In 2002, the net profit of OAO RAO "UES of Russia" increased 2.5 times compared to 2001.

The financial and business operations of RAO "UES of Russia" in 2002 were characterized by the following tendencies:

• significant increase in the volume of sales of products, work, and services;
• increase in earnings before taxes;
• reduction in accounts payable and receivable:

The amount of the subscription fee for administration of the UES operation and development received by the Company reached RUB 40,354.3, or 148.3% compared to last year; the value of electricity sold to domestic consumers reached RUB 1,709.8 million, or 176.8% of last year's level; the value of electricity exports reached RUB 8,799.3 million.

The profitability of services related to adminstistering the UES operations fell from 461% in 2001 to 343% in the period under review, whereas the profitability of electricity exports dropped from 181% to 80%.

As a result of decline in cost-efficiency of the Company's principal kinds of products (work, services), which account for 93.0% of the sales volume, the sales profitability decreased from 67.2 kopecks per RUB 1 of sales revenues in 2001 to 61.6 kopecks per RUB 1 of revenues in the period under review.

Profit from sales in the reporting year amounted to RUB 32,371.1 million.

Income from other operations and extraordinary items amounted to RUB 12,323.8 million. As a result, the Company's profit increased to RUB 44,694.8 million.

The net profit margin in the reporting period made 59.8 kopecks per RUB 1 of sales revenue, which is 26.7 kopecks more than last year.

In 2002, the net profit totalled RUB 31,426.9 million, or 2.5 times more than in 2001. As a result, return on assets increased 2.9 percentage points to 13.4% compared to 2001, whereas return on equity increased 4.8 percentage points to 12.3%.

Description of the Company's Financial Situation

In 2002, after the transfer of fixed assets as a contribution to the authorized capital of the newly established wholly-owned subsidiaries, the structure of the Company's assets changed considerably.

The share of fixed assets and property investments (capital assets) in total assets increased 8.6% to 85.4%, whereas the share of fixed assets in the total assets decreased from 36.1% to 14.0%, and the share of long-term financial investments in the assets of subsidiaries and dependent companies grew over the period under review by 31.0 percentage points; the share of current assets in the total assets fell from 23.2% to 14.6%.

The structure of fixed assets is characterized by:

• decrease in the share of fixed assets by 30.6 percentage points from 47% to 16.4%;
• increase in the share of long-term financial investments by 31.8 percentage points;
• reduction of the share of construction in progress by 1.2 percentage point.

The structure of current assets is characterized by:

• increase in the share of cash and short-term financial investments in current assets from 36.2% to 48.0%;

• increase in the share of inventories and expenditures by 3.5 percentage points;
• decrease in the share of accounts receivable by 15.2 percentage points.

In absolute terms, accounts receivable decreased by RUB 23,344.0 million, including the reduction of short-term receivables by RUB 22,181.9 million. The subscription fee receivables reduced by RUB 1,113.2 million; advances decreased by RUB 24,039.3 million; short-term receivables from other debtors decreased by RUB 2,460.9 million; long-term receivables from other debtors decreased by RUB 1,162.2 million.

Liabilities

The liabilities and capital structure are characterized by:

• decrease in the share of short-term liabilities by 2.4% from 19.4% to 17.0%;
• decrease in the share of long-term liabilities by 3.3%;
• increase in the share of shareholders' equity by 5.7%.

The structure of borrowed funds is characterized by:

• increase in the share of payables by 4.6 percentage points from 59.0% to 63.6%;
• increase in the share of short-term loans and debt issues by 4.7 percentage points from 13.9% to 18.6%;
• decrease in the share of payables on long-term loans and debt issues by 11.5 percentage points from 18.1% to 6.6%;
• increase in the share of other long-term liabilities, including long-term payables, by 2.6 percentage points from 8.2% to 10.8%.

In absolute terms, the short-term payables in the reporting period decreased by RUB 6,060.4 million, including repayment of debt on promissory notes issued and increase in the payables to other creditors by RUB 35,645.7 million

A faster decrease in the amount of current assets compared to reduction of the amount of current liabilities made it possible to reduce the net working capital to RUB 20,866.8 million. The shortage of net working capital for covering the accumulated inventories and VAT on the acquired valuables as of the end of reporting period amounted to RUB 11,766.8 million.

Business Performance Indicators

The business performance indicators reflect improved use of resources by the Company and increased rate of their turnover:

• receivables turnover increased 1.4 times over the period;
• the current assets turnover period decreased by two months;
• the turnover of net working capital is 23.5, which corresponds to 15 days and suggests its insufficiency.

Business Performance Indicators

Debt-to-Equity Ratios

The values of debt-to-equity ratios from the point of view of financial stability are within the recommended level:

• shareholders equity to total liabilities ratio is 79% with the critical value of the equity ratio being 50%;
• the value of the debt ratio, which is the relationship between borrowed funds and shareholders' equity, is 0.26, with the critical value being 1.0.

Debt-to-Equity Ratios

Liquidity Ratios

The value of cash ratio is within the recommended range. Cash and marketable securities cover the Company's short-term liabilities by 41%, with the recommended values being within the range of 20%-50%.

The values of the quick ratio and current ratio are within the permissible range. The most liquid assets (short-term receivables, cash and securities) cover the Company's short-term liabilities by 76%. The value of the current assets to short-term liabilities ratio makes 86%.