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crystallizes the stake's value for VEON, helps to reduce leverage and removes the risks of the Italian market from VEON's investment case. VEON plans to direct part of the proceeds (around $1.0bn) toward simplifying its ownership in its Bangladeshi and Pakistani units; it will acquire these subsidiaries from GTH at a valuation in line with our estimates. However, it is not certain that the deal will go through, as it still needs the approval of GTH minorities. The remaining proceeds ($1.9bn) have been earmarked for cutting VEON's debt, which will strengthen its balance sheet and enable it to increase its dividends, as it has promised (we forecast an 11% dividend yield for 2018). We reiterate our BUY recommendation on the stock and have updated our model to reflect the recent developments. Our target price of $4.50 per share implies 56% upside from the current price.
9.2.10 Utilities corporate news
During the ceremony for the commissioning of Vostochnaya CHP, the
RusHydro CEO, Nikolai Shulginov, confirmed that the company plans to continue commissioning new power units in the Far East . According to Shulginov, RusHydro expects to actively participate in the unfolding modernisation programme, with five projects, including new capacities of the 455 MW Artyomovsk CHP-2, the 344 MW Khabarovsk CHP-4 and the 144 MW Yakutskaya GRES-2, and the modernisation of 203 MW at Vladivostok CHP-2 and Komsomolsk CHP-2. RusHydro is to update its investment justifications for these projects and will submit these to the government commission on energy sector development for final approval; however, according to Shulginov, all of these projects already have the support of President Vladimir Putin.
GazpromEnergoHolding (GEH, manages utility assets of Russian gas giant Gazrom) and T Plus utility major of sanctioned Russian tycoon Viktor Vekselberg hired PricewaterhouseCoopers to value their respective assets , Reuters reported on September 18. Reportedly the valuation might pave the way for a potential joint venture between the companies. The latest April 6 round of sanctions hit Vekselberg, his investment vehicle Renova, and fellow billionaire Oleg Deripaska, the hardest. Previous reports suggested that Vekselberg's utility major T Plus could be sold to Gazprom's energy holding as part of the state support effort , while another tycoon Mikhail Prokhorov bought 39.4% in his International Financial Club (IFC) Bank. Previously Renova and Gazprom failed to negotiate a joint venture for utility assets under which Renova could get 25% of the new company. Reuters reminds that the Federal Antimonopoly Service (FAS) protested the deal, claiming it would give GEH control over too much generation capacity.
9.2.11 Metallurgy & mining corporate news
Highland Gold’s the first half of 2018 earnings undershot analyst estimates. EBITDA of $71.4mn was down 5% y/y and came 15% below expectations. This was partly offset by free cash flow (FCF) being 25% above expectations, mostly due to lower capex, while the company announced a higher dividend (4.3% yield). While the outlook suggests that the second half of 2018 might be stronger, we think a slight delay in capex on Kekura creates the risk of a delay in commissioning the mine and might be negative for the stock. Sberbank’s unchanged 12-month Target Price of GBP 150 implies a 14% ETR. Hold reiterated. EBITDA below expectations on lower sales volumes and higher costs. EBITDA of USD 71.4mn was 15% below estimates
106 RUSSIA Country Report October 2018 www.intellinews.com