rushydro group 1q 2017 ifrs results & market update

RusHydro Group1Q 2017 IFRS results &

market update

June 7, 2017

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This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements and reflect the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the actual results of operations, financial condition and liquidity of the Company and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation.

By attending this presentation, you agree to be bound by the foregoing limitations.

2

Disclaimer

I. Key highlights & operating results

II. Financial results

IV. Market update

III. Segment review

Key highlights of 1Q 2017

4

Key figures

~187RUB bn

Financial debt of RusHydro Group after

repayment of RUB 55 bnof RAO ES East Subgroup

debt

4.66kop./share

Dividend for 2016 approved by the BoD in

May 2017

-2.0%reduction of

manageable cash costs in 1Q 2017

in real terms

55RUB bn

Equity raised from VTB to reduce the debt of RAO ES East subgroup

29.1TWh

Total RusHydro Group output in 1Q’17 2016

(-5.4%)

30.2RUB bn

Consolidated EBITDA in 1Q’17

(+11.1% or 14.4% on comparable basis)

18.8RUB bn

Consolidated net profit in FY’16

(+27.9%)

9.6RUB bn

Fair value of 5-year non-deliverable forward contract with VTB in

respect of 55 bn shares

RAO ES East subgroup debt

Operating efficiency

Dividends

Organizational development

Operations

Corporate governance

PJSC RusHydro and VTB sign 5-year forward agreement. RUB 55 bn raised from VTB used in full to repay the debt of Far Eastern subsidiaries.

Reduction of operating and SG&A expenses on track: only 0.6% growth in total OPEX, comparable (ex. ESC Bashkortostan) manageable cash OPEX fell 2% in 1Q’17

RusHydro management commits to payout of 50% of net profit in dividends in 2017

As of April 1, 2017, management authority for PJSC RAO ES East is transferred to PJSC RusHydro; HQ of PJSC RAO ES East in Moscow was dismantled

• Total electricity output of the Group in 1Q’17 – 29.1 TWh (-5.4)%• RusHydro expects 2017 operational results mostly inline with 2016

Start of the first 3-year period of the new long-term incentive plan (LTIP) for top management, based on 3 KPIs (TSR, FCF, innovations)

1

2

3

4

5

6

RusHydro Group 1Q 2017 operating results

5

9 613 8 673

4 051 4 694

1Q 2016 1 Q 2017

Hydro

CHP and geothermal9 799 8 729

1 5991 204

5 6435 788

1Q 2016 1Q 2017

Siberia

South

Center

-7.7% -2.2%

European part of Russia and Far East (price zones), GWh Far East (non-price and isolated zones), GWh

Total electricity production by power plants of RusHydro Group in 1Q 2017 – 29,1 TWh (-5.4%).

Total production by hydropower plants (HPPs) and pump storage hydropower plants (PSHPPs) of RusHydro Group in 1Q 2017 – 20.5 TWh (-3.4%), production by thermal and geothermal plants of the Group – 8.7 TWh (-9.8%).

Power plants of RAO ES of East subgroup in 1Q 2017 produced 9.3 TWh (-9.2%), total heat output by the thermal plants was 12,102 thousand GCal (-9.2%).

Output of Boguchanskaya hydropower plant in 1Q 2017 – 3.2 TWh (+1.6%).

6

Hydro production trends 2014-2017

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2014

2015

2016

2017

Long-run average

200

400

600

800

1 000

1 200

1 400


2014

2015

2016

2017

Long-run average

800

1 000

1 200

1 400

1 600


2014

2015

2016

2017

Long-run average

Center of Russia, GWh Siberia, GWh

South of Russia & N. Caucasus, GWh Far East, GWh

1 000

1 500

2 000

2 500

3 000

3 500


2014

2015

2016

2017

Long-run average

7

Water inflows to major reservoirs in 2014-2017

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

J F M A M J J A S O N D

2014 2015 2016 2017 Long-term average

0

100

200

300

400

500

600

700


2014 2015 2016 2017

0

1 000

2 000

3 000

4 000

5 000

6 000


2014 2015 2016 2017

-1 000

1 000

3 000

5 000

7 000

9 000

11 000

13 000

15 000

17 000


2014 2015 2016 2017

Water inflow to reservoirs of the Volgo-Kama cascade, m³/s Water inflow to the Sayano-Shushenskaya HPP, m³/s

Water inflow to the Chirkeyskaya HPP, m³/s Water inflow to the Zeyskaya HPP, m³/s

8(1) Day ahead selling prices data from the Administrator of the trading system (ATS)

Electricity spot market overview

Non-indexation of gas tariffs for industrial consumption in 2016, expected increase as of 2H 2017 – 3%.

