Page 154 - RusRPTOct22

(adjusted for write-offs due to asset revaluation) decreased 3% y/y to R1.96bn.
Our view: The increase in revenues and EBITDA owed to the commissioning of the Azov wind farm in May 2021, which led to an increase in capacity payments under the renewable energy DPM, as well as an 8% y/y increase in electricity sales volumes amid favorable DAM pricing. The decline in adjusted net income was down to an increase in interest expenses due to higher capex.
Revenues and EBITDA were in line with our expectations, but net income was slightly above our forecast. For the full year, we currently project a 12% y/y increase in revenues, a 32% increase in EBITDA and a 32% decrease in net income (this last projection now looks a bit conservative).
Enel Russia is one of our top picks in the utilities sector (BUY, R0.76/share target price, 117% upside). We think that the company may return to dividend payments in 2023, once the sale of Enel Group's controlling stake to Lukoil and the Gazprombank-Freesia investment fund is completed. Recall that the closing of the transaction was postponed due to the August presidential decree restricting the sale of Russian energy assets by nonresidents from "unfriendly" countries until the end of 2022. If Enel Russia does start distributing dividends again, the dividend yield could be around 37% in 2023 and 20-30% over 2024-30.
9.2.11 Mines and Minerals - gold & diamonds
Russian diamond major Alrosa has approved an investment decision to restore its major Mir mine, Interfax reported. This should increase the capital expenditure to RUB33bn-RUB35bn ($542mn-575mn), with the total cost of the project estimated at $2bn. As followed by bne IntelliNews, the US and the UK have sanctioned Alrosa. The US has banned imports of non-industrial diamonds originating from Russia. The US has also banned debt and equity transactions with Alrosa and its CEO, Sergey Ivanov . Alrosa still expects the mine to reopen by 2030s, with the extractable diamond resources evaluated at 200mn carats. However the $2bn investment figure is much higher than previous estimates, possibly due to the impact of sanctions.
Alrosa intends to strength the positions in domestic market, proposing to invest in diamonds, Kommersant reports citing the company’s Head of Strategy Dmitry Amelkin. Alrosa prepares to bring investment diamonds to the market, VAT on the purchase of which will be canceled from 1 October. The company intends to offer two products — rare large diamonds worth from $50,000, as well as diamond baskets worth $25,000-50,000, which represent a group of the company's products and will have a single price per carat. The miner also offers storage services for these diamonds. Also of note, Amelkin stated the company’s cutter plants are operating in 100% of capacity and increased production by 30% y/y for 8M22.
154 RUSSIA Country Report October 2022 www.intellinews.com