Page 90 - RusRPTSept20

A potential non-payment crisis in the wholesale market payment has been avoid as discipline in electricity bill payments remains at 99.32% in July, according to the market settlement body. The average collection rate of electricity bills for generation services (wholesale market) in Jan-July 2020 stood at 99.32% vs. 100% for the same period a year earlier, the deputy head of the Centre of the Financial Settlement in the Electricity Market (CFR), Dmitry Chernov said on August 5.
At the same time, the payment discipline in the retail sector was 98.3% in 1H20 (vs. 98.4% in 1H19). According to Chernov, households showed the weakest payment discipline: at 94.6% in 1H20.
“Indirect evidence clearly pointed to a lack of any non-payment crisis in Russian electricity – despite market participants’ concerns when the government abolished penalties for non-payment for electricity until YE20,” VTB Capital (VTBC) said in a note. “We do not expect any working capital pressure at the generators, grids or supply companies, as Russian consumers demonstrate excellent payment discipline.” Nevertheless, VTBC said that incoming 1H20 IFRS data points to a 20-30% operational/net profit drop in the period for fossil-fuel generators, driven not by the COVID-19 effect, but the extraordinary 30% production growth at hydro plants and demand pressure driven by the OPEC+ effect.
“However, early July/August data indicate that this is predominantly a one-off effect, as RSV prices show strong recovery into the second half of the year,” VTBC added.
Renewable “agreements for the delivery of capacity” (DPM in Russian) could face even stricter localisation rules. The Russian government could make the localisation requirements for the new RUB400bn ($5.4bn) programme of renewables DPM projects even stricter, Kommersant reported on August 6.
This comes in a proposal from the Ministry of Industrial Production to the Ministry of Finance for the 2025-35 renewables support programme.
The fine for insufficient localisation could reach 100% of the capacity payment, while not fulfilling the export requirements could deprive a company of 20% of the capacity payment (unless export accounts for 5% (export revenues to the cost of the plant) for solar and wind commissioning in 2025-30,15% in 2031- 35, and 3-5% for small HPPs), VTB Capital (VTBC) said in a note.
The Association of Renewable Energy Development believes that extra localisation requirements will result in RUB50bn of additional investments being required and that 100% fines look aggressive with a more diversified approach being more balanced.
At the same time, the final rules for the selection have not yet been defined, with no agreement between the ministries, while generators are eager to continue to have the DPM programme and regulators have offered to use LCOE for the selections.
The final legislation is likely to be ready for government assessment by October, according to the Ministry of Energy. Thus, the first selections for this new programme are likely to take place no earlier than February 2021.
90 RUSSIA Country Report September 2020 www.intellinews.com