Increase in cross-flow between the 1st and 2nd price zones after removal of restrictions in 2014 led to long-term growth of average prices in Siberia.

Full commissioning of 2,997 MW Boguchanskaya HPP (50/50 JV of RusHydro and RUSAL) with electricity production of ~14 TWh in 2016 and projected ~17 TWh in 2017 has no pronounced effect on pricing in Siberia.

Low demand growth and general overcapacity on the market coupled with below-inflation hikes in gas tariffs (3% in 2017-2018 according to Ministry of Economy) will lead to stabilization of unregulated power prices in European Russia in the medium-term.

1002

1043

1 254

1 1361116

1204

1233

1120 1122

1224

1184 1179

11471167

1298

1204

1180

1104

1164 1154

1202

800

900

1000

1100

1200

1300

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2013 2014 2015 2016 2017

777764

639

677

723

662

762

983

1026

895

854

922

994

800

714

913

994

718

789

914

866

600

700

800

900

1000

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2013 2014 2015 2016 2017

Europe and Urals (1st price zone), RUB/MWh (1) Siberia (2nd price zone), RUB/MWh (1)

Regulated market overview

9

119 118 124 132125 113 113 111 110 115

8282

5998

179 189 182 186 190 191

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

KOM - Europe (1) KOM - Siberia (1)

13.4 13.5 13.7

15.5

17,9

15.8 15.9 16.0

18.5

22,2

2013 2014 2015 2016 2017

Europe Siberia

112,5 114,4 116,4124,8 127,5

66,1

42,4 42,8 42,9

2013 2014 2015 2016 2017

Europe Siberia

2 247 2 3132 076 2 066

2 3042 104

1 859

DPM - Europe

Electricity tariffs Heat tariffs

2016/2015 2017/2016 2016/2015 2017/2016

DGK 9.4% 5.6% 7.6% 4.0%

DEK 7.3% 7.4% - -

Kamchatskenergo 8.9% 12.1% 14.4% 8.6%

YuESK 6.4% -0.8% 9.5% 5.1%

Magadanenergo 19.5% 14.4% 9.1% 5.4%

Chukotenergo 8.1% 11.4% 5.7% 6.2%

Sakhalinenergo 4.8% 1.2% 7.7% -2.5%

Yakutskenergo 5.9% 10.8% 9.6% 11.4%

Sakhaenergo 10.0% 10.1% 8.9% 11.4%

Peredvizhnaya energetika 5.2% 22.3% - -

(1) According to the rules of the long-term capacity selection, KOM prices for 2017-2019 will be hiked to CPI of the preceding year minus 1 pp

Capacity prices in pricing zones, ‘000 RUB/MW/month (1) Weighted avg capacity tariffs in pricing zones, ‘000 RUB/MW/month

Weighted average electricity tariffs in pricing zones, RUB/MWh Heat and electricity tariffs of RAO ES of the East



IV. Market update

III. Segment review

11

1Q 2017 financial results review(1)

1Q 2017 EBITDA – RUB 30.2 bn (+11.1%), comparable EBITDA growth – 14.7%;

Underlying (adjusted) net profit(2) in 1Q 2017 – RUB 20.4 bn (+21%), reported net profit – RUB 18.8 bn (+25%);

Only 0.6% increase in comparable operating costs and 2% decrease in comparable manageable cash costs driven by cost optimization and fuel savings in RAO ES East Subgroup due to significant increase in hydro output;

Weighted-average EPS in 1Q 2017 increased to RUB 0.0468 per share vs 0.0387 in 1Q 2016.

