Page 174 - RusRPTApr21

block is ready for the final official testing/approval and switch to the grid. On a negative side new dividend policy admit correction of 202324 dividends from previously guided Rb20bn due to CAPEX obligations to modernization and renewables construction – yet to be clarified.
Unipro ticks investors’ boxes: the company confirmed it is a month away from the relaunch of Berezovskaya and indicates its shareholders can expect an 11% p.a. dividend yield over the next four years.
Additionally, management stepped up its rhetoric on moving into renewables and upgrading its ESG profile. All this is exactly what we think shareholders want from a typical utility these days: a double-digit yield and fitting into the climate change paradigm. However, while we acknowledge the robustly positive upgrade of the company's business case, we remain cautious about the company delivering. Our new 12- month Target Price of RUB 3.30 implies a 28% ETR: Buy reiterated.
Unipro ticks the boxes for shareholders. Unipro’s management tried to deliver one of the most robust results presentations in the company’s history. They started by confirming that the Berezovskaya relaunch – for which investors have waited for more than five years – will arrive in the next month. Management then promised 25-40% EBITDA growth in the next two years. The Board has guided for RUB 20bn of dividends a year until 2024; promising investors a combined 44% yield in the next 45 months. The CEO proclaimed investments into renewables as the new backbone of the firm's long-term growth strategy, besides the customary 'light' and 'heavy' modernisation of fossil-fuel capacity. Finally, the CFO hinted at forthcoming optimisation of the capital structure as the company prepares to take on debt to finance both dividend generosity and the Russian version of the green push. At face value, little can be added to this, unless the company sells its coal-fired Berezovskaya, and the CEO denied such plans even exist.
Devil in detail. We acknowledge that if Berezovskaya gets up and running, the next two years’ 22.4% yield dividend is a solid argument to get the story back on investor radar screens. However, we believe the green push will be difficult. Competition is already fierce, including the large role Fortum Russia, a sister company of Unipro, plays in the field. The selected projects' ROIs require strict capex discipline and timely delivery of construction works to stay above the hurdle rate. We estimate that the latest renewable projects selected now generate a moderate 9% IRR, which leaves little value on the table. We believe the company will be forced to choose either going all-in on renewables to have a meaningful impact on its output carbon intensity and future profits, or to continue paying RUB 20bn of annual dividends. We forecast an average EBITDA of RUB 29.4bn in 2021-27F, coupled with
174 RUSSIA Country Report April 2021 www.intellinews.com