Велес Капитал ИК

investment company

Enel Russia

Capital markets day

February 25, 2020

Enel Russia hosted Analyst Day – mildly negative

Enel Russia presented its new strategy. Key takeaways:

- DPS was down to RUB 0.085 from 0.14. Management decided distribute RUB 3 bn as dividends per year for 2019, 2020 and 2021, providing for 8% DY;

- CapEx target for the next 3 years was upgraded from RUB 38.7 bn to RUB 39.4 bn with the total construction spending for wind parks reiterated at EUR 496 mn;

- in 2022, the net debt reaches RUB 33.2 bn (ND/EBITDA’22 2.4х);

- wind parks commissioning dates confirmed: Azov – in 2021, Murmansk – in 2022, Stavropol – after 2022;

- company might take part in future RER auctions;

- turbines on the company’s balance are to be sold in 2021 outperforming their book value (RUB 1.7 bn);

- management is skeptical about the DPM-2 upgrade auctions, does not believe in using Russia?made turbines soon.

Investors took the news on the dividends cut from RUB 5 bn down to RUB 3 bn per year negatively. Some of them hoped for the special dividends after selling Reftinskaya GRES earlier, yet those were not paid out. The 8% DY to be offered by the Enel Russia shares outperforms the sector index (4.8%) and the market consensus (6.5% - IMOEX). However, there are utilities that offer higher DY with less investment programs. Unipro offers 10%, the companies controlled by Gazprom Energy Holding (TGK?1, OGK-2 and Mosenergo) offer 8% through 10.8%. However, we do not expect the dividends to rise, as participation in the upcoming RER auctions does not help the company to afford paying out dividends.

Considering the Analyst Day results, we place our recommendation and estimation of Enel Russia shares UNDER REVISION as our model requires an upgrade with the new information.

Previous price target: RUB 1.06; Recommendation: HOLD.