Key growth factors: ↗ growth of capacity sales from newly commissioned Zelenchukskaya hybrid HPP;↗ 100% liberalization of capacity sales from hydro in Siberia to 100% as of May 1, 2016;↗ implementation of rigorous cost cutting in the Group;↗ fuel savings resulting from significant increase in hydro output in the Far East;↗ increase in subsidies in the Far East.

Negative factors affecting profitability: ↘ divestment of LLC ESC Bashkortostan in Dec 2016

(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information(2) Net profit is adjusted for effects of impairment of fixed assets, accounts receivable, and loss on disposal of fixed assets.

Revenue, bn RUB Operating expenses, bn RUB

EBITDA, bn RUB Net profit, bn RUB

Key highlights

104.4 98.8 95.1 98.8

107.7 103.4 98.4 103.4

1Q'2016 1Q'2017 1Q'2016(excl. ESCB)

1Q'2017

Operating revenue Government grants

87.0 78.9 78.4 78.9

1Q'2016 1Q'2017 1Q'2016(excl. ESCB)

1Q'2017

27.2 30.2 26.4 30.2

25.3% 29.3% 26.8%29.3%

1Q'2016 1Q'2017 1Q'2016(excl. ESCB)

1Q'2017

EBITDA EBITDA margin

15.0 18.8 14.7 18.8

16.920.4

16.420.4

1Q'2016 1Q'2017 1Q'2016(excl. ESCB)

1Q'2017

Adjustments Net profit (reported) Net profit (adj.) (1)

30.2

-0.2 -0.6

-1.8

-0.1 -0.1

26.4

4.9

0.21.5

EBITDA 1Q'16(excl. ESCB)

Revenue Other operating income Purchased electricityand capacity

Employee benefitexpenses

Electricity distributionexpenses

Fuel expenses Third parties services Other expenses EBITDA 1Q'17

30.2

-4.4-0.2

-0.4

0.0 -0.1

27.2

5.7

0.9

1.5

EBITDA 1Q'16 Revenue Other operating income Purchased electricityand capacity

Employee benefitexpenses

Electricity distributionexpenses

Fuel expenses Third parties services Other expenses EBITDA 1Q'17

12

1Q 2017 EBITDA: cost analysis

+11.1%

+14.7%

1Q EBITDA – cost analysis

Comparable 1Q EBITDA – cost analysis (1)

(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information

78.9

-0.2

-1.5

-0.4

-0.4

78.4

0.5

1.8

0.1

0.2

0.4

0.0

OPEX 1Q'16 (excl. ESCB)

Employee benefit expenses

Purchased electricity and capacity

Fuel costs

Electricity distribution expenses

Third party services

Depreciation

Taxes other than on income

Other materials

Water usage expenses

Other expenses

OPEX 1Q'1778.9

-5.7

-1.5

-0.9

-0.5

0.0

-0.4

87.0

0.4

0.0

0.2

0.3

OPEX 1Q'16

Employee benefit expenses

Purchased electricity and capacity

Fuel costs

Electricity distribution expenses

Third party services

Depreciation

Taxes other than on income

Other materials

Water usage expenses

Other expenses

OPEX 1Q'17

73.1

-0.1 -0.9

72.3

0.50.8

0.5

1Q'16(excl. ESCB)

PJSC RusHydro ESC RusHydroSubgroup

RAO ES EastSubgroup

Other segments Misc &undistributed

operations

1Q'17

73.1

-8.5-0.980.7

0.5

0.8 0.5

1Q 2016 PJSC RusHydro ESC RusHydroSubgroup

RAO ES EastSubgroup

Other segments Misc &undistributed

operations

1Q 2017

13

Operating expenses in 1Q’2017 (1)

+0.6%Total

growth of expenses

+1.0%CPI in Russia in Jan-Mar

2017

-2%decrease in manageable

groups of cash costs

(1) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information(2) Operating expenses excluding depreciation and other non-cash items

1Q’2017 operating expenses

Comparable RusHydro Group OPEX in 1Q’2017 – segment analysis (RUB bn) (2) Comparable RusHydro Group OEPX in 1Q’2017 – segment analysis (RUB bn) (2)

