Finance: Well earned

The improvement was particularly noticeable in the case of generating companies. As Raiffeisenbank analyst Fedor KORNACHEV sees it, several factors lie behind the upward trend. First, many investment projects are now complete and the new plants (covered by CDAs) have started making an appreciable contribution to revenues. Second, the mechanism for calculating payments under CDAs has changed: the formula now takes into account returns on federal government bonds (OFZs) for the previous year, which rose strongly in 2015 against a background of higher interest rates. KORNACHEV also says that certain companies, such as Inter RAO and RusHydro, benefited from more effective cost management programs.

Natalia POROKHOVA, Head of the Research and Forecasting Group at Analytical Credit Rating Agency (ACRA), believes that total payments under CDAs will be 36 percent higher in 2016 than in 2015, with roughly half of the increase driven by new plants. At the same time, she expects payments under CDAs to fall in 2017 due to lower interest rates.

Inter RAO UES

In the money

In June 2016, Inter RAO Group sold a 40.29 percent stake in Irkutskenergo, booking 31.9 billion rubles in profits on the deal, according to the group’s IFRS accounts for the first half of the year. Commenting on these results, Fedor KORNACHEV observes that the company’s profits (which more than tripled, to 62 billion rubles) were boosted not only by the sale of Irkutskenergo shares, but also by a year on year rise of more than 20 percent in the CDA price.

Inter RAO’s financial results were also influenced by the addition of 325 MW in new or upgraded capacity, as well as the transfer of existing facilities to CDAs. The optimization of fuel costs under a new contract with Rosneft was another positive factor, KORNACHEV adds. “In essence, cash flow is up thanks to a substantial rise in operating cash flow, which has been pushed up by revenues from new plants operating under CDAs. Generation is the main driver of growth in Inter RAO’s cash flow,” the analyst believes.

Over the six-month period, revenues at Inter RAO rose 3.9 percent to 407.1 billion rubles, while net debt fell by close to 90 percent to negative 50.9 billion rubles: cash holdings on deposit exceed current loan obligations. This situation arose thanks to the sale of Irkutskenergo shares, but the debt burden is expected to fall further as loans totaling 30 billion rubles are repaid ahead of schedule this year.

ROSSETI

A penny saved

Financial results at ROSSETI Group of Companies improved noticeably in the first half of 2016 compared to the same period last year: net profits totaled 53.8 billion rubles, versus 24.1 billion rubles to mid-2015. Revenues rose 18.1 percent to 415.5 billion rubles, while EBITDA was up 25.2 percent, reaching 143.3 billion rubles. “These stronger results were driven by higher tariffs in several regions and efforts by management to ensure financial stability at subsidiary companies, to monitor counterparties’ payment discipline and in general to control costs,” comments Finam analyst Alexei KALACHEV. “The group intends to hold to its strategy of lowering unit operating costs and improving overall efficiency.”
EBITDA at Inter RAO rose 41.9 percent in the first half of the year to 52.9 billion rubles. Its EBITDA target for 2016 has been revised upwards, from 79 billion rubles to more than 85 billion rubles.

E.ON

Burned

Unipro (the former E.ON Russia) is in a less happy position than other energy market players.

The company was in the red at the mid-year reporting date, with losses totaling 0.6 billion rubles (as opposed to 5.8 billion rubles in profits for the first six months of 2015). This weak performance was due above all to the write-off of equipment damaged in an accident at the Berezovskaya TPP.

The fire broke out on February 1, 2016, Unipro notes in its accounts for the first six months of the year, and left an 800 MW plant undergoing unscheduled repairs that will last, at a minimum, until mid-2018. The group will lose a significant portion of its capacity revenues and estimates that reconstruction costs will be at least 25 billion rubles.

Igor GONCHAROV, an analyst with BCS, believes insurance will cover a good portion of the cost of rebuilding damaged equipment at the Berezovskaya TPP. “The company has announced that it now expects to receive insurance payments in the fourth quarter of 2016 and in 2017. So far, there has been no indication of the share of costs covered by insurance,” he notes. As the analyst sees it, the deteriorating outlook for reconstruction of the damaged thermal facility weakens Unipro’s investment case, despite confident growth in EBITDA. EBITDA was up 18 percent in the first half of the year to 12.7 billion rubles, thanks to higher revenues from new plants and a rise in spot prices in European Russia.

Unipro’s debt burden is nil despite a loan from the parent company, E.ON. The loan does not show up in accounts to mid-2016 and will be repaid by the end of the year.

RusHydro

Riding the wave

The company’s results improved in the first half of the year, with profits up nearly 40 percent at 25.5 billion rubles. Revenues rose 10.2 percent to 187.9 billion rubles. Analysts note that the figures benefited from increased power output (thanks to higher water levels) and falling costs, which led to stronger operating performance. A cost control program has been included in the group’s new development strategy, which the Board of Directors approved in June this year. As RusHydro General Director Nikolay Shulginov said earlier, the company is currently making major efforts to find scope for further optimization.

At the same time, analysts take a dim view of RusHydro’s decision to proceed with the sale of new shares to refinance RAO ES EAST debt. BCS analyst Igor GONCHAROV points out that the company still aims to take in 55 billion rubles and notes that an Investor Day has been scheduled for October, giving the group an opportunity to comment on major issues such as the use of outside capital to refinance RAO ES EAST, as well as regulatory changes and capex revisions, which should help to stabilize the subsidiary’s debt burden.

EBITDA for the reporting period was up 42.6 percent at 48 billion rubles. In GONCHAROV’s opinion, this solid growth should boost the company’s share price, whose movement has been affected by an uneven rise in water levels. RusHydro’s market capitalization has risen 22 percent since the start of the year.

Irkutskenergo

Priced right

Irkutskenergo’s financial results saw no significant improvement in the first half of 2016, but the company’s financial condition is stable and returns are solid. Revenues rose 9.2 percent year on year to 62 billion rubles, but without pushing up net profits, which declined slightly to 7.3 billion rubles (down 0.19 percent). The stronger revenues were accompanied by a higher cost of sales, which rose 11.54 percent to 49.384 billion rubles, largely due to increased expenditures on electricity and capacity, as well as higher transmission costs.

“Irkutskenergo has no CDA projects, but strong prices in the energy market and the liberalization of TPP capacity are positive factors,” comments Natalia POROKHOVA. The analyst notes that from 2016 all TPP capacity is sold at market prices, independent of tariffs.


by Tatyana ALESHKINA

04-12-2016 14:27