Unipro confirmed at HOLD, TP RUB 3.05 - Fortum takes over: dividends balanced out by risks

We still remain cautious on Unipros shares keeping them on HOLD on the back of Fortums unclarified intentions regarding the recently taken over Russian asset despite strong dividends (12% DY in 20-22e covered by FCF). We cannot yet rule out risks (such as a management reshuffle, reorganisation, dividend revision etc.), though most likely they would not be realised in 2020e since technically Fortum is still temporarily barred from executing control over Unipro. It is still unclear what will happen to the coal-fired Berezovskaya power plant (the core FCF-driver and foundation of the dividend investment case) given Fortums focus on renewables. What is upsetting is that even if Fortum were to reorganise its Russian business, Unipros minority investors are not guaranteed any premium above the 6-month average price in case of a buyback as the takeover was indirect and there is no other benchmark price. Overall, we prefer Enel Russias safer fixed dividends (10% DY in 20-22e, not far from Unipros) and coal-free story to Unipro, given the listed risks posed by Fortums takeover. We also point out the delay in the launch of Berezovskaya unit 3 till end-3Q and a slight capex overrun both costing another RUB 6-7 bn in FCF this year, yet we slightly raise our DCF TP to RUB 3.05 from RUB 2.9 on the back of lower risk-free rates.