Comparable 1Q’2017 operating expenses

-9.3%Total

decrease in expenses

RusHydro Group debt profile (1)

39% – state banks

83% – fixed rate

91% – RUB denominated

14

84

28

69

17

2212

Cash & Deposits May-Dec2017

2018 2019 2020 2021-2041

39% – state banks

83% – fixed rate


Sourse

Currency

Interest 79% – fixed rate


53% – state banks 36% – public instruments

11% –other

Source

PJSC RusHydro 104.9

RAO ES East Subgroup

38.1

BoGES JV (Boguchansk HPP)

guarantee 26.5

Other8.2

Liability under the forward contract

with VTB Bank9.3 (3)

RUB 187 bn

(1) As of Apr 30, 2017(2) Debt excluding BoGES guarantee (RUB 26.5 bn) and lease payments (RUB 0.4 bn), after repayment of RUB 2.7 bn Sberbank loan and EUR 87 mn loan from Credit Agricole. (3) Liability under the 5-year forward contract with VTB recorded as a long-term derivative financial instrument at fair value through P&L in the amount of RUB 9,609 mn. The fair value of the forward contract

at the initial recognition of the instrument was RUB 10,013 million and it was recorded within equity as the result of the shareholder transaction. Subsequent changes in the fair value of the non-deliverable forward contract is recorded within profit or loss.

Total financial debt as of Apr 30, 2017, amounted to RUB 187 bn

A low interest and FX risk debt portfolio with ca. 93% of the facilities being RUB-denominated and ca. 79% bearing fixed interest rate

Strong relationship with state-owned banks, that currently account for ca. 53% of the debt book

Effective rouble interest rate of ca. 9.3% and comfortable weighted-average duration of debt at the level of 3 yrs

In March 2017, RusHydro reduced debt of RAO ES East subgroup by RUB 55 bn with equity raised from VTB Bank

In May-June 2017, RusHydro repayed RUB 2.7 bn Mosprime-linked loan from Sberbank and EUR 87 mn loan from Credit Agricole

Key highlights

Transparent debt composition (RUB bn) Transparent debt composition (RUB bn)

Debt repayment profile (2) (RUB bn)



IV. Market update

III. Segment review

66.6

-0.5

65.0

0.3

1.7 0.0

Electricity sales1Q'16

(excl. ESCB)


RAO ES EastSubgroup

Other Electricity sales1Q'17

66.6

-0.5

-8.974.3

1.7 0.0

Electricity sales1Q'16


RAO ES EastSubgroup

Other Electricity sales1Q'17

98.8

-0.1

95.1

1.61.7 0.5

Revenue 1Q'16(excl. ESCB)

Electricity sales Heat sales Capacity sales Other Revenue 1Q'17

98.8

-7.7

-0.1104.4

1.7 0.5

Revenue 1Q'16 Electricity sales Heat sales Capacity sales Other Revenue 1Q'17

98.8

95.1

1.1 0.4

2.1 0.1

Revenue 1Q'16(excl. ESCB)


RAO ES EastSubgroup

Other Revenue 1Q'17

98.8

-8.9

104.4

1.1

2.1 0.1

Revenue 1Q'16 PJSC RusHydro ESC RusHydroSubgroup

RAO ES EastSubgroup

Other Revenue 1Q'17

1Q 2017 revenue: segment review (1)

16(1) Revenue only from external parties (intergroup sales are excluded)(2) Here and henceforth comparable data for 2016 excluding contribution of LLC ESC Bashkortostan, sold in the end of 2016, are based on management accounting and are given only for information

-5.4% +3.8%

-5.4% +3.8%

-10.3%+2.4%

1Q’17 revenue – segment review Comparable 1Q’17 revenue – segment review (2)

1Q’17 revenue – sales review Comparable 1Q’17 revenue – sales review (2)

1Q’17 electricity sales Comparable 1Q’17 electricity sales (2)

30.2

26.4

0.10.4 2.6

0.5 0.2

EBITDA 1Q'16(excl. ESCB)

