The Unified energy system of Russia consists of 69 regional energy systems, which in turn form the seven united energy systems of East, Siberia, Ural, Middle Volga, South, Center and North-West, located on the territory of 79 subjects of the Russian Federation. The power supply systems of UES of Russia are connected by the intersystem high voltage power lines (220-500 kV and above) and perform parallel operation in the synchronous mode. Grid facilities of UES of Russia amount to more than 10,700 transmission lines 110-1,150 kV.

Major branch infrastructure organizations

System Operator of Unified Energy System, JSC — a specialized organization that is solely responsible for the centralized operational dispatch management (ODM) of the Unified energy system of Russia (

Council for Organizing Efficient System of Trading at Wholesale and Retail Electricity and Capacity Market, Non-profit Partnership (NP Market Council) — a non-profit organization uniting subjects of the power industry and large consumers of electric power on a membership basis (

Inter RAO UES Group — a diversified energy holding that operates generating and sales assets in Russia, Europe and the CIS. The company is the sole Russian operator of electricity export and import (

Russian Grids, JSC (JSC Rosseti) — the operator of power networks in Russia, one of the largest grid companies in the world that operates 2.2 million km of power lines and 473 thousand transformer substations with a capacity of more than 743 GW. The property complex of Rosseti includes 43 subsidiaries and dependent companies, including 14 interregional companies and one trunk grid company. The controlling shareholder is the state represented by the Federal Agency for state property management of the Russian Federation. Rosseti is the main shareholder of Lenenergo (

Key indicators of the electric power industry of Russia

As at 31 December 2014, the total installed capacity of power plants of the country was 240.3 GW, which is almost 3% above the end of 2013 exceeding the maximum load in 1.53 times.

Due to the input throughout the year of a number of power facilities, including commissioning of the third unit of Rostov NPP-2 and launch of the hydraulic units 7-9 of Boguchanskaya HPP, the gain of new capacities in Russia in 2014 amounted to 6,693 MW, which is more than 66% above the level of 2013 (4,018 MW). At the same time, the power plants of UES of Russia have decommissioned 1,762.6 MW of inefficient and out-of-date generating equipment.

Installed capacity of the existing power plants had the following breakdown by types of generation in 2014: heat power plants — 68.24%, hydroelectric power plants — 20.60%, and nuclear power plants — 11.16%.

Annually, all power plants in the country produce over a trillion kilowatt hours of electricity. In 2014, electricity production amounted to 1,047.4 bn kWh, which is slightly higher than in 2013.

According to the Ministry of Power Industry, in 2014, Russia’s share in global electricity generation remained at the level of 2013, amounting to 4.7%, which corresponds to the fifth largest in the world after Japan, USA, China and India.

Structure of installed capacitySee official website of UES of Russia / of power plants of the UES of Russia as at the end of 2014, %

Structure of installed capacity, %

Structure of electricity generationSee official website of UES of Russia / by types of power plants of the UES of Russia in 2014, %

Structure of electricity generation, %

Electricity generationPresentation of the Ministry of Power Industry on performance results of the fuel and energy complex of Russia in 2014., bn kWh

Electricity generation

Electricity consumption in 2010-2014Information review Unified energy system of Russia: intermediate results (operative data), December 2014., bn kWh

Electricity consumption in 2010–2014

Dynamics of electricity consumptionInformation review Unified energy system of Russia: intermediate results (operative data, December 2014. in the UES of Russia in 2014 by months, bn kWh

Dynamics of electricity consumption

Dynamics of investmentsPresentation of the Ministry of Power Industry on performance results of the fuel and energy complex of Russia in 2014 (preliminary data on 2014) in generation and the grid complex development, RUB bn

Dynamics of investments

According to the Ministry of Power Industry of the Russian Federation, total investments of power grid and generating companies in the development of generation and grid complex in 2014 decreased by 5.5% y-o-y and amounted to RUB 819 bn. The largest decline (by almost 6.7%) to RUB 321.7 bn was marked among grid companies, while generating companies reduced their investments by 4.7% to RUB 497.7 bn.

Integrated power system of the North-West

The united energy system (UES) of the North-West includes eight power supply systems located throughout ten regions of the Russian Federation in the Northwest Federal District: St. Petersburg, Murmansk Region, Kaliningrad Region, Leningrad Region, Novgorod Region, Pskov Region, Arkhangelsk Region, Republic of Karelia, Republic of Komi, and Nenets Autonomous district. The area of the operating zone of the joint dispatch management of the North-West covers 1,533.4 thousand sq. km, the cities and towns of which are populated by 13.7 million people.

The operating zone of the Leningrad regional dispatch management includes power supply systems of St. Petersburg and the Leningrad Region.

At the end of 2014, the power grid complex consists of 125 power stations (including 101 power stations of 5 MW and above) with total installed capacity of 23,286 thousand MW, 1,089 electrical substations 110-750 kV with total installed capacity of 86,913.6 MVA, and 1,412 power lines 110-750 kV with total length of 44,105.4 km in single circuit.

