Inter RAO 2Q 20 - Kaliningrad budget overrun adds to low demand, prices
Inter RAO has reported 2Q 20 results which were negative yoy on EBITDA (down by over 30% yoy) even beyond our expectations on a substantial engineering segment one-off. While the effects from lower domestic (down 13-14% yoy) and export prices, lower electricity production (down 30% yoy in Russia), lower exports (by over 70% to Finland and Lithuania), and the completion of the Turkish project were expected, RUB 3 bn worth of a negative effect on EBITDA in the engineering business came as a surprise on the back of a budget miss by the main contractor involved in the Primorskaya construction for Rosneftegas in Kaliningrad. Thus, we treat the results as negative, although the new RUB 120-125 bn EBITDA guidance for 2020e (down ca. 12-15% yoy) meets our own estimates, with 2020e capex confirmed at RUB 30 bn incl. modernisation capex and RUB 1 bn for smart electricity meters (with IRR yet unknown). A negative WC effect also raises concerns, though.Inter RAO UES PJSC is a functioning operator of electricity exports and imports in the territory of Russia. Co. represents the interests of two Russian power sector participants: RAO UES of Russia and Rosenergoatom concern, which possess 60 and 40% of the shares respectively. Co. is engaged in arranging transboundary