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Enel Russia: 1H 2019 IFRS results and meeting takeaways

Enel Russia: 1H 2019 IFRS results and meeting takeaways

Enel Russia reported 1H 2019 financials and hosted the Analyst Day – mildly negative.


Enel Russia re-categorized Reftinskaya GRES into the “for sale” assets category already in 2Q 2019, which was surprising. Due to that, the company admitted loss from devaluation at RUB 8.4 bn because of the balance cost of the asset was higher than the cost of selling, leading to loss of RUB 2.14 bn in 1H 2019.

The rise of sales initially related to growth of electric energy and capacity prices.

Reduction of spending for employees caused by re-categorization of Reftinskaya GRES provided for a 14.3% growth in terms of EBITDA.


Conference takeaways:

Enel disclosed additional terms of selling the asset:

- RUB 2 bn will be received after acquiring the approval of FAS

- Enel Russia will continue managing Reftinskaya GRES via leasing contract (RUB 4 bn). Kuzbassenergo will pay for the fuel and the other inventories.

- up to RUB 3 bn extra will be received within 5 years in case the RGRES output exceeds 19 KWh and the one-day-ahead market prices outperform the ones locked in by contract.

Company’s management announced its intention to participate in RES auction, which is scheduled to take place until the end of the current year. Capacity of 120 MWh for the new solar and wind mills will be offer at the auction.

No forecast on the 2019 estimates has been provided and there was no comment on the future dividends. We saw no new strategy for the next term. The company presented its recent strategy in February of the previous year, which is actually invalid by now, as it does not include disposal of Reftinskaya GRES.

- the company estimates RUB 5.3 bn p.a. as loss in terms of EBITDA caused by selling RGRES, and RUB 2.5 bn as savings in CapEx.


Our analysis.

Dividends. The company is obligated to pay 65% of its net profit generated by regular business function according to the currently valid dividend policy. However, the management made it clear in course of the press conference that the volume of payments might be changed. No special dividends are expected either, as it looks like the management intends to take part in the RES auction and the available assets would be directed to construction of new wind parks.

Possibly receiving RUB 3 bn extra. We assume that chances of receiving given assets are not high as the output of RGRES was reducing gradually from 2012 and the price rise in Ural for 1H 2019 seems to have ended already.


Messages came out in mass media saying FAS has approved the deal on selling the station. Probability of selling the station is now estimated at almost a 100%. We assume that in terms of a two-year outlook, the stock lacks certain growth drivers: dividend payments are likely to be reduced significantly while the CapEx rises remarkably. Unfortunately, Enel Russia provided no clear benchmarks neither for dividends, nor for the financials. We expect that information from the presentation of the new strategy in late 2019. Basing on the meeting results, we reiterate the price target at RUB 1.06 per share and the recommendation “BUY”.




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