PJSC RusHydro ESC RusHydro Subgroup RAO ES East Subgroup Other segments Misc &undistributed

operations

EBITDA 1Q'17

30.2

-0.4

27.2

0.1 2.6

0.5 0.2

EBITDA 1Q'16 PJSC RusHydro ESC RusHydro Subgroup RAO ES East Subgroup Other segments Misc &undistributed

operations

EBITDA 1Q'17

17

1Q 2017 EBITDA: segment review

• Stable pricing environment supporting declining hydropower output (-7.7% in 1Q’17 in price zones)

• 100% liberalization of capacity sales from hydro in Siberia

• Launch of 140 MW Zelenchukskaya hybrid HPP under CSA (DPM) contract

• Rigorous cost-cutting

• Increase in end-user tariffs

• Lower load of the most inefficient CHPs due to increased hydro output

• Substantial fuel savings

• Increase in government subsidies

+11.1%

+14.7%

1Q’17 EBITDA – segment review

Comparable 1Q’17 EBITDA – segment review (1)

Disposal of LLC ESC Bashkortostan to Inter RAO Group in Dec 2016


13.9 14.318.6 18.7

68.6%67.6%

1Q 2016 1Q 2017

Operating profit

EBITDA

EBITDA margin, %

8.59.0

1Q 2016 1Q 2017

24.3 25.3

27.1 27.7

1Q 2016 1Q 2017

Revenue, external Revenue, intergroup

Segment review (1/3) – PJSC RusHydro

18

+2.1%

+5.4%

+0.7%

+3.0%

Revenue, bn RUB

Operating expenses, bn RUB

Operating profit & EBITDA, bn RUB

RusHydro’s average achieved selling spot power prices in European Russia in 1Q’17 – RUB 1,271/MWh (+0.5%); in Siberia in 1Q’17 – RUB 900/MWh (-3.4%).

3.4% decrease of electricity output from hydropower plants and 7.7% decline in hydropower output in price zones in 1Q’17 as compared to 1Q’16 due to high base effect of 2016 and average water inflows in 2017.

Operating expenses increased by 5.4% mostly on the back of higher electricity purchase.

Increase in capacity sales due to launch of 140 MW Zelenchukskaya hybrid HPP in the South of Russia contracted under CSA (DPM) agreement.

Increase in capacity prices of the competitive capacity auction (KOM) for the hydropower plants of the second price zone following full liberalization of capacity market for hydro in Siberia with increase of capacity sold at KOM price from 80% to 100% since May 1, 2016;

3% p.a. tariff hike in regulated gas in 2017-2018 should give support to unregulated power prices in European Russia in the medium-term.

Key highlights

5.5 8.38.2 10.8

15.6%

19.7%

1Q 2016 1Q 2017

Operating profit

EBITDA

EBITDA margin, %

47.8 48.6

1Q 2016 1Q 2017

52.7 54.7

52.854.8

1Q 2016 1Q 2017

Revenue, external Revenue, intergroup

Segment review (2/3) – RAO ES East Subgroup

19

+4.0%

+1.7%

Electricity generation by the plants of RAO ES East in 1Q 2017 –9,291 GWh (-9.2%) due to higher hydro electricity output by Zeyskaya and Bureyskaya hydropower plants;

Significant fuel savings resulting from substitution of fossil fuel power generation by hydro due higher electricity generation by hydropower plants of the Far East;

Increase of 5.6% and 7.4% in electricity tariffs for JSC DGK (ca. ¾ of Subgroup’s electricity generation volumes) and PJSC DEK respectively compared to 2016;

Heat output was down 9.2% in 1Q’17 to 12,102 ths Gcal on higher temperatures;

Increase in government grants mostly due to compensation of expenses related to electricity purchased in Chukotka in 2016.

