Financial Review

Key financial and economic indicators

Revenue analysis

Revenue from sales of products (services) at the end of 2024 was RUB 3,114 million (6.5%) higher than in 2023, including revenue from electricity transmission, which was RUB 3,075 million (6.8%) higher than in 2023. This was due to a 2.6% increase in the tariff for electricity transmission, as well as an increase in the volume of electricity transmission services by 1,000.6 million kWh, or 4.2%.

The increase in revenue from grid connection amounts to RUB 395 million, or 65.1%, due to the presence of grid connection contracts executed in 2024 with a relatively high value compared to the same period in 2023.

Revenue from electricity sales decreased by RUB 649 million, due to the transfer of the status of guaranteeing supplier in the GS-1 zone (Elista, Republic of Kalmykia) to JSC Chitaenergosbyt, effective 1 October 2023, in accordance with Order No. 713 of the Ministry of Energy of the Russian Federation dated 30 August 2023. Revenues from other activities grew by RUB 293 million due to the intensification of the Company’s efforts to develop additional (non-tariff) activities and promote competitive services in construction and assembly, repair and maintenance, as well as the conclusion of agency agreements with resource supplying organisations (suppliers of public utilities) in the Republic of Kalmykia for subscription services and acceptance of payments from individuals.

Cost analysis

The cost of sales is RUB 3,250 million (8.0%) higher than in 2023. This upward trend is mainly due to an RUB 717 million increase in expenses for purchased electricity to compensate for losses, which is related to a 5.9% increase in the tariff for purchased electricity to compensate for losses, a 1.7% increase in the volume of paid electricity losses, and expenses for services provided by PJSC Rosseti by RUB 1,024 million, or 11.3%, due to a 7.2% increase in the rate for maintenance of UNPG facilities, a 16.1% increase in the volume of standard losses, and a 4.2% increase in the rate for compensation for electricity losses in UNPG grids, expenses for the payment of TGO services by RUB 492 million, or 12.2%, which was due to an rise in the average tariff by 16.8%, personnel expenses by RUB 858 million in connection with the indexation of the Company’s personnel salaries.

Other costs are higher by RUB 541 million mainly due to the need to implement the repair programme for priority activities, as well as the growth in other revenue.

Compared to the results for 2023, the financial result grew by RUB 4,795 million. This increase reflects changes in the carrying amount of the electricity grid assets of the Volgogradenergo branch in accordance with FAS 6/2020 ‘Fixed Assets’, as well as an increase in the Company’s revenue, mainly from electricity transmission.

The increase in the net debt/EBITDA ratio by 0.51 was attributable to higher net debt and lower EBITDA.

The increase in the net cash flow in 2024 comes from reduced operating cash flow.

The Company’s net assets as at 31 December 2024 were lower than the authorised capital by RUB 2,728 million.

Reasons for this ratio:

• An additional issue of shares, which increased the authorised capital of PJSC Rosseti South by RUB 6,960.2 million by placing 69,601,830,929 (Sixty-nine billion six hundred and one million eight hundred and thirty thousand nine hundred and twentynine) additional ordinary registered uncertificated shares with a par value of 10 (ten) kopecks each for a total par value of RUB 6,960,183,092 (Six billion nine hundred and sixty million one hundred and eighty-three thousand ninety-two) each 90 kopecks
• Recognition of impairment losses on power grid assets as at the date of transition to FAS 6/2020 (adjustment of indicators as at 31 December 2021)

Given the change in the economic situation in the country, the legislator stipulated that, in accordance with clause 1 of Art. 17 of Federal Law No. 46-FZ dated 8 August 2022 ‘On Amendments to Certain Legislative Acts of the Russian Federation,’ — a decrease in the value of the net assets of a joint stock company below the amount of its authorised capital at the end of 2022–2023 shall not be taken into account for the purposes of applying clauses 4 and 6 of Art. 35 of Federal Law ‘On Joint Stock Companies’.

