Page 84 - RUSRptAug18

Still, the news are seen as moderately negative for the operator, as the analysts see no reason for MTS to gain control in the MTS Bank, even though the bet on higher fintech revenues could be justified.
Russian mobile telecom major MTS is suing Turkmen authorities for $750mn at the World Bank's ICSID (International Center for Settlement of Investment Disputes), the company said on July 27. MTS had to suspend its operations in Turkmenistan in 2017 after the Turkmen authorities cut off its access to the intercity and international communications network. As of the end of the second quarter of 2017, MTS had 1.7mn subscribers in Turkmenistan. The company considered "that the Turkmen State has violated its rights as a foreign investor under the Agreement on Promotion and Reciprocal Protection of Investments (the 'Treaty') signed between the Government of the Russian Federation and the Government of Turkmenistan on March 29, 2009, ultimately resulting in the total expropriation of the Company’s investment in Turkmenistan."
9.2.10 Utilities corporate news
RusHydro reported its operating results on July 30 . Though there was a slight y/y decrease in net power output at the flagship Volga-Kama cascade, the results are still strong, in our view. It seems that RusHydro is enjoying favourable water conditions, as the high-water period has continued. Moreover, the elevated water inflow is likely to remain in place in the third quarter of 2018 , which would support the company's financial results. One negative point, however, is that the water level is low at the HPPs in the Far East, meaning that output is loss-making at the thermal facilities in the region, which were operating in condensing mode in 2Q, which would have had a negative impact on the company. Though the company's operating results look quite solid, we believe that a robust operating performance is unlikely to translate into stellar financials. First, RusHydro's bottom line in 2018 is likely to again be affected by impairments after the launch of new facilities in the Far East. Second, additional pressure could come from the revaluation of liabilities related to a forward contract with VTB.
Mosenergo has released its 1H18 production results. Total electricity generated printed at 30.3bn KWh, suggesting that volumes were flat YoY after the 3.9% YoY increase in 1Q18. The total heat send-out amounted to 46.3mn GCal, which implies a 3.6% YoY improvement in 1H18, while in 1Q18 it increased 12.5% YoY. The key reason for such dynamics was the weather. Overall, analysts consider the released results to be neutral for the share price performance. And although the 1Q18 operating data was positive for the company and supportive for the financials, the key source of profits in 1H18 was the increased capacity payments, which remained high in 2Q18 but have started to phase out from 3Q18.
Enel Russia has reported its 1H18 production results. 2Q18 electricity production increased 1.3% YoY to 8,801GWh, partly offsetting the negative dynamics of 1Q18 – meaning an overall 1H18 production slide of 1.8% YoY, to 19,018GWh. Konakovskaya GRES production fell most in 1H18, 8% YoY. The 2Q18 heat sendout fell 6% YoY, suggesting a 1H18 sendout of 2,753,000GCal, a 3% YoY decline. Analysts believe that although the results are relatively neutral, the improved operating data in 2Q18 is supportive for 1H18, as they would enable the company to at least partly offset the negative
84 RUSSIA Country Report August 2018 www.intellinews.com