In 2014, the volume of electricity generated by power stations of the operating zone of the joint dispatch management of the North-West amounted to 102.5 bn kWh, up by 1.4% y-o-y. Electricity consumption in the reporting period in UES of the North-West was 0.5% above the level of 2013, and amounted to 90.8 bn kWh.

Regions of activity

Lenenergo is one of the largest distribution grid companies of Russia serving a capacious market (territory of St. Petersburg and the Leningrad Region). The situation in economy of the country and the region has a significant influence on Lenenergo development, thus the Company is continuously monitoring the economic development of the region.

Key indicators of social and economic development of the Company’s regions of service in 2014
Indicator St. Petersburg Leningrad Region
CPI, December 2014 / December 2013, % 113,76 111,73
Growth, December 2014 / December 2013, p.p. +8,35 +6,74
For reference: Growth, December 2013 / December 2012, p.p. +0,39 –0,62
IPI in 2014, % 91,8 100,1
Growth, 2014/2013, p.p. –7,8 +4,5
For reference: Growth 2013/2012, p.p. –5,1 –10,1
Real income in dynamics
January-December 2014 / January-December 2013, % +2,9 –3,6
For reference: January-December 2013 / January-December 2012, % +7,6 +0,1
Execution of the consolidated budget for 2014, RUB bn, including:
income 433 635 97 259
growth by 2013, % +6,1 +35,1
expenses 448 181 83 199
growth by 2013, % +13,9 +7,2
Public debt of the subject as at 31.12.02014, RUB mln 14 625,29 10 880,58
Growth by 2013, % –21,6 +85,5
Foreign trade turnover (goods), USD mln, including: 50 238 19 743
By January-December 2013, % –7,1 +7,7
Export 20 321 15 511
By January-December 2013, % +6,2 +15,8
Import 29 917 4 232
Fixed capital expenditures for January-December 2014, RUB bn 502,6 178,8
By January-December 2013, % +1,8 –30,7
Commissioning of residential buildings, total area, thousand sq. m 3 261,8 1 787,6
By January-December 2013, % +26,3 +31,4

Data of the Federal State Statistics Service, territorial body of the Federal State Statistics Service over St. Petersburg and the Leningrad Region (Petrostat), Committee of finance of St. Petersburg, the official website of Administration of the Leningrad Region ( and St. Petersburg (, the website Open budget of the Leningrad Region (, including on the basis of operational data of statistical reporting were used when writing the content of this report. The methodology for determining most of the indicators is placed on the Petrostat’s official website at

St. Petersburg

The largest enterprises and organizations of the Northwestern Federal District are located in St. Petersburg. The economy of St. Petersburg is characterized by a diversified structure, a high level of development of financial and banking infrastructure, competitiveness of a number of industries, the presence of modern trade network and capacious consumer market.

In 2014, the dynamics of regional macroeconomic indicators was multidirectional. Thus, IPI decreased and CPI was up. Foreign trade turnover decreased by 7.1 % compared to 2013, which was mainly due to significant reduction of import (by 14.3 %). Concurrently, export of the region considerably grew by 6.2%.

At the same time, positive trends were marked in the dynamics of real income and fixed capital expenditures. The indicator of commissioning of residential buildings was also significantly up by 26.3%.

As of the end of the reporting period, public debt of the region decreased by 21.6% compared to 2013, and amounted to RUB 14.6 bn.

Leningrad Region

The Leningrad Region is one of the most economically successful regions of the Russian Federation. Large facilities in machine building, metallurgy, chemical and agricultural industries are located on its territory. In 2014, revenue of the region increased significantly by over 35% to more than RUB 97 bn. At the same time, public debt of the region increased to the level of 2013 by 85.5% to RUB 10.9 bn. The growth of CPI and decreased real income were noted.

Foreign trade turnover of the Leningrad Region grew by 7.7% and amounted to USD 19.7 bn. Increased export by 15.8% and reduced import by 15% were noted in the structure of foreign trade turnover. In the reporting period, fixed capital expenditures significantly dropped (by 40.7%) compared to 2013, and commissioning of residential buildings grew by 31.4%, and amounted to 1,787.6 thousand sq. m.

Competitive environment

Three levels of grid companies have developed in the Russian power industry

Lenenergo operates at the second level of the energy system as a major network company in the territory of two regions with separate tariff regulation — St. Petersburg and the Leningrad Region.

Electricity is supplied to the grid of Lenenergo form the branch of FGC UES — MES of North-West and generating companies. The services on electric power transmission are rendered to guaranteeing suppliers, independent power sales companies and direct consumers — participants of the wholesale electricity market.

Major consumers are sales companies JSC Petersburg Sales Company (75.5% of total productive supply of Lenenergo), LLC Rusenergosbyt (4.95% of total consumption) and JSC RKS-energo (8.5% of total consumption).

The Company also renders services in technological connection.

Thirty four sales companies operate on the territory of St. Petersburg and the Leningrad Region, including four guaranteeing suppliers. To perform its obligations on electricity transmission to the consumers of the region Lenenergo uses the services of 51 third-party network companies.