In order to improve the financial and economic performance of PJSC Rosseti South, including bringing the value of net assets into line with the amount of authorised capital, management brought forward measures, such as challenging tariff balance solutions for electricity transmission through court proceedings.

With regard to the challenge of tariff balance solutions for the electricity transmission for 2024 concerning the Kalmenergo branch of PJSC Rosseti South, the Company’s claims were satisfied in full.

Liabilities

The results for 2024 show a decrease in accounts receivable and an increase in accounts payable.

Accounts receivable

The total amount of accounts receivable of PJSC Rosseti South at the end of the reporting period was RUB 6,930 million, and as of 31 December 2023 – RUB 7,454 million. The decrease totalled RUB 524 million and was caused by the trade receivables for electricity transmission services.

Trade receivables amounted to RUB 4,813 million, which is RUB 603 million (11.1%) below the level as at 31 December 2023 – RUB 5,416 million. The decline resulted from the fulfilment of obligations to pay for electricity transmission services and a reduction in the debt of PJSC TNS Energo by RUB 290 million, JSC VMES by RUB 272 million, LLC Nezavisimaya Energosbytovaya Kompaniya Yuga by RUB 69 million, LLC Energosistema by RUB 61 million, PJSC Astrakhanskaya Energosbytovaya Kompaniya by RUB 31 million, SUE URSV by RUB 27 million, LLC MIFPK-Bers by RUB 27 million, with an increase in the debt of PJSC Volgogradenergosbyt by RUB 66 million, LLC Novaya Energosbytovaya Kompaniya by RUB 33 million, LLC CHPEK by RUB 22 million, and LLC EES-Garant by RUB 17 million.

The bulk (66.6%) of the Company’s receivables comes from the settlements for the electricity transmission services rendered.

The total amount of receivables of PJSC Rosseti South for services rendered for the electricity transmission (before deduction of the allowance for doubtful debts) as at 31 December 2024 amounted to RUB 5,272 million, including restructured receivables of RUB 749.1 million and overdue receivables of RUB 771.8 million. Compared to the results of 2023, accounts receivable as of 31 December 2023 decreased by RUB 1,596.41 million. This reduction was achieved, among other things, through the repayment of restructured current debt, as well as through the enforcement of debt collection and penalties to encourage unscrupulous counterparties to fulfil their financial obligations in a timely manner.

The bulk of overdue receivables is accounted for by energy supply companies (RUB 266.9 million, or 34.6%) and other direct consumers, mainly bankrupt entities (RUB 216.9 million, or 28%).

In 2024, the security unit collected overdue debts for electricity transmission services under 280 enforcement orders, totalling RUB 1,054.43 million.

Accounts payable

Accounts payable at the end of the reporting period were up by RUB 977 million (9.5%) compared to the beginning of the year and amounted to RUB 11,318 million as at 31 December 2024.

Bonds

No credit ratings were assigned to the Company in the reporting year.

Tariff policy

Guidelines for calculating tariffs for electricity transmission services and grid connection services are approved by the federal executive authority responsible for tariff regulation, the functions of which are exercised by the Federal Antimonopoly Service (FAS of Russia).

The maximum levels of tariffs for electricity transmission services are approved by the FAS of Russia.

Electricity transmission tariffs

In 2024, unified (common-pot) tariffs for electricity transmission services were in effect in all constituent entities of the Russian Federation within the catchment area of PJSC Rosseti South. The distinctive feature of this pricing scheme is that for all consumers of the same voltage class, electricity transmission is charged at a single tariff regardless of which organisation’s grids they are connected to.

In the regions where PJSC Rosseti South operates, uniform (common-pot) tariffs for electricity transmission services were approved for the period from 1 December 2024 to 31 December 2024, broken down by half-year. For 2024, electricity transmission tariffs for all regions where PJSC Rosseti South operates were approved within the minimum and maximum tariff limits established by the FAS of Russia.

