FedGrid Company Announces IFRS Results for 1H2012

Federal Grid Company Announces IFRS Results for 1H 2012

Moscow, 15 November 2012 - Federal Grid Company of Unified Energy System ("Federal Grid Company" or the "Company", LSE and Moscow Exchange ticker: FEES), the operator and managerof Russia's Unified National Electric Grid, and its subsidiaries, together referred to as "FGC UES Group" (the "Group"), announces its unaudited consolidated financial results for the six months ended 30 June 2012 prepared in accordance with International Financial Reporting Standards (IFRS).

Key Highlights

Financial:

·; Revenue of RUB 66,909 million

·; Adjusted EBITDA* of RUB 37,761 million

·; Operating profit of RUB 15,039 million

·; Profit for the period of RUB 3,914 million

·; Adjusted Profit** for the period of RUB 13,997 million

* Adjusted EBITDA is calculated as conventional EBITDA (profit for the period before income tax expense, finance income and costs, depreciation and amortisation) adjusted to exclude an impairment of available-for-sale investments, a reversal of impairment of investments in associates, and a non-specific impairment of property, plant and equipment, and to include finance income

** Adjusted profit for the period is calculated as profit for the period adjusted to exclude an impairment of available-for-sale investments, a reversal of impairment of investments in associates, a non-specific impairment of property, plantand equipment, and related deferred income tax effects

Operational:

·; Electricity transmission as at 30 June 2012 amounted to 248.656 billion kWh (+4.8% compared to 1H 2011)

·; Total number of substations*** as at 30 June 2012 amounted to858

·; Total transformer capacity - 323 MVA

*** Including leased assets and ORU and cells on substations owned by third parties

Key developments in 1H 2012

- On 27 April 2012, the Board of Directors of Federal Grid Company approved three long-term debt instruments in order to diversify the Company's debt financing sources:

Ø Russian bonds totaling up to RUB 125 billion

Ø Stock-exchange authorised rouble bonds totaling up to RUB 100 billion

Ø Eurobonds totaling up to RUB 100 billion

- On 11 May 2012, the Ministry of Energy of the Russian Federation approved the RUB 505 billion 2012-2014 investment program for Federal Grid Company

- On 21 May 2012, the Federal Tariff Service approved electricity transmission tariffs for 2012-2014. According to the decision, starting in 2H 2012, the tariff will be increased by 11% with subsequent 9% tariff increases slated for mid-2013 and mid-2014

Andrey Kazachenkov, First Deputy Chairman of the Management Board of Federal Grid Company, commented:

"Federal Grid Company's principal financial results for 1H 2012 are adjusted EBITDA of RUB 37,761 million and adjusted Profit for the period of RUB 13,997 million.

The Company continues pursuing its long-term development programme to improve operationaland investment efficiency.

Federal Grid Company is thus continuing to pursue balanced financial policies to support the long-term development of Russia's backbone electricity grid".

Operating expenses

*includes amortisation of intangible assets of RUB 0.5 bn in 1H 2011 and RUB 0.3 bn in H1 2012

The Group's total operating expenses in 1H 2012 amounted to RUB 53,584 million, up 17% year-on-year (y-o-y). The growth was largely due to an increase in depreciation expense and an accrual of allowance for doubtful debtors.

Depreciation accounted for 38% of total costs in 1H 2012, and increased by 29% y-o-y to RUB 20,186 million, primarily due to the commissioning of new property, plant and equipment.

Personnel costs, which accounted for 24% of total costs in 1H 2012, increased by just 1% y-o-y to RUB 13,033 million.

Electricity purchase costs in 1H 2012 decreased by 5% y-o-y to RUB 6,432 million primarily due to reduction of actual volumes of electricity losses during transmission owing to increased UNEG efficiency as well as a result of decreased wholesale electricity prices.

An accrual of allowance for doubtful debtors amounted to RUB 1,933 million in 1H 2012, compared witha reversal of allowance of RUB 124 million in 1H 2011.

Repairs and maintenance costs accounted for 3% of total costs, and increased by 4% y-o-y to RUB 1,567 million.

Other expenses increased by 19%, primarily due to 50% increase of taxes, other than income tax, 77% increase of research and development costs and 40% growth of fuel costs.

Debt

The Group's net debt as at 30 June 2012 amounted to RUB 106.8 billion, compared with RUB 85.2 billion as at 31 December 2011. The portion of the long-term debt amounted to RUB 150.7 billion. The increase in the long-term debt was primarily due to the successful placement of long-term rouble-denominated bonds totalling RUB 10 billion with an average coupon of 8.1% during 1H 2012.

The Group's net debt to adjusted EBITDA for the last 12 months ratio amounted to 1.40 as at 30 June 2012, compared to 1.02 as at 31 December 2011.

Investment and Capital Expenditure

Federal Grid Company continues to adhere to the five-year investment programme approved bythe Ministry of Energy of the Russian Federation.

Capital expenditure during the reporting period decreased by 15% y-o-y to RUB 59,685 million.

The unaudited condensed consolidated interim financial statements of FGC UES Group prepared in accordance with IAS 34 as adopted by the European Union as at and for the six months ended 30 June 2012 are available on the Company's website at www.federal-grid.com 

Conference Call

The Company will host an investor and analyst conference call on Thursday, 15 November 2012at 09:00 UK time (13:00 Moscow time). Dial in details are as follows:

If you have not registered, you must press *0 when prompted to enter your passcode

Not registering for the call may lead to additional waiting times

A replay of the call will be available until 21 November 2012 using the following details:

Replay

A transcript of the conference call will become available on Federal Grid Company's website www.federal-grid.com.

Enquiries:

Contacts

About Federal Grid Company

Federal Grid Company is the operator and manager of Russia's unified electricity transmission grid system. The Company operates over 126 km of transmission lines and has over 322 GVA of installed transformer capacity. Based on the length of transmission lines and transformer capacity in place, Federal Grid is the largest publicly traded electricity transmission company in the world.

Federal Grid's business is to provide electricity transmission and technological connection services.It maintains and develops the grid system and supervises grid facilities and infrastructure in 74regionsof Russia, covering a territory of 13 million square kilometres. Its customers are regional distribution companies, electricity suppliers and large industrial enterprises. The Company is a natural monopoly with

a 79.55% stake controlled by the Government of Russia.

Federal Grid Company was incorporated in June 2002 as part of reorganisation of Russia's electrical power industry.

Federal Grid Company's common shares are included on the MICEX-RTS stock exchange underthe ticker FEES and the Company's GDRs are listed on the London Stock Exchange and traded under the same FEES symbol.

Further information can be found at www.federal-grid.com