Page 115 - RUSRptSept18

Russian electric grid major Rosseti (Russian Grid) reported 11% year-on-year revenue increase in January-June 2018 to RUB485bn ($7bn), Ebitda increase of 3.6% to RUB145.4bn, and net income advance of 5.4% to RUB56.9bn. At the same time the company's profitability margins declined due to 17% rise in operational costs, driven by a 29% rise in grid losses expenses, a 56% increase in the costs of buying electricity for retail, and an almost 183% rise in impairment charges for account receivables, Renaissance Capital commented on August 29. Rosseti is among the best dividend stocks in Russian utilities universe, which was further enhanced by recent pledges to increase the payout . "The growth in 1H18 IFRS profit along with positive results for 1H18 RAS profit raises prospects for more dividends for FY18," Renaissance Capital wrote. However, "management guides for RUB5bn in total dividends for FY18, which would still leave the dividend yield for common stock at close to just 2-3%," the analysts estimate, and reiterate the Sell rating and target price of RUB0.6 for common shares our Hold rating and target price of RUB1.24 for preferred shares of Rosseti. The analysts also note that the Russian government is looking into the possibility of abandoning dividend payments for common shares by Rosseti in favour of keeping this money within the company to finance infrastructure capex. "Although the discussion is at an initial stage and Rosseti management is inclined to increase dividend payments, we think such a move could significantly damage Rosseti common shares by undercutting investors’ interest in the stock," Renaissance Capital warns.
InerRAO released its 1H18 IFRS numbers on August 15. The results were robust , hitting analysts expectations and beating the consensus. Management said it now expects to hit the upper bound of its previous EBITDA guidance, RUB110bn. However, it also remained unbending on dividends, maintaining its 25% payout expectation. VTB Capital (VTBC) views InterRAO’s investment case as the most compelling in Russian utilities and has a 12-month Target Price of RUB 8.50, which implies an ETR of 118%. Buy reiterated. InterRAO’s 1H18 IFRS results exceeded expectations, impressing with extra profitability from the new operating DPM unit and the Kaliningraskie CHPs lease. Total 1H18 revenue stood at RUB 460,746mn, translating into an 11% y/y improvement (1% below our estimates and 2% below consensus), with a y/y generation business upturn of 7%. Total costs increased 9% y/y. Adj. EBITDA reached RUB 59,384mn, a 24% y/y gain, hitting estimates and beating the consensus by 6%. Net income also improved, 24% y/y, to RUB 38,296mn, 8-9% higher than our and consensus expectations.
Subsidiaries of Oleg Deripaska’s EN+ have begun the process of re-registering in Russia following the creation of the Special Administrative Regions on Russia Island in the Far East and October Island off Kaliningrad. Rusal also reported that its board has examined re-registering in Russia. These “on-shore off-shores” offer companies zero tax on profits received through dividends. In mid-August, EN+ indicated that Deripaska would reduce his holding in the company to below 50% in exchange for sanctions relief. Re-registering in Russia does not provide any meaningful protection from US sanctions, but suggests that the company is preparing a plan B involving heavy state support if the US Treasury rejects the proposal from EN+ to remove sanctions.
9.2.11 Metallurgy & mining corporate news
A support package for sanctioned Russian aluminium major Rusal includes acquiring surplus metal for the state commodity reserve , the Minister of Industry and Trade Denis Manturov told the press as cited by Reuters on August 28. The government previously rejected the idea of buying up surplus aluminium from Rusal. Previous reports indicated that En+ and Rusal of sanctioned Russian tycoon and Kremlin insider Oleg Deripaska could be getting closer to striking a deal with USTD to suspend
115 RUSSIA Country Report September 2018 www.intellinews.com