Page 191 - RusRPTMay21

We understand that the initial plan was for RSTI to spin off its retail functions in the North Caucasus at the federal level. However, it looks like there is currently no solution at the federal level, leading to downside risk in ROSSETI's dividends. Non-payments on the wholesale market convert into bad debt reserves for all participants on the wholesale market, which has a marginally negative impact on generation companies.
MRSK North-West saw its top line increase 6.2% y/y to RUB12.7bn in 1Q21, with distribution revenue up 6.5% y/y to RUB12.5bn and connection fees down 8% y/y to RUB345mn. COGS rose 8.2% y/y to RUB11.2bn, with distribution costs increasing 8.5% y/y to RUB11bn during the quarter. Consequently, profit from sales declined 6% y/y to RUB1.3bn in 1Q21, while the bottom line was up 2.8% y/y to RUB0.9bn.
RusHydro reported mixed 1Q21 RAS results 28 April. While revenue was up 3.2% y/y to RUB46.4bn, EBITDA was down 2.8% to RUB23.7bn. The company’s net income fell 5.7% y/y to RUB13.5bn in 1Q21. The company saw a 19.5% y/y decline in electricity generation by HPPs in 1Q21. However, the pricing environment supported the top line, as liberalized prices in the European part of Russia and Siberia were up 11.3% y/y and 1.2% y/y, respectively, in 1Q21. Moreover, KOM prices rose c. 20% y/y. RusHydro’s top line rose 3.2% y/y to RUB46.4bn (revenue adjusted to surcharge was up 4% y/y to RUB34.6bn), with revenue from electricity sales down 13% y/y to RUB18.6bn and revenue from capacity sales up 25.1% y/y to RUB16.5bn in 1Q21. COGS rose 10.8% y/y to RUB26.1bn during the quarter. EBITDA was down 2.8% y/y to RUB23.7bn, which is better than we expected for 1Q21 (we anticipated the decline to be in the high single digits). The company’s net income fell 5.7% y/y to RUB13.5bn in 1Q21.
RusHydro’s BoD approved a business plan and investment program for 2021-25, the company reported on Friday, 16 April. The company plans to invest RUB517.7bn in the modernization and construction of new assets. The company aims to launch 1.5MW of installed capacity, which will be predominantly gas-powered TPPs in the Russian Far East, as well as simultaneously decommission 1.6MW of outdated capacity. Moreover, the investment program assumes the allocation of funds to develop design documentation for the Neryungrinskaya GRES (NGRES) and Partizanskaya GRES (PGRES) expansion projects. The expansion of NGRES and PGRES is part of a state project to increase the throughput capacity of the BAM and Transsib railways. We see the news as neutral for HYDR shares, as the approved program is just 4% higher than our current capex estimates for 2021-25. However, we still see risks to HYDR's investments in building and modernizing its capacity in the Russian Far East. The guaranteed ROIC for the RUB216.1bn in capex (including VAT) to be spent on construction and modernization in the Russian Far East is still unclear. There is also no clarity on the potential returns on the investment projects related to BAM and Transsib.
191 RUSSIA Country Report May 2021 www.intellinews.com