Page 162 - RusRPTJun21

· Capacity split. Total selected capacity stood at 4.2GW, with InterRAO offtaking 25% of the selection, followed by SGK (the electricity arm of SUEK) with 20%, then Unipro with 20% (another unit of Surgutskaya GRES to be modernised). GEH’s gencos got 31% of capacity with Mosenergo having 18%.
· Type split. Most of the projects are related to modernising turbines, with only two out of 21 focused on upgrading boilers.
· Zone split. 19% of selected capacity was in Zone II, with the rest in Zone I.
· Fuel type split. 27% of the selected capacity is coal-fired while the rest is gas-fired.
· Efficiency coefficient. LCOE ranged from RUB 1,751/MWh to RUB 2,445/MWh.
For the 2027-29 auction with localised turbines, we note the following key takeaways.
· Capacity split. The total amount of capacity offtaken was 1.6GW. InterRAO took 56% with its Kashirskaya GRES project, while 30% of capacity was selected for OGK2 and the rest for TPlus. As planned, the projects for the nine turbines were selected in three size categories.
· Timing. The projects were selected for 2027-28, with the quota being fullfilled and no projects selected for 2029.
· Zone split. No project in Siberia was chosen, despite the initial quota of not more than 322MW.
· Equipment. It is not known which equipment the producers are going to use. Previously, Power Machines’ turbines were classified as innovative, meaning that they could be used in the auction, and Power Machines has also signed an agreement with SGK for a project in Novosibirsk (but it was not selected).
We see the news as supportive for all the selected companies. In terms of the 2027 auction, InterRAO yet again dominated the selection, while SGK and Unipro were traditionally active, and on the positive side is the relatively large offtake for GEH gencos (with the projects to ensure profitability in the longer term). The 2027-29 auction offtake is impressive for InterRAO and especially positive for OGK2, as this would be a major support to EBITDA once DPM1 phases out. Apart from that, we see the auctions as competitive. In addition, more focus on turbines is positive in terms of the deeper modernisation, and more CHPs were selected in the 2027 auction than at previous auctions.
InerRAO’s operating profits recovered, as cross-border trading boomed after the COVID-related trough last year and production grew in 1Q21. However, behind the robust financial numbers, InterRAO continues to keep minority investors in the dark regarding its strategy to unlock value. Engineering M&A, with PE twice and EV/EBITDA six times higher than IRAO’s own multiple, the lack of details on Vostok Oil investments, the reluctance to increase its dividend policy and the launch of the management ESOP leave few short-term triggers on the plate. Our DCF-based model continues to point at substantial long-term value, though. We maintain our RUB7.00 12-month TP (42% ETR). 1Q21 – recovery marginally above expectations. InterRAO’s 1Q21 IFRS results came marginally above our expectations, supported by generation growth, RSV prices, delta-DPM revenues, Kaliningrad lease, export
162 RUSSIA Country Report June 2021 www.intellinews.com