Page 154 - RusRPTJan21

cleaning on its territories. It voiced a total environmental capex estimate of $5.6 bln through 2030 (21% of the $27 bln total capex target over 2021-30), though this figure may increase, as Nornickel will provide more detailed guidance for climate change and biodiversity capex next year.
On top of the environmental capex, Nornickel now plans to spend $4 bln to revamp 60% of its infrastructure by 2030. This will include the $1.3 bln it previously announced would go toward industrial safety capex in 2020-24.
While the 2020 output guidance was unchanged, the 2021-22 guidance was revised slightly. The nickel guidance was up 2% for 2021 but unchanged for 2022. Copper guidance was down 1% for 2021 and 2% for 2022, while PGM guidance was down 2% for 2021 and 5% for 2022 because Nornickel now expects lower grades. The 2023 guidance was also given for the first time, and it matched the 2022 projections. We adjusted our output forecasts to account for the update, which lowered our 2021-23 EBITDA forecasts 3-4%.
The output targets for 2030 were raised, as Nornickel upgraded its ore mining plans. The 2030 targets for copper and nickel were raised 2% and 4%, while the target for PGMs increased 7%. Nornickel now guides that it will produce 4.82-5.14 moz of PGMs in 2030, which implies an impressive 4.1% CAGR over 2020-30.
Despite the increased environmental and infrastructure capex and long-term production targets, the capex guidance for 2021-30 was reiterated, due to ruble depreciation. Nornickel plans to spend $3.0-3.4 bln in 2021 and $3.5-4.0 bln per year in 2022-25. In order to improve execution for its investment program, Nornickel is expanding the pool of construction companies that can operate in Norilsk, which should limit the issues the company has had due to a shortage in its contractor labor force. Since this may help bring an end to the company's long track record of underspending, we increase our 2021 capex forecast from $2.5 bln to $3.0 bln. However, we are keeping our forecasts for 2022-25 at $3.5 bln per year on average, which is in line with the low end of the guidance.
The management reiterated its stance on dividends, saying it wanted to link dividends to FCF when the shareholder agreement expires (with the dividend for 2021 being the last one covered by the SHA), though this will depend on the decisions of key shareholders (Potanin and Rusal). See our ​report​.
Overall, we think that the investor day was positive for ESG-committed
154 ​RUSSIA Country Report​ January 2021 www.intellinews.com