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gone bankrupt. Radionova also noted that MNOD’s damages will force many companies to reconsider their approach and assess whether it is more profitable to invest in production now or to sue Rosprirodnadzor. The investigation into the causes of the accident at MNOD’s CHPP-3 was extended until 30 October. Not to be confused with damage compensation, the amount of which is still under dispute (Rb148bn requested). The fines under question here are already known by the market and should be priced in.
Norilsk Nickel has estimated the amount of the total environmental damage from the spill at HPP-3 at RUB21.4bn ($274mn).
There are two main differences between the approaches that Norilsk Nickel and Rosprirodnadzor took when calculating the amount of the damage to water resources (which accounts for 99.5% of the total claim).
· The company uses a non-action coefficient of 1.1x (instead of the 5.0x, which Rosprirodnadzor used), as NTEC launched clean-up works immediately after the incident.
· The amount of spilled fuel was 14.3kt, not 19.1kt, as Rosprirodnadzor assessed.
Furthermore, the company contends that the amount of damage to the soil was also calculated incorrectly.
Finally, the clean-up and rehabilitation costs, which are estimated at approximately $154mn, must be deducted from the amount of the fine.
Norilsk Nickel’s estimation is only about a seventh that of Rosprirodnadzor’s. The company has already excluded $2.1bn from EBITDA as a provision and we estimate the dividend yield for 2020F at 11.0%. If the final amount is equal to Norilsk Nickel’s estimate, that would mean a $1.8bn recovery in provisions, implying a 24% upside risk to our forecast of 2020F EBITDA, less the provision for the claim, which implies a 13.7% dividend yield. However, the court has yet to reach its decision, with the first hearing due to take place on 12 October.
UC Rusal released strong 3Q20 Operating Update. The results were strong, showing an increase in aluminum output and sales q/q. Aluminum production rose 1.3% q/q to 939kt in 3Q20 with Siberian smelters representing 93% of total aluminum output Aluminum sales reached 1mt – up 3.3% q/q with sales of VAP products rising 25.4% q/q to 455kt, leading the share of VAP in total sales mix to recover to 45% in 3Q20 vs 37% in 2Q20. Own aluminum sales rose 5% q/q to 935kt Average aluminum realized prices rose 6.5% q/q to $1,762/t driven both by rising LME prices and the increase in the average realized premium component. The realized discount vs BCSe benchmark decreased to $25/t vs $35/t in 2Q20. In 1Q20, there was a premium of $2/t over BCSe benchmark In 3Q20, total alumina production slightly increased – by 0.4% q/q
159 RUSSIA Country Report November 2020 www.intellinews.com
