Page 107 - RusRPTFeb19

exemptions for different consumers.
• Vice premier Dmitry Kozak has stated that any solution will account for consumers' real incomes.
• MinEnergo is opposed to the change, arguing in part that it will raise costs for consumers and will be unpopular.
Minister of Energy Alexander Novak gave an interview to Kommersant on December 26. The key takeaways for the electricity sector are as follows.
Coal generation. There has been no final decision on the losses of coal generation in Pricing Zone I, but there is likely to be a higher price cap for such plants. This does not necessarily need to equal the level in Pricing Zone II, but it does need to allow for a minimal level of marginality. Takeaway. The idea is positive for OGK2, which we estimate is losing some RUB 2.6bn on the operations of the Novocherkasskaya coal-fired power plant in European Russia.
Modernisation. Siemens and GE will have a chance to offer their turbines for modernisation, but only if the localisation criteria are satisfied. Most of the equipment in the modernisation is still going to be steam turbines, so as to create demand for local producers. Takeaway. The ministry does not have an outright preference for local producers over localised foreign suppliers. Thus, InterRAO’s initiative to bring the CCGT unit from GE to Russia might well succeed and be in demand.
KOM for new generation. Given the 1.5-2GW being decommissioned annually, there are places where this KOM would be required but the inflation cap needs to be taken into account. In places, guaranteed returns on new power units are going to be offered as a mechanism for guaranteeing demand for new turbines to be created in Russia.
Rosseti dividends. Various ministries are in talks about the dividend policies of regulated companies; the current tariffs do not envisage dividend payments while government decrees require them. There is no certainty that a 50% payout of IFRS net income would be the requirement, taking into account companies’ investment needs.
Rosseti share issue. There is a possibility of an additional share issue at Rosseti to decrease the government stake. However, this is only at the discussion stage, with the key goal being to develop the grids and attract private investors.
Tariffs growth. Over the last three years, the growth in tariffs has exceeded inflation (this could be the case through 2022). This was driven by a number of one-offs, such as DPMs, and while assessing DPM-2 this is taken into account.
Distributed energy. The 3.5% annual production growth by distributed electricity producers is a worrying signal for the system. The Ministry is aiming to cut the burden on consumers and make grids more efficient: it is discussing the split in the burden split between MRSKs and FSK, as well as the payment for reserved capacity.
Renewables. A final decision on the support for renewables after 2024 is to come in 1H19. Stimulus measures need to be in place, but not necessarily only via the burden on consumers. This could be a combination of various
107 RUSSIA Country Report February 2019 www.intellinews.com