Page 131 - RusRPTNov22

However, if JV with Power Machines is able to continue production of gas-fired turbines, than it may be a good asset – matching Inter RAO’s needs in refurbishment, maintenance of existing units and possibly construction of the new turbines.
Unipro released its operating statistics for 3Q22. Output surged up by 33% in 3Q22. Power sales account for roughly 56% of total Unipro’s sales, the remaining being capacity (including DPM). Sale of electricity is an important story, hence, we follow the production profile. Poor hydrology buoyed thermal production in Siberia, the factor that sooner or later reverses. Ex-Berezovskaya, production was up by a more modest 4% y/y. Overall, we like Unipro (Buy), noting its positive FCF. Historically, the company distributed cash flows through dividends. Now, we think it will collect the cash on the balance sheet instead. The key uncertainty is the future of controlling shareholder, as German Uniper may exit Russia, selling its stake. That may change the corporate governance status of the company, hence keeping the status quo is probably not the worst outcome for minorities.
Unipro released its 3Q22 RAS numbers. Unipro reported strong growth in profits in 3Q22 to Rb7.1bn, or up 64% y/y, on the back of 24% hike in revenues (to Rb27.4bn) amid 10% growth in costs. The factors that contributed to stellar financial performance are solid power production (up 33% y/y), hike in KOM capacity prices and spot prices in Siberia. Production wise, Siberia-based Berezovskaya recorded the highest power output in years (due to low hydro production in the region). We reiterate our Buy on Unipro, noting its positive FCF. Historically, the company distributed cash flows through dividends. Now, due to changed geopolitical conditions, it is collecting cash on the balance sheet instead (already Rb21bn). We remind that the key uncertainty for Unipro and its investment case is future of the controlling shareholder, as German Uniper may exit Russia, selling its stake. That may change the corporate governance status of the company, hence keeping the status quo is probably not the worst outcome for minorities.
RusHydro reported operating results for 3Q22. Hydro production plunged 25% y/y to 20.6TWh, overall power output dropped 20%. The weakest performance was registered by Siberian hydro production that declined 67% due to poor hydrology. Hydro production depends on water levels and has little to do with economics and demand. Still, it is hydro that ensures much of the earnings of RusHydro. Hence, we watch for hydro production, as it reflects the earnings dynamics in the short-term. Besides Siberia, other regions of operations (Volga-Kama cascade, South, Far East) are doing ok. RusHydro likely to report weak 3Q22 numbers amid lower output. We remind that RusHydro is also aggravated by fuel cost inflation at its Far East unit. These two problems (poor hydrology and fuel cost inflation) may lead to substantially deteriorated results. Overall, it may also put a downward pressure on dividends.
131 RUSSIA Country Report November 2022 www.intellinews.com