Enel Russia Presents Its 2017-2019 Strategic Plan With an Increased Dividend Payout

Published on Friday, 2 December 2016

  • The company delivered on its commitment to achieve improved financial results in 2016 and plans to provide solid bottom-line growth starting from 2017 onwards, mainly supported by higher DPM revenues and forecast gradual economic recovery
  • Enel Russia’s priorities for the new plan period include cost efficiency initiatives and strong focus on equipment reliability
  • As a result of an increased cash generation, the strategic plan includes a significantly higher recommended dividend payout

 

Carlo Palasciano Villamagna, General Director of Enel Russia, said: «By the end of 2016, we plan to post a net income that will allow us to distribute dividends applying a more generous payout than previously planned, following the recovery in our financials achieved over the course of the year. In the coming years, we will continue to focus our managerial strategy on maintaining the efficiency of our power plants, further implementing cost efficiency initiatives, optimising our debt structure and generating positive cash flow to assure stable shareholder remuneration based on a more attractive dividend payout.»

Moscow, December 02nd, 2016 — Enel Russia (the «company») has published today its strategic plan for 2017-2019, approved earlier by the company’s Board of Directors.

 

MARKET ENVIRONMENT AND STRATEGIC GUIDELINES

In 2016 the company significantly recovered its financials after a challenging 2015, largely thanks to increased generation margins that came about due to higher free electricity prices and lower cost of coal that was due to favourable RUB/Tenge exchange rate.

From 2017 onwards, the company expects an accelerated growth of its earnings, mainly supported by the spike in DPM revenues and forecast gradual recovery of the Russian economy.

The 2017-2019 plan is based on the same key pillars outlined in the previous plan, while taking into account the current challenging market landscape characterised by the following forecasts:

  • tariff containment as a consequence of inflation control
  • slower electricity consumption growth rate
  • significant amount of excess capacity in the system affecting power and capacity prices.

In light of the above, Enel Russia confirms the following key pillars of its strategic plan:

  • Overall cost optimisation, including capex efficiency and opex growth containment below the consumer price index (CPI)
  • Continued focus on efficiency and reliability of cash-generating equipment
  • Debt structure optimisation
  • Shareholder remuneration, including increased dividend payout already valid for 2016 results

 

EARNINGS OUTLOOK

Throughout 2017-2019, Enel Russia will focus on ensuring the reliability of its generating fleet, compensating for the gradual decline in output of its conventional gas-fired units due to the impact of new entrants on the market. No new capacity additions are envisaged over the strategic plan period, with minor decommissioning of outdated capacity expected at Sredneuralskaya power plant in 2017.

On the costs side, the company will continue to implement its efficiency strategy and keep opex growth below inflation, a target that Enel Russia has constantly met during the last few years.

The Enel Russia 2017-2019 strategy envisages the following EBITDA targets:

  • 15.8 billion RUB in 2017,
  • 16.3 billion RUB in 2018,
  • 16.7 billion RUB in 2019.

The strong growth of EBITDA in 2017-2019 versus 2016 (11.7 billion RUB) is attributable to a spike in DPM revenues, increase of spreads and continued cost containment programme.

Under the 2017-2019 strategic plan, Enel Russia expects to post a net ordinary income of 2 billion RUB in 2016, compared to a net ordinary loss of 2.1 billion RUB in 2015, and expects its bottom-line to grow from 2017 onwards largely following EBITDA dynamics, also supported by a reduction of net financial charges.

As a result, net income is expected to reach:

  • 6.7 billion RUB in 2017,
  • 6.6 billion RUB in 2018,
  • 7 billion RUB in 2019.

 

CAPEX AND CASH FLOWS OUTLOOK

Planned capital expenditures in 2017-2019 are expected to total approximately 17.5 billion RUB, i. e. 4% lower compared to the previous plan (18.2 RUB billion for 2017-2019). The current capex plan mainly addresses equipment reliability, environmental and stay-in-business investment projects, while the company will continue to favour projects that demonstrate profitability in the current environment.

Enel Russia expects to maintain positive free cash flow during all three years of this strategic plan horizon thanks to growing operating cash flow and decreasing financial charges.

 

SHAREHOLDERS REMUNERATION

The recommended dividend payout from IFRS net ordinary income has been increased from 40% to 55% on 2016 results, 60% on 2017 and 65% on 2018-2019, supported by the abovementioned cash-generation profile.

  2016 2017 2018 2019 CAGR (%)
2016-19
EBITDA ~11,7 ~15,8 ~16,3 ~16,7 ~+12%
Net ordinary income ~2,0 ~6,7 ~6,6 ~7,0 ~+52%
Payout ratio 55% 60% 65% 65% +15 p. p.
Capex accrued ~7,4 17.5 billion RUB over 2017-2019

An Enel Group subsidiary, PJSC Enel Russia operates the following power plants: Konakovskaya GRES, Nevinnomysskaya GRES, Sredneuralskaya GRES and Reftinskaya GRES. The company’s total gross installed electrical capacity is 9,428.7 MW (equivalent to 8,878.4 MW net installed capacity) and thermal capacity is 2.382 Gcal/h. PJSC Enel Russia’s authorised capital is 35,371,898,370 roubles, which is divided into ordinary shares with a par value of 1 rouble. The Enel Investment Holding B.V. share in the company’s authorised capital is 56.43%, PFR Partners Fund I Limited’s share is 19.03%, Prosperity Capital Management Limited’s share is 8.23%, VTB Bank’s share is 3.87% and other minority shareholders’ share is 12.44%. PJSC Enel Russia shares are listed in Level 1 MICEX quotation list. The company was established in Yekaterinburg on October 27th, 2004 as OJSC OGK-5. On July 7th, 2009 by the resolution of Annual General Shareholders’ Meeting the company was renamed OJSC Enel OGK-5 and on August 8th, 2014 the Federal Tax Service registered the new version of the company’s charter with the name OJSC Enel Russia. On June 25th, 2015 the company changed its legal type and was renamed PJSC Enel Russia.