Page 149 - RusRPTMar21

VEON’s dividend policy to stay in place. The company’s dividend policy implies a payout of 50% of FCF after licenses, although this is subject to the leverage ratio remaining around 2.4x post-IFRS 16. The company decided not to pay out dividends for FY20 (despite generating $357mn in equity FCF in FY20) due to the expected outflow from the acquisition of the remaining 15% stake in its Pakistani unit (c. $320mn, on our estimates).
The company should be in a better position to propose dividends for FY21 given the potential improvements in FCF generation following stronger revenue and EBITDA. VEON will also continue to optimize its debt portfolio, improve its currency mix, extend its tenor and reduce cost of debt, all of which should lead to a stronger capital structure.
9.2.10 Utilities corporate news
Enel Russia presented its 2021-23 strategy on February, saying it would not pay dividends and its wind farm projects are being delayed.
The company has decided not to pay dividends in 2021 and to reallocate the R3bn in dividends previously guided to be paid this year to 2023 (in addition to 65% of 2022 net income). It also announced an upward revision to capex guidance and more details on the launch of two wind farms, Azov and Cola, both of, which will be delayed. Having taken account of these major changes, we have updated our valuation model. We downgrade the stock to HOLD, with a R0.97 per share 12-month target price.
A sector dividend outlier. With its decision to forgo dividends in 2021, Enel Russia currently screens as a sector outlier. Given that other Russian utilities still offer quite robust dividends, the decision has already resulted in a substantial market reaction. Though one could argue that Enel Russia is in a different stage of its investment cycle than other utilities companies with its huge outlay on wind farms, this should have been evident to the management when they provided the previous dividend guidance (a fixed dividend payout of R0.0848 per share for 2020-22).
Wind farms delayed. The new strategic plan shows the Azov wind farm being launched in late May 2021 and the Kola wind farm in late April 2022. We have adjusted our model to reflect the later commissioning of these units. We estimate that the delays will cost Enel Russia R2.1bn in EBITDA, while the company may also have to pay fines if it is unable to get them canceled.
Higher capex than we previously expected. With the new capex
149 RUSSIA Country Report March 2021 www.intellinews.com