Page 123 - RusRPTJul21

● This year, electricity consumption in Russia is expected to return to the pre-pandemic level, or might even exceed it. According to System Operator, for January-May, electricity consumption was up 4.7% YoY (or 5.4% YoY, adjusting for 29 February 2020).
● Smart meters are not expected to cause any major tariff growth, with the programme to install them to take 15 years. Companies are to make the economies that allow them to finance the installation.
● The Ministry of Energy does not support the construction of 25 waste-to-energy plants, as there is no need for the new capacity, while it would cost four times more than nuclear. MinEnergo is ready to allow such investors to operate under market rules.
● There are no plans for a progressive tariff in Russia; first, it is important to work out targeted support.
● The strategy for developing hydrogen in Russia is due to be approved by the end of 2Q21.
● The liquidation of the cross-subsidy could be excluded from the Strategy through 2035, as it is hard to abolish it completely (although it could be kept at a certain level).
● There are no plans to privatise Rosseti, RusHydro and InterRAO.
● The modernisation of TPPs with innovative gas turbines could be moved to the core selection process.
● It is impossible to ban the existing market surcharges, while new ones have to be considered carefully.
● The question about the debt of the guaranteed suppliers in the North Caucasus could be discussed by a government commission, as a solution needs to be found.
Our View: We highlight the following.
● The recovery in electricity demand is favourable for gencos’ 2021 financial outlook, and for thermal gencos to a larger extent, given the moderation in water inflows from their record 2020 levels.
● Smart metering legislation still lacks a decision on the return for supply companies, with some, such those owned by InterRAO, noting that the current investments are at the level of the tariff decisions.
● For the first time in the last few years, MinEnergo could be abandoning the idea of abolishing the cross subsidy, with the latter implying a higher burden on industrial consumers to compensate for the low regulated tariffs for the population (see our Russian Utilities – RUB 5tn for Mother Russia, of 22 April 2020).
● The problem with non-payments in the North Caucasus could imply unfavourable receivables growth unless the government
123 RUSSIA Country Report July 2021 www.intellinews.com