Page 136 - RusRPTDec20

get ready for a turbulent 12 months ahead.
RusHydro​ has emerged as the clear winner in the COVID-19 aftermath. Strong hydro levels have elevated the company's dividend projections to marketfriendly levels a year ahead of consensus expectations, while a relatively clear and value-friendly capex outlook provides room for even further growth. Aiding the ESG angle of the investment case is the company's determination to gradually transfer its coal-fired capacities to gas supply, supporting RusHydro’s green status. To us, this sounds like an attractive investment story, and we reiterate Buy with a RUB0.90 12- month Target Price.
Conference
call messages.
· 25-30% EBITDA margin guidance for 2020F was reiterated, in line with our expectations.
· 4Q20 production has been stable; it is difficult to make forecasts for 2021, but management is upbeat about it.
· As per management, 2021 dividends are to be substantially above the level of those paid in 2020, pending approval by the board and government. Recently, the former CEO provided guidance of RUB 25bn dividends, a 7.6% yield.
· 2020 capex was guided 20-25% below the approved plan, given it had stated the maximum amount in the investment programme, with some moved to the coming years (e.g. DPM2 ) and some lines were optimised.
· The final approval of DPM2 for RusHydro is due by YE. Thus, the timing of projects’ commissioning could also be moved. All DPM2 projects are expected to be gas-fired; the change of the capex guidance is to be finalised with the project assessments underway.
· Sovetskaya Gavan launch could trigger about RUB 20bn in write-offs in 2020, but onwards there might be some offsetting positive revaluations. No other major write-offs are expected in 2020 (we though continue to be more conservative on that, while still assuming a large moderation in write-offs in 2020), with 4Q20 to be definitive.
· RusHydro is interested in one station that is part of BAM supply scheme; no decision has been made, but RusHydro is looking for a guaranteed return attached to it.
136 ​RUSSIA Country Report​ December 2020 www.intellinews.com