Primary consumers of the Company’s electricity transmission services are:

• Electricity retailers – entities of wholesale and retail markets that are selling electricity to end consumers connected to the power grids of the Company’s branches and grids of other grid organisations
• End consumers of electricity
• Territorial grid operators – entities of retail electricity market that transmit the electricity to the end consumers via their grids

The volume of required gross revenue (RGR) from electricity transmission activities of Rosseti South in 2024 is 5.04% higher than the RGR approved for 2023.

1. The own RGR of branches of PJSC Rosseti South increased by 1.79%. The low growth rate of own RGR across the Company as a whole is caused by lower year-on-year own RGR in 2024 at the branches of PJSC Rosseti South: Astrakhanenergo – due to the faster growth rate of UNPG costs, and Kalmenergo – due to the decline in revenue to be transferred by the Rostovenergo branch of PJSC Rosseti South within the single tariff zone.
2. The cost of electricity transmission services via the UNPG grids increased by 10.75% for the Company as a whole, with the highest growth rates observed in:
   • At the Astrakhanenergo branch, costs rose by 25.74%, due to changes in the declared capacity (by 15.57 MW, or 13.19%) and the volume of electricity losses in the UNPG grids, and growth in the rate for grid maintenance by 10.5% and the rate for payment of standard electricity losses in the UNPG by 9.3%.
   • For the Rostovenergo branch, costs increased by 12.60%, which was attributable to changes in the declared capacity (by 41.45 MW, or 3.09%) and the volume of electricity losses in the UNPG grids, and an increase in the grid maintenance rate by 10.5% and the rate for payment of standard electricity losses in the UNPG grid by 16.24%.
3. The amount of expenditure on the purchase of electricity to compensate for losses increased by 3.82% for the Company as a whole. The largest increase was seen at the Kalmenergo branch of PJSC Rosseti South (by 8.95%), which is caused by an 8.09% increase in the purchase price of electricity to compensate for losses, including due to an increase in sales mark-ups by guaranteeing electricity suppliers.
4. The total cost of TGO services for the Company increased by 14.60%:
   • At the Astrakhanenergo branch, costs rose by 11.20%, exceeding the growth rate of Astrakhanenergo’s own RGR. The faster growth in the required gross revenue of other TGOs was mainly driven by an uptick in the number of TGO electrical grid equipment (Gorelektroset Astrakhan municipal unitary enterprise) and its inclusion in the mutual settlement scheme.
   • At the Volgogradenergo branch, the increase in costs amounted to 6.40%.
   • At the Rostovenergo branch, costs went up 18.90%, which is more than the growth rate of Rostovenergo’s own RGR. The faster growth in the necessary gross revenue of other TGOs is primarily due to increased number of TGO electrical grid equipment.
5. The year-on-year increase in the average tariff for electricity transmission services for PJSC Rosseti South was as follows:
   • At the Astrakhanenergo branch 3.93%,
   • At the Volgogradenergo branch 3.51%,
   • At the Kalmenergo branch 20.36%,
   • At the Rostovenergo branch 6.01%.

Grid connection fee

Grid connection fee is calculated when newly commissioned and earlier connected consumer terminals with increased maximum capacity are connected and also if the power supply reliability category, connection points, type of production activities of already connected consumer terminals are changed without revising the maximum capacity, but involving the change of the external power supply scheme of such terminals.

Should the category of reliability change, grid connection fee shall be calculated for the volume of maximum capacity of the applicant’s consumer terminals with the changed category of reliability.

In cases of changes in the scheme of external power supply, which do not entail revision of the maximum capacity due to changes in connection points, types of production activities, grid connection fee shall be calculated for the amount of maximum capacity specified in the grid connection application.

The standardised tariff rates established in the territories where PJSC Rosseti South operates differentiate between voltage levels and the type of material used and/or the method statement, and are set out in the RTS tariff solutions for 2024 (available on the Company’s official website in the Consumers/Grid Connection/Grid Connection Tariffs section).