Page 139 - RusRPTSept22

Russia’s power system operator released July power demand/production statistics on August 2. Numbers for European Russia imply lower demand/consumption, while Siberian demand was up y/y. Spot prices in European Russia in July went down a bit (by 0.7% y/y) to Rb1,491/MWh, while they surged 21.1% in Siberia. Given that gas tariffs increased by 5% y/y from 1 July, lower spot prices imply lower spark spreads for gas-fired generation.
Demand numbers are a bit concerning, but the overall investment case is intact. July power demand statistics from System Operator came quite mixed, rise in Siberia, slight decline in European Russia, overall quite flat (down by just 0.2% y/y nationwide). However, given that most Russian capacity resides in European Russia, it has a big role. We see some slippage in spark spreads in European Russia in July (higher gas tariffs, flat spot prices). We are reminded that power demand and pricing were strongly up until mid-June, when we noticed some weakness. Overall, we think that for Inter RAO and Unipro 3Q22 and 2H22 will still be strong, due to lingering positive impact from capacity tariff indexation. (Unipro management earlier yesterday upped their FY EBITDA guidance, due to strong 1H results).
“We keep our fundamentally positive stance on Inter RAO and Unipro. Near-term gencos fundamentals are overshadowed by bigger questions – in case of Inter RAO – poor disclosure, in case of Unipro – future of controlling shareholders. However, numbers are still important and we take a chance to speak on the sector’s fundamentals. While the spot prices and capacity tariffs are still at quite attractive levels (for gencos), we note that lower spark spreads will erode the margins from electricity sales, if weak demand persists into the future,” BCS GM said in a note.
9.1.11 Metallurgy & mining sector news
Russian copper and aluminium consumption to be down 2x y/y in 2022 – RBC, citing the strategy developed by Minpromtorg. The copper demand collapsed to 220-250kt, while aluminium one – to 720-760kt this year.
139 RUSSIA Country Report September 2022 www.intellinews.com