Page 152 - RusRPTOct20

the share of GE in the joint venture (currently both hold 50.99% and 50% shares, respectively). As followed by ​bne IntelliNews,​ Siemens is on track to maintain its leadership on Russian gas turbine market​ and comply with localisation requirements. Italian Ansaldo Energy and REP Holding, a subsidiary of Russian Gazprombank, also said it will ​set up a joint venture​ that will specialise in production, repair, and maintenance of gas and steam turbines. In the meantime Power Machines of steel tycoon Alexei Mordashev after a divorce with Siemens​ is ​restructuring its business​ to decrease the sanction risks, while ​aiming for gas turbine contracts together with ODK Saturn​, a subsidiary of Russian state technology agency Rostec.
RusHydro​ has officially launched the Sovetskaya Gavan CHP, ​which represents the last of the company's priority projects in the Russian Far East. This likely means that impairments related to the power plant - recall that tariffs in the Far East do not allow for an adequate return on investment, so RusHydro pencils in significant impairments after launching assets in the region - will be reflected in the 2020 IFRS results. These impairments will pressure the bottom line, which, on the other hand, will be boosted thanks to positive water flow dynamics this year. Given this, a back-of-the-envelope calculation suggests that the yield on dividends for the 2020 results (to be paid in 2021) could be 7.5% (DPS of R0.054). As the BoD has proposed a DPS of R0.036 for the 2019 results (to be paid in 2020), over the next 12 months the stock's dividend yield could reach 12.5%. Moreover, since we do not foresee major impairments in 2021-22, the dividends for these years (to be paid in 2022 and 2023) should yield around 10%.
RusHydro​’s management has held an online conference via the VTB My Investments portal on September 29. ​The company was represented by Deputy CEO, Andrey Kazachenkov. The key takeaways are as flows.
· Write-offs.​ In 2020, RusHydro has commissioned the last project in the Russian Far East without a guaranteed rate of return, Sovetskaya Gavan. This is to trigger a write-off in 2020, although the size has yet to be estimated according to the write-off rules during the audit of the financials. At the same time, 2020 write-offs are set to be lower YoY.
· Forward revaluation.​ If the current share price levels hold, the forward revaluation would support the 2020 bottom line and partly offset the negative effect from the write-off. Other supportive factors include elevated water inflows, the DPM of the Zaramagskiye HPPs and VerkhneBalkarskaya small HPP, and a reduction in fuel costs.
· Dividends.​ The current dividend policy (approved in April 2019 for three years and could be prolonged), with a 50% of IFRS net income payout and a three-year dividend floor, was reiterated.
· Further construction.​ The company does not currently have any plans to modernise fossil-fuel generation, except for the four approved projects in the Russian Far East that are part of the DPM2
152 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com