Page 171 - RusRPTSept21

According to the Market Council, this could become the largest green bilateral contract in Russia; in 2029, wind and solar bilateral contracts stood at 60.2th MWh, increasing to about 200th MWh in 2020 and as much as 263th MWh for 7mo21.
Elsewhere, RusHydro announced that it had signed an agreement with the St Petersburg International Mercantile Exchange on cooperation in the development of green certificates trading. The platform will make it possible for consumers to buy green energy from RusHydro. The agreement between the Exchange and RusHydro is also aimed at coming up with proposals to improve the legislation concerning the trading of certificates and CO2 quotas. It also takes into account the CO2 trading experiment in the Sakhalin region aimed at regional and national systems of carbon regulation with carbon quotas being traded.
Our View: We believe such an auction by Hevel will find enough demand from its electricity consumers. The demand for green energy is growing and thus a contract at a 3-5% premium to RSV prices looks a relatively cheap way to lower a company’s Scope 2 carbon footprint.
RusHydro’s news comes on top of the report from 21 July that it had signed an agreement with the Association of Energy Market Participants ‘Target #7’. That is to assess RusHydro's generation assets so that the company can take part in I-REC, the international green certificates system (see our RusHydro – ESG – To become part of I-REC – positive, of 22 July). We see the development as supportive and positive.
Only recently, the company signed bilateral contracts with Sberbank and Polyus. We continue to believe that RusHydro will be able to benefit from the development of a green premium in Russia.
TGK-1 reported its 2Q21 IFRS results and held a conference call on August 5. Revenues, EBITDA and net income grew 15%, 20% and 39% y/y in the quarter. The EBITDA margin widened 1.2 pp y/y to 30.1%, while the net margin grew 2.6 pp to 14.7%. The y/y growth in 2Q21 was driven by several factors, including: higher spot electricity prices (up 16% y/y in 2Q21 in the first price zone); increased electricity output (up 3.6% y/y) and sales (up 8.6% y/y), including a 16-fold y/y increase in export volumes; tariff subsidies for heat totaling R2.36bn (versus R0.56bn in 2Q20) from the St Petersburg and Murmansk budgets that were postponed in 1Q21; and a R0.2bn higher quarterly impairment gain on financial assets. The positive factors fully offset the R1.3bn negative impact on EBITDA from the expiry of CSAs at TGK-1's two thermal units at the end of last year. The conference call did not deliver any new information. The company did not provide any guidance on the 2021
171 RUSSIA Country Report September 2021 www.intellinews.com