Reasons for Changing the Items on the List of Operating Expenses
The increase in remuneration costs, insurance premiums and social expenses for 2019 compared to the same period last year by RUB 8,657 million, or 5.3%, was mainly due to the inclusion of NCSP Group and NFOT indicators in Transneft Group’s consolidated data, as well as due to increased insurance premiums to state off-budget funds in view of an increase in the maximum amount of their calculation base.
The increase in pension accruals for 2019, as compared to the previous year, is due to the following factors:
- in 2020, there has been a change in the structure of salaries for the majority of employees, i.e. the fixed part (salary) was increased and the variable part (bonus) was decreased, which led to the recognition of a one-off expense in the total amount of RUB 6,121 million as of 31 December 2019 as a result of increased obligations for the pension plan with fixed payments, which was recorded as Past Service Costs;
- in 2019, amendment to legislation which provides for multi-stage increase of the retirement age in the Russian Federation (from 55 to 60 years for women and from 60 to 65 years for men), resulted in the recognition of a one-off income as of 31 December 2018 in the total amount of RUB 13,831 million stemming from reduced obligations for the pension plan with fixed payments.
In 2019, electricity costs increased by RUB 4,000 million or 9.4% compared to the previous year. The increase in electricity (power) costs is mainly caused by the increase in the weighted average price (tariff) of electricity (power) and the increase in the volume of purchased electricity (power) due to the growth of oil turnover by 2.5%.
The outlay on materials in 2019 grew by 9.7% or RUB 3,246 million compared to 2018.
Cost of oil sales for export in 2019 amounted to RUB 187,336 million, including the RUB 151,025 million cost of sales for oil bought from Rosneft under the agreement signed in April 2009, as well as oil export customs duties in the amount of RUB 36,341 million. The indicator was formed due to oil supplies to the People’s Republic of China.
The increase in the cost of oil sales on the domestic market in 2019, which amounted to RUB 5,433 million or 92.5% as compared to 2018, is caused by the increase in the volumes of oil sold by the companies of Transneft Group.
The cost of sales of petroleum products on the domestic market in 2019 rose by RUB 1,909 million, or 30.1%, compared to 2018, due to a slight increase in sales volumes, the average selling price of petroleum products and the Group’s acquisition of control over NCSP Group in September 2018.
Other taxes paid by Transneft Group and included in its operating expenses refer to, above all, property tax, land and transport taxes.
Other operating expenses also include the outlay on communication services, transport and secondment expenses, as well as expenses and revenues resulting from disposal of fixed assets and other assets, fines and penalties received and paid along with other revenues and expenditures.
The decrease in other operating costs is mainly due to the Group’s application of IFRS 16 Leases starting from 1 January 2019.