Page 132 - RusRPTNov21

On 1 October, InterRAO announced that it would double electricity supplies to China from 1 October.
This news suggests that InterRAO is to supply at an annualised run-rate of c. 6.5bn kWh.
The average supply tariff was not disclosed, but we estimate it at c. RUB 3.25/kWh, making total supplies worth RUB 21bn (if they continue for a full year). However, according to Russian legislation, InterRAO only keeps 5% of that, as its own profit (and so the maximum profitability of its supplies to China) is RUB 1bn per annum. Taking into account that the announced growth is 100% of the previous average, we are talking about RUB 500mn of additional profits for IRAO per year, or RUB 41mn (or USD 574,713) per month.
Thus, the effect is not too material. The rest of the profitability, under Russian law, is channelled to lower electricity tariffs in the Russian Far East. Along with that, we note that InterRAO's supplies to Finland are record-breaking and could yield as much as RUB 6-7bn of additional EBITDA this year (which we already account for in our model). On final point worth noting is that in both Finland and China, grid capacities are now 100% utilised and no further supply growth is possible without costly investments into the grid infrastructure. Along with that, we also note that Chinese total electricity consumption is 7.5tn kWh, so InterRAO's extra 3bn kWh is 0.04%.
Russia’s regions could launch carbon trading if they plan for carbon neutrality
The Minister for Economic Development, Maksim Reshetnikov, speaking at the Ecumene 2021 congress, said that those regions aiming for and announcing carbon neutrality plans by a certain year would be able to set the particular quotas for emissions of greenhouse gases for certain companies and would be able to introduce carbon quotas trading. By the end of 2021, the law on the Sakhalin experiment is to be approved. Currently, the government is working on the adjustments to the law on emissions and the verification of emissions is to be launched, while with climate projects in 1H21, carbon units trading is to be launched.
Along with that, Reshetnikov noted that Russia and Kazakhstan were cooperating closely in regards to the climate agenda and could create complementary carbon regulation systems.
On 30 September, President Vladimir Putin commented that active work was being carried out to draw up the criteria for moving to a low-carbon economy.
In the meantime, the Ministry of Finance has published the key points of the budget and tax policy for 2022-24. A large part is on energy transition and decarbonisation, stating that if the carbon neutrality planned through 2050 materialises, the demand for oil would decrease strongly, while the energy transition in the energy sector, along with carbon trading, carbon certificates and carbon border adjustments,
132 RUSSIA Country Report November 2021 www.intellinews.com