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Annual Report 2015

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Production cost and the cost structure

Total actual net cost for 2015 amounted to RUB 35,547 million, which is less than the 2014 level by RUB 4,483 million (11.2%). The decline in the production cost against the previous year was due to the termination of the SLR functions in the regions where the Company operates and therefore a reduction of cost of purchased electricity for sale. However in 2015, the actual primary cost elements showed the following change as compared to the previous year:

  • The growth in cost of LGO services was RUB 246 million. The cost increase is due to the change in the Karelenergo ’uniform (boiler)’ tariff settlements scheme and the increase from July 01, 2015 of individual tariffs for settlements between LGOs.
  • The cost of purchased energy for losses compensation increased by RUB 288 million. This increase is due to the growth of the average weighted purchase price of electricity to compensate for losses and the volume of losses electricity purchased for compensation of 11% and 3%, respectively, as compared to the previous year.

The basic increase in the purchase price of the losses occurred in the second half of 2015 due to the adoption of the RF Government Decree ’On amendments to certain legislative acts of the RF Government to refine terms and conditions of capacity acquisition on wholesale market for supply to the households and equivalent categories of consumers, and acquisition of capacity by the organization managing the unified national (Russian) power grid’. In this regard, there was a change of forecast consolidated balances of the FTS Russia as related to the consumption of electricity (capacity) by the household consumers. For this reason, there was an increase in the capacity price in the wholesale electricity and capacity market, which affected the growth of unregulated price.

The growth of variable costs as of year-end 2015 amounted to 6.5% while the actual annual average CPI value was 15.5%, which demonstrates the effectiveness of measures to contain the costs (see more details in section ’Performance management’).

Production cost structure dynamic pattern, %
Analysis of production cost and the cost structure, RUB million
Costs 2011 2012 2013 2014 2015
Total production cost 27,781 28,129 38,293 40,030 35,547
Non-influenceable costs 15,998 15,800 25,327 26,800 21,457
PJSC FGC UES services 8,177 8,371 8,339 8,439 7,887
LGO services 1,503 819 2,812 Including the losses compensation in sales activity 4,045 Including the losses compensation in sales activity 4,291
Purchase of electricity to compensate for loss 3,646 3,629 4,257 Including the losses compensation in sales activity 4,341 Including the losses compensation in sales activity 4,629
Purchase of electricity for sale 0 0 6,429 6,037 487
Depreciation 2,672 2,981 3,491 3,938 4,163
Influenceable costs 11,783 12,329 12,966 13,230 14,090
Raw and other materials 1,540 1,684 1,795 1,753 1,890
Electricity for economic needs 313 302 314 311 260
Production services 952 1,034 1,099 1,041 967
labour costs with deductions (including NPF) 7,525 7,742 8,252 8,489 9,221
Communication services 108 108 121 84 94
Services by public utilities 103 102 103 93 152
IT services 117 106 84 133 84
Land surveying 90 58 118 93 222
Security services 202 207 212 211 409
Taxes 158 160 275 347 790
Other costs 676 826 592 675 35,547
Production cost structure (including management and selling costs) in 2015, %