Key highlightsRevenue, bn RUB



+31.0%

+52.4%

0.6 0.4 0.0 0.41.0 0.6 0.2 0.6

3.8%3.3%

0.9%

3.3%

1Q 2016 1Q 2017 1Q 2016(excl. ESCB)

1Q 2017

Operating profit EBITDA EBITDA margin, %

25.216.7 16.8 16.7

1Q 2016 1Q 2017 1Q 2016(excl. ESCB)

1Q 2017

Operating expenses

26.217.3 17.0 17.3

1Q 2016 1Q 2017 1Q 2016(excl. ESCB)

1Q 2017

Segment review (3/3) – ESC RusHydro subgroup (electricity retail) (1)

20

+2.0%-34%

-0.4%-33.7%

Revenue, bn RUB



Retaining profitability levels on the back higher operational efficiency even in continuing situation of insufficient retail tariffs;

Electricity output by RusHydro Group’s retail companies in 1Q 2017 amounted to 5,945 GWh (-7%), excluding the results of LLC ESC Bashkortostan in 2016;

The decline was mostly driven by PJSC Krasnoyarskenergosbytdecreased its output due to a number of consumers switching to wholesale electricity purchases, higher temperatures and other factors;

In December 2016, the Group completed the transaction to divest 100% of LLC ESC Bashkortostan to Inter RAO Group. The transaction amount was RUB 4.1 bn. By December 31, 2016, the Group received a tranche in the amount of RUB 3.6 bn and deferred consideration in the amount of RUB 0.5 bn that was actually received by the Group in February 2017. As of December 31, 2016, the Group recognized gain on the sale of LLC ESC Bashkortostan in the amount of RUB 3.048 bn in other operating income.

Key highlights

+257.6%-43.7%-35.2%




IV. Market update

III. Segment review

Key drivers of 2017 financial performance

22

26

3744

64

79 7373

100

26

24 13

2009 2010 2011 2012 2013 2014 2015 2016 2017

Operational EBITDA (Rub bn) Targeted investment component (Rub bn)

Key positive factors in 2017

↗ Maintaining high operational results of 2016 on the back of favorable hydrological conditions;

↗ Substitution of expensive thermal generation by hydro output due to high inflows in the Far East;

↗ Commissioning of Zelenchukskaya hybrid HPP-PSHPP and Gotsatlinskaya HPP under capacity supply agreements (DPM);

↗ Reduced interest payments after repaying RUB 55 bn of RAO ES of East Subgroup;

↗ Commissioning of Nizhne-Bureyskaya HPP in 2H’17;↗ 100% liberalization of hydro capacity in Siberia;↗ Integration of headquarters and reduction of non-

operational personnel;↗ Successful cost optimization.

Negative factors affecting profitability/risks in 2017

↘ Reduced revenue after sale of LLC ESC Bashkortostan and dams of Angara cascade (PJSC Irkutskenergo);

↘ Risk of reduced inflows to main reservoirs, dry summer;

↘ Stagnation of spot electricity prices due to low demand and non-indexation of gas tariffs;

↘ Increase in fuel costs in case of increased utilization of thermal capacity and interruption in fuel supply;

↘ Increase in non-controllable costs.

23

Best dividend story and practice among Russian SOE utilities

2.5 2.53.7

5.26.0

15.0

19.9

2011 2012 2013 2014 2015(25% of

IFRS profit)

2016(50% of RAS

profit)

2017(50% of

IFRS profit)

2011 2012 2013 2014 2015 2016(2)

Krasnoyarskaya HPP 0.0% 4.9% 0.0% 0.0% 0.0% 0.0%

Quadra 1.9% 2.6% 0.0% 0.0% 0.0% 0.0%

Unipro (EOn Russia) 0.0% 2.6% 10.8% 16.2% 8.8% 7.2%

RusHydro 0.6% 1.0% 1.3% 2.3% 2.5% 6.5%

Irkutskenergo 0.4% 0.8% 3.3% 5.4% 7.7% 0.0%

Mosenergo 0.6% 1.7% 2.2% 4.6% 1.0% 3.6%

InterRAO 0.0% 0.0% 0.0% 0.0% 0.1% 0.8%

Enel Russia 0.0% 0.0% 0.0% 5.0% 9.0% 0.0%

TGK-1 0.2% 0.5% 1.7% 2.6% 4.8% 4.9%

OGK-2 0.3% 0.1% 0.0% 0.0% 2.9% 2.1%

T Plus (KES Holding) 0.0% 0.0% 0.0% 0.0% 0.00% 0.0%

0.86 0.79 0.961.36

1.56

3.88

4.66

0,6% 1,0%

1,3%

2,3% 2,5%

6.5%

5.6% (3)

0,5%

1,5%

2,5%

3,5%

4,5%

5,5%

6,5%

7,5%

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

5,5

6

2011 2012 2013 2014 2015(25% of

IFRS profit)

2016(50% of

RAS profit)

2017(50% of

IFRS profit)

DPS, kop.

