Page 189 - RusRPTMay21

on the turbine, and management could not provide any updates at this stage.
Renewables rules: Enel Russia expects the new renewable support programme to be less ambitious, now the finalisation of terms is in place. Once released, the company would assess participation in the tender.
Drivers are in the longer term. Enel Russia's 1Q21 might seem strong as the company surprised us on the EBITDA and net profit lines; however, we do not ignore the wider trend. Underlying profitability is slumping, driven by the phase-out DPM (see our CEEMEA – Utilities Quarterly – 3Q20; DPM1 expiry – risks, dividends and investments of 2 October 2020). The delayed wind projects commissioning and the absence of dividends for 2020 will in our view continue weighing on the investment case of the story – at least throughout the current year (see our RUSSIA – Enel Russia – Time-shifting investor trust of 19 February). Enel Russia has made a big play on upgrading its ESG profile, and we believe this will significantly strengthen the long-term attractiveness of the story. However, this green transformation is causing massive turbulence for company's financial viability right now, in FY21. Without dividends, and as the company falls to the low point of its profitability before recovering from FY22, we maintain our Hold recommendation based on a RUB 0.85 12-month Target Price.
On 27 April, Unipro released strong 1Q21 results, with electricity production growing 7.3% y/y to 12.8bn kWh due to the colder weather, demand growth and increased export. Heat production improved 29.9% y/y to 940kGCal, also on the back of the colder weather y/y.
Fortum signed an agreement with Procter & Gamble on 30 March on cooperation in the development of renewable energy in Russia. As part of the agreement, Fortum is to supply green energy from its wind farms in the Rostov region to Procter & Gamble’s plant in the Tulsk region. According to the head of Procter & Gamble in Eastern Europe, Sotirios Marinidis, along with the company aiming to reach carbon neutrality by 2030, moving one of the largest plants in Europe, specialised in the production of household chemicals, to green energy is a major positive development for the business.
The list of companies moving to green electricity consumption continues to expand and we note that similar contracts have recently been signed by:
Sibur with TGK1 PhosAgro with TGK1 Polyus with RusHydro Shekinoazot with Fortum
We expect green energy to develop a premium pricing in Russia, until CO2
189 RUSSIA Country Report May 2021 www.intellinews.com