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Veles Capital - RusHydro: IFRS report preview - Mar 23, 2018

RusHydro

IFRS report preview

RusHydro will present its consolidated report and a RAS report for 2017 FY and the company will hold out a conference call on Monday, March 26.

The report will be posted after 2:00 pm MSK, the conference call is to start at 4:00 pm MSK.

We expect the sales to plunge due to retirement of ESKB distribution company (the company was sold to Inter RAO) and we assume commissioning of Yakutskaya GRES-2 late last year does not manage to compensate the loss in sales. We assume, the EBITDA dynamics (YoY) to be close to zero. We expect a net profit dip to be caused by the impact of one-off items and rising financial spending due to re-estimation of the forward, previously arranged with the VTB bank. We observe great risk of loss from re-estimation of OS as reconstruction of the flooded Zagorskaya PSPP-2 has currently been suspended and there is a chance that the company writes off a share of its cost.

Statements regarding the dividends’ payoff for 2017 FY will be an important matters during the conference call as the company normally pays 50% of not corrected net profit by IFRS. Currently the does not follow the dividend policy in its payments, but goes in line with the government’s order on paying off half of the net profit as dividends.

Some comments regarding Tayshetsky project of RusHydro with Rusal are to be interesting as well.

Moreover, comments on the further prospects of Zagorskaya PSPP-2 recovery are to be very interesting, and on the upcoming additional emission (previously, an additional emission for RUB 13-14 bn has been announced for the following several years).

We expect comments on the discussion on time constraints/prospects of introducing DPM mechanism at the Far East.

We are also interested in the comments regarding the prospects of VTB bank exiting the company’s equity.

We indicate great risk of admitting the loss from depreciation of the debt arrearage and the principal assets in the annual report from RusHydro. We expect a weak report anyways, not even considering those. Our forecast observes one-off retirements (meaning loss) worth RUB 10 bn. We expect the company announce a low dividend base due to one-off loss. Considering the consensus not providing for such a poor report, we expect the market to take RusHydro report release NEGATIVE.

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