DY, %

Board of Directors of RusHydro recommended the AGM to pay out 50% of 2016IFRS net profit or 4.66 kopecks per share.

As of 2015, RusHydro dividend policy provides for dividend payment based onconsolidated IFRS net profit.

2016 dividends based on RAS net profit were determined in conformity withGovernment order regarding SOE dividends, providing for payout of 50% of thehighest resulting net profit (under IFRS of RAS).

Dividends to be paid out reduces RusHydro liabilities (and effective rate) underthe forward contract with VTB. 50% of net profit payout reduces annual forwardrate by more than 4%(1).

Dividends (RUB bn)

DPS and dividend yieldDividend yield of the Russian generating companies

(1) Dividends not only would fully cover due quarterly payment on forward, but will also finance more than 40% of the next quarterly payment.(2) Calculated based on the date of announcement of recommendations on dividends by the Board of Directors.(3) Calculated based on close price on May 24, 2017 - date of announcement of recommendation on dividends by the Board of Directors.

RusHydro Group investment plan 2017-2022, RUB bn, including VAT

24

Adjustment primarily due to shift of launch and funding timelines of fossil fuel power projects in the Far East, as well as construction of small hydro(1).

(1) RusHydro has submitted 2 bids to a 2017 auction to award contracts for the construction of renewables : Krasnogorskayasmall HPP 1 & 2 with capacity 24.9 MW each (to be commissioned in 2021 and 2022)

26.1 21.728.8 24.5 27.5 27.9 27.7 28.6 26.3 27.6 26.0 26.8 24.9

23.721.9

30.327.7

16.225.3

4.6 6.5 2.41.3

20.9

12.5

23.4

21.3

5.0

19.0

1.3

30.8

21.9

31.240.5

24.9

33.6

18.8

21.9

18.620.6

18.921.0

20.1

4.8

3.8

3.5 4.1

3.0

3.5

2.5

2.8

2.8

3.1

2.62.2

2.0

106.3

81.8

117.2 118.1

79.6

109.8

53.6

61.1

47.653.7

47.551.3

47.0

2016plan

2016fact

2017old

2017new

2018old

2018new

2019old

2019new

2020old

2020new

2021old

2021new

2022plan

Other

RAO ES Subgroup (rehabiltation and new construction)

Priority projects in the Far East

New construction, HPPs, RusHydro and subsidiaries

Rehabilitation and modernization of HPPs, RusHydro and subsidiaries

Overall capacity commissioned in 2016 – 240.9 MW, including: • 140 MW – Zelenchukskaya hybrid hydro & pumped storage plant• 30.6 MW – Zaragizhskaya small hydropower plant• 70.3 MW – other capacity increase, including uprate from modernization

Overall capex limit of the Group for 2017 estimated at RUB 120 bn (including VAT)

Planned capacity increase in 2017 – 607.1 MW, including: • 193.5 MW – 1st phase of Yakutskaya TPP-2• 320 MW – Nizhne-Bureyskaya HPP• 93.5 MW – other capacity increase, including uprate from modernization

Evaluation of efficiency of forward contract

25(1) Number of RusHydro shares held by VTB is RUB 55 bn. Profit base for dividend distribution as of 2018 is indicated for calculation purpose only, and doesn’t constitute an officia l financial guidance.

