Page 108 - RusRPTSept20

9.2.10 Utilities corporate news
Italian-owned utility Enel Russia sent a request to Deputy Prime Minister Yury Borisov and Minister of Energy Alexander Novak at the end of July asking for the modernisation rules to be softened, Vedomosti reported on August 6. On 21 July, the Ministry of Energy published draft legislation allowing for the use of the foreign CCGTs in the DPM2 with the three conditions: i) the post-modernisation capacity must not exceed 250MW; ii) the equipment has to have been acquired before 2015; and iii) it was not in operation before that. This was done to cover the Tatenergo project of Naberezhnochelninskaya CHP so that it could be approved for the 2026 selection with the Siemens turbine. In its letter, Enel is asking to increase the capacity from 250MW to 450MW and to be able to use equipment bought before 31 December 2015, as well as to move the 2026 selection from September to December. According to the article, Enel is eager to use a 440MW turbine it has from Ansaldo Energia. The news concerns the turbine that the company acquired to modernise Sredneuralskaya GRES (that project was shelved due to market conditions). Enel Russia paid €98mn for the turbine.
MacQuarie prepares to dispose of its 5.82% stake in Enel Russia. The consortium of investors holding a 19% in Enel Russia (PFR Partners Fund l Limited) has been split, a move that would be a prerequisite for a possible stake sell. The breakdown of the stakes in Enel Russia shows Macquarie with 5.8156% and RDIF with 5.5387%, while the remaining portion is attributable to AGC Equity Partners. It had been reported previously that Macquarie is considering disposal of its stake, so the split of the consortium may pave the way for that. Though the stock could see improved liquidity should Macquarie choose to dispose of its stake on the open market, the transaction means overhang risks for the stock. The defensive nature of the business - the fixed dividend policy is a key element of that - should provide support for the stock and would be a strong selling point. Another selling point is the company's substantially improved ESG profile, especially compared with the other fixed dividend story in the Russian utilities space, Unipro, which is going to see the share of coal in its EBITDA increasing substantially after the relaunch of Berezovskaya Unit 3 (although this was recently postponed again and is now expected in 1H21).
Russian electric grid major FSK (Federal Grid Company) reported a 2% year-on-year decline in revenues under IFRS in 2Q20, with decrease in collected fees and revenues for construction services shrinking Ebitda by 8% y/y, and net profit by 23% y/y. As reported by bne IntelliNews, FSK already reported weak results in 4Q19 and 1Q20, but remains one of the best dividend payers in the Russian utility sector, while its parent Rosseti recently got a boost to its outlook from its potential consolidation and pledge to improve dividends. In 2Q20 FSK's earnings and net profit missed the expectations of BCS Global Markets analysts by 10%, that see the results for the quarter as mild negative for FSK's shares, as it might lead to the dividend per share decrease (DPS) for 2020. BCS GM suggests a focus on 2020 guidance updates, an update to Rosseti/FSK dividend policies including 220 interim and 2020 guidance, and updates to changes in tariff regulation for distribution grids, while maintaining the Buy recommendation for FSK shares with target price of RUB0.25 per share.
Following strong operational results seen in 2Q20, Russian hydropower major RusHydro showed solid 2Q20 IFRS numbers, with revenues up by 6% year on year, Ebitda gaining 47% y/y, and net income jumping by 62% y/y. As reported by bne IntelliNews, RusHydro was helped by warm weather at the beginning of 2020, achieved the biggest share price gain in the sector, and had its investment case re-rated upwards by analysts. Notably, in 2Q20 the earnings and the bottom line have beaten the expectations of BCS Global Markets analysts by 26% and 37% respectively, due to solid operating results, cost control, higher state grants and new capacities added (especially
108 RUSSIA Country Report September 2020 www.intellinews.com