At present, competition between network companies in the region is practically absent. Networks 0.4–10 kV are owned by regional and local networking organizations. At the regional level there is competition between Lenenergo and territorial grid organizations (TGOs).

In addition to Lenenergo, activities on electricity transmission are carried out by 19 territorial grid organizations in St. Petersburg and 31 organizations in the Leningrad Region.

Along with Lenenergo, technological connections of consumers in St. Petersburg and the Leningrad Region are performed by JSC St. Petersburg Electric Networks, the branch of FGC UES — MES of North-West, JSC Leningrad Regional Managing Electric Grid Company (LOESK), and a number of third-party network companies.

Market share of Lenenergo

The share of Lenenergo in the electricity transmission market of St. Petersburg and the Leningrad Region in 2014 accounted for 71.1%, up by 5.4 p.p. y-o-y. The growth was due to reduction in consumption by large enterprises of the electricity supplied by territorial grid organizations (TGOs), and leaving of some TGOs’ consumers connected under the scheme of the so-called “last mile”.

The market size is calculated as total amount of electricity consumption by own consumers of power sales companies which perform their activity in St. Petersburg and the Leningrad Region, including the consumers directly connected to the power installations of generating companies.


Market indicators of Lenenergo peers, interregional distribution grid companies, formed as a result of the reform of RAO UES and currently operating in various regions of the Russian Federation as subsidiaries of Rosseti, are considered in the analysis of Lenenergo position. The companies do not compete among themselves directly as they serve different geographical market segments. The regional distribution grid companies operate in similar market conditions within the general tariff policy, therefore, all key market and country economic factors equally influence activities of all market players. At the same time, situation and prospects of development of each company are closely related to the features of an economic situation in the regions of their performance. It is necessary to consider that demand for electric power in Russia considerably differs between regions and settlements. Nevertheless, comparison of indicators of these companies allows receiving the idea of complex development as a whole and about the place of certain players in the system of the distribution grid complex of the Russian power sector in particular.

In 2014, the companies of the power grid complex were adversely affected by political and economic events, which led to slower growth in electricity prices, increase in accounts receivable, overlapping channels of external financing and increased cost of credit resources, as well as reduction of investment programs. The number of regions where the mechanism of the so-called “last mile” acts that led to decline in revenues of power grid companies decreased.

In the reporting period, according to IFRS financial statements Lenenergo ranks second among Russian peers in Book value of assets, eighth — in Revenue, second — in EBITDA and EBITDA margin, and eighth — in Net profit. The Company ranks eighth in Market capitalization.

For comparison, the companies included in the Group of JSC Russian Grids whose shares are traded on the Moscow Exchange are given below.
Along with Lenenergo, other regional distribution grid companies are as follows: ROSSETI stake in the charter capital of SDCs
MOESK (50.90%); 50,90 %
IDGC of Centre (50.23%); 50,23 %
IDGC of Centre and Volga (50.4%); 50,40 %
IDGC of Ural (51.52%); 51,52 %
IDGC of Siberia (55.59%); 55,59 %
IDGC of Volga (67.63%); 67,63 %
IDGC of North-West (55.38%); 55,38 %
IDGC of South (51.66%); 51,66 %
IDGC of North Caucasus (92.00%); 92,00 %
Tomsk Distribution Company (TRK) (85.77%); 85,77 %
Kubanenergo (92.24%). 92,24 %

Key operating indicators

Installed capacity,

Installed capacity

Productive electricity supply, mln kWh

Productive electricity supply

Market capitalization on MICEX Stock ExchangeAccording to data of MICEX Stock Exchange as at 30 December 2014, RUB bn

Market capitalization on MICEX Stock Exchange

Comparison of Lenenergo with its peers under IFRS financial statements for 2014According to financial statements prepared under IFRS.

Book value of assets, RUB bn

Book value of assets

Revenue, RUB bn


Net profit/loss, RUB bn

Net profit/loss

EBITDA EBITDA is calculated as profit before tax plus financial expenses minus financial income plus depreciation of fixed assets and intangible assets. At the EBITDA calculation adjustments on non-monetary items were not considered., RUB bn


Factors of Lenenergo investment appeal

Position of a natural monopoly in stably emerging market of St. Petersburg and the Leningrad Region.

Approved dividend policy and positive dividend history.

Diversified base of consumers including large-scale industry, medium and small enterprises and population.

Effective implementation of the large-scale investment program directed on renovation of power facilities and providing opportunities for business development.

Individual approach of regulators to establishment of the long-term parameters of tariff regulation for the purpose of creation of sources for implementation of the investment program.

Strong reputation of the diligent borrower confirmed with a long-term credit rating of Moody’s at Ba2 (negative) on the international scale.

Status of the backbone enterprise.

Support of significant investment projects from the state, including by participation in their financing.

High potential of operational efficiency increase due to the implementation of the programs on costs reduction, increase of power efficiency and innovative development.

Strong team of skilled managers: the Company is headed by highly qualified, experienced and trained employees.