2017 2018 2019 2020 2021

1 Effective forward rate 7.4%Forward nominal value p. 2 ∗ rate p. 6∗5+Commission p.3−dividends p.7+dividends outflow p.8

Forward norminal value p. 2/5

2 Forward nominal value, Rub mn 55 000

3 Commission for organizing the transaction, RUB mn 575

4 Key rate of the Central Bank (current level),% 9.25% 9.25% 9.25% 9.25% 9.25%

5 Forward margin, % 1.5% 1.5% 1.5% 1.5% 1.5%

6 Forward rate (p. 4 + p. 5), %9.25%+1.5%

=10.75%9.25%+1.5%

=10.75%9.25%+1.5%

=10.75%9.25%+1.5%

=10.75%9.25%+1.5%

=10.75%

7Dividends, paid to VTB, less income on dividends (VTB share in the capital 12.9%), RUB mn (1)

39 751*50%*12.9% - 13%=

2 231

50 000*50%*12.9% - 13%=

2 806

50 000*50%*12.9% - 13%=

2 806

50 000*50%*12.9% - 13%=

2 806

50 000 *50%*12.9% - 13%=

2 806

8

Dividends outflow due to sale of treasury shares (treasury stock after the transaction – 3.52% of charter capital), Rub mn

39 751*50%*3.52% - 13%=

609

50 000 *50%*3.52% - 13%=

766

50 000 *50%*3.52% - 13%=

766

50 000*50%*3.52% - 13%=

766

50 000 *50%*3.52% - 13%=

766

9Forward rate (for each year) adjusted for dividends and commission, %

(55 000*10.75%-2231+575+609)/

55000 = 8.8%

(55 000*10.75%-2806+766)/

55000 = 7.0%

(55 000*10.75%-2806+765)/

55000 = 7.0%

(55 000*10.75%-2806+765)/

55000 = 7.0%

(55 000*10.75%-2806+765)/

55000 = 7.0%

26

2017 outlook

Continued trend of strengthening financial stability and optimization of debt portfolio• Further optimization of borrowing costs and maintaining comfortable debt repayment schedule• Target net debt / EBITDA ≤ 2.0• RusHydro rating S&P upgrade in May 2017 to further strengthen company’s credit quality

Approval of RusHydro value growth program by the Board of Directors (expected in Sep’17) • Increase in operating revenue (optimization of management cost and investment projects, economically justified tariffs for the Far

East Federal district, return on investment) • Positive effect of the forward transaction with VTB

Concentration and utilization of internal resources for development • Increased operational efficiency on the basis of developed cost optimization plan • Investment program optimization – review of technical solutions and transfer of part of financing to later periods with maintaining

commissioning timeline of key facilities• Further optimization of portfolio of non-core assets and assets, not essential for main activity of the Group

New generation capacity commissioning and modernization of existing facilities• Commissioning of the 1st phase of Yakutskaya TPP-2 (194 MW), Nizhne-Bureiskaya HPP (320 MW), modernization and increase in

capacity of existing power plants (93.5 MW)• Increase in RusHydro group installed capacity in 2017 is expected at 607.1 MW

27

Preliminary 2017 disclosure and IR calendar

The dates are preliminary and subject to possible change

(1) The Annual General Shareholders Meeting is held no earlier than two months and no later than six months after the end of the fiscal year. (2) In accordance with the Federal law No. 282-FZ of December 29, 2012, from 2014 the dividend record date may not be earlier than 10 days, and may not be later than 20 days after, the date of

the resolution of the general shareholders meeting approving the payment of the dividend.

June 17-19 Renaissance Capital Investor Conference (Moscow)

June 20-21 VTB Capital Forum (London)

June 26 Annual General Meeting of Shareholders 1

July 10 Dividend record date (2)

July 20 1H 2017 operational results

July 31 1H 2017 RAS results

August 29 1H 2017 IFRS results

September 4-6 HSBC Investor Conference (London)

September 14 Morgan Stanley Power & Utility Summit (London)

October 20 9M operational results 2017

October 31 9M 2017 RAS results

November 13-14 Goldman Sachs CEEMEA 1x1 Conference (London)

November 29 9M 2017 IFRS results

December MOEX Forum (London)

Thomson Reuters Extel 2011:No.1 IR Team in Russian Utilities

Thomson Reuters Extel 2012:No.1 IR Team in Russian Utilities

IR contact detailstel.: +7 (495) 225 32 32

ext. 1607, 1319, 1304

[email protected]

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mailto:[email protected]

rushydro group 1q 2017 ifrs results & market update

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