Page 11 - BNE_magazine_03_2020 wellness

bne March 2020 Companies & Markets I 11
Russia sectors performance % YTD
Source: MOEX, BCS GM
With earnings per share (EPS) in the utility sector expected
to grow at a double digit rate over the course of this year compared with no growth at all for the benchmark MSCI Russia index, then utilities have already become the default choice for exposure to the Russian stock market, says VTBC. The firms Enel Russia, RusHydro, InterRAO, Unipro and OGK2
are all “pockets of growth” in a sector that is likely to put steady corporate profit growth.
Reform of the utilities sector started back in 2007 when the sector last rallied, but the 2008 crisis caused a pause. However, in the intervening years the reforms have continued backed
by investment incentives that have led to an overhaul of the entire sector. Now that the investment phase is winding down that leaves utilities with most of their investment finished and improving profit and free cash flow positions.
And the reform programme has been updated and encompassed by the current so-called DPM2 programme to upgrade ageing generation capacity that is supposed to run to 2035 and will entail a total of $620bn of investment. Bank analysts are predicting that the rally will continue in 2020.
“Each is using the low point of the capex cycle in a different manner: some are looking at M&A opportunities (InterRAO), others to raise dividend payments (Unipro), and yet others for horizontal expansion (renewable energy for Enel Russia) or vertical integration (gas turbine production for the GEH gencos),” Sklyar added.
Russian stoligarch Rotenberg gets Moscow toll road contract
bne IntelliNews
The RUB5bn ($79mn) contract for toll collection on the Moscow Ring Road (CKAD) was awarded to the United Operator (CKAD) linked to stoligarch Arkady Rotenberg, Vedomosti daily reported on January 31.
As reported by bne IntelliNews, assets of sanctioned Rotenberg are among the largest beneficiaries of state construction and infrastructure contracts.
In 2019 Russian gas major Gazprom said it would buy out two of Rotenberg's subcontractors, at the same time as the co-operation with the state development bank VEB.RF was announced, which could bring a shift in how the Kremlin oversees mega-construction projects.
But the Moscow contract could indicate that after
the reorganisation, Rotenberg’s assets will remain in the lucrative public construction building segment. Vedomosti notes a direct conflict of interest, as both the commissioner and the contractor are affiliated with Rotenberg and his associates.
The billionaire’s other transportation infrastructure con- tracts included the mega-bridge to the Crimea Peninsula and the controversial truck levy system Platon.
In the energy sector, Gazprom was previously reported to be seeking to buy out major subcontractors such as StroyGazMonthazh and Gazprom Bureniye of Rotenberg and StroyNefteGaz of Gennady Timchenko.
But the waters surrounding the deals have been muddied, as reports claimed that Rotenberg sold his StroyGazMontazh to a company registered a few months before the deal with unknown beneficiaries and later linked to the top managers of the gas giant.
At the same time Rotenberg was rumoured to be one of the mystery buyers of two of Gazprom's recent quasi-treasury share SPOs.
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Sectors: % return YTD