Page 188 - RusRPTMay21

Russia faced a massive negative FX one-off, but this year reported an FX gain, which, coupled with the above, led to YoY net income growth of 8%, again beating market expectations.
Conference call messages. We note the following takeaways.
Azov: Enel Russia announced that it will launch the Azov wind project from 1 May, a month ahead of guidance, and that capacity and electricity payments are to start from 1 May. The project is to receive 45% of capacity payment due to the need to finalise the document on localisation, with a 100% payment coming from June. The total capacity payment is estimated at RUB 1,020-1,030mn per month. Once the project launches, revenues and depreciation would feed into financials, and the company would stop capitalising interest.
Kola: The Kola wind farm construction is progressing well, and there is no change to the previous guidance of a 1 May 2022 launch.
Fines: The Market Council has released four months fines release for the Azov project due to the force-majeure. The company negotiated with 50% of its larger consumers, and 28% of capacity penalties were waived. Thus, Enel Russia would pay 72% of fines for December-March, and 100% for April, which is RUB 30-35mn, and no penalties for May. The provisions for penalties have already been made.
Bad debt: Reserve provisions were revised in 1Q21 with their partial collection. Rosseti made all payments related to the North-Caucasus on time in 1Q21. The Power Producers Association is working on a possible prolongation of the 100% North Caucasus payment guarantee beyond 1 July. We note that the inability of gencos to prolong the agreement might bring a noticeable receivables build-up for Enel Russia in the second half of the year.
Costs: Cost optimisation came mainly from the renegotiation of selected service contracts, for which accruals were made in the past and were revised in 1Q21. The company is to work on cost optimisation further in FY21, but FY21 costs are unlikely to decline at a 1Q21 pace.
Debt: The average cost of debt in 1Q21 stood at only 7.1%, vs. 8.5% in 1Q20.
Production and guidance: Despite the positive production trends, it is too early to update the guidance and comment on the revised outlook.
Turbine sale: Enel Russia is in discussions with several counterparties
188 RUSSIA Country Report May 2021 www.intellinews.com