Page 18 - RusRPTJul21

At the same time, Inter RAO is also preparing to execute large investment projects for Vostok Oil, as well as a potential project to replace steam turbines with gas turbines.
Sova Capital analysts believe that the company could increase its dividend payout to 50% if InterRAO is the only developer in building Vostok Oil’s infrastructure and does not have to take heavy capex on its balance sheet. Should the payout ratio increase, InterRAO's dividend yield forecast for 2021 could double from 3.7% to 7.4%.
Hydropower holding RusHydro currently pays out 50% of unadjusted IFRS net income, and previously already mitigated the impact of potential one-offs by introducing a dividend floor of the average dividend payout for the previous three years. Sova Capital expects RusHydro's dividend yield to rise from 6.3% in 2020 to 8.9% in 2021, mainly thanks to an impairment-free 2021.
As for Russian Grids (Rosseti), its "dividend solutions are not transparent, and the company’s precise dividend calculation has never been disclosed," Sova writes, reminding that the official dividend policy is to calculate the first 50% of adjusted IFRS and RAS net income and to pay out the larger of the two.
"We think the probability that Rosseti will pay in line with a recent government decree is very low, as the parent company’s actual cash proceeds for 2020 (dividend flows from subsidiaries) accounted for 48% of consolidated IFRS net income in 2020," the analysts believe.
The grid operator also unexpectedly lowered its dividends for 2020 by 72%, with a current DY of only 1.8%. Moreover, Rosseti and the Finance Ministry have already confirmed that it will have a special dividend calculation, according to Interfax.
The subsidiary of Rosseti, the Federal Grid Company (FSK), dividend policy also stipulates calculating 50% of adjusted IFRS and RAS net income and paying out the larger of the two. FSK has an effective payout ratio that is below 50%, in particular 35% of IFRS net income for 2020.
"The company is preparing to increase its capex for BAM and Transsib, and it could protect its current conservative dividend policy," Sova Capital believes. Assuming a dividend payout for 2021 of 50% of IFRS net income that does not include the depreciation adjustment, the expected dividend yield for 2021 could increase from the anticipated 7.1% to 13.1%, the analysts estimate.
Sova Capital maintained Buy ratings on shares of Gazprom, Transneft, InterRAO, RusHydro and FSK, a Hold rating on RosSeti ordinary and a Sell rating on Rosseti's preferred shares.
18 RUSSIA Country Report July 2021 www.intellinews.com