Page 171 - RusRPTApr21

Prime news.
CEO of InterRAO Alexandra Panina, speaking at the VedomostiRussian Energy conference, reports that the company expects record high export volumes (and, thus, profits) in 1Q21, driven by the cold weather conditions, but that 2Q-3Q21 are likely to show a moderation from 1Q21 due to the weather factor, while the pandemic restrictions would still be intact. Although the news sounds enthusiastic, this is not a game changer, as the recovery from the unimpressive FY20 (hit by the warm widter and COVID-19) was expected and confirmed after the FY20 results (see our InterRAO – FY20 IFRS; blurred value proposition, of 2 March) and is included in our model, while the contribution from export operations to the group’s net income/EBITDA is minimal, with the generation segment driving profits. Thus, we see the news as relatively neutral.
Federal Grid Company (FSK) reported its FY20 RAS results on Friday 5 March.
Total revenues declined 5% y/y, with grid connection revenues sliding 71% y/y (driven by the schedules of applications) while grid transmission revenues were almost flat y/y.
Total costs were also almost flat y/y. Adjusted EBITDA (in the company's calculation that, apart from write-offs and reserves, also excludes grid connection revenues) decreased 2% y/y. Net income declined 31% y/y to RUB39,965mn, with the 2019 results also taking the DVEUK deal into account.
Rosseti also released its FY20 RAS results together with FSK, its largest subsidiary.
As the RAS results are non-consolidated, they largely reflect the dividends received from subsidiaries and subsidiaries' share price revaluation. Revenues were down 60% y/y due to no interim dividends vs. 9mo19 dividends in 2019 vs. the 8% growth y/y, excluding the effect from dividends. Costs declined 5% y/y, while the bottom line slid 78% y/y.
The downward trend of net income was not unexpected, given the elevated base of 2019 and slide in grid connections. At the same time, the key takeaway for us from the FY20 RAS results was the scale of the drop in grid connection revenues: the 71% y/y drop was below the previous business plan that we applied. Thus, in the IFRS financials, the grid connection component would also be lower and put pressure on net income and dividends. We expected a 6.2% dividend yield (implying a 29% y/y reduction in dividends) with net income down 21% y/y in 2020, but it seems there are downside risks.
171 RUSSIA Country Report April 2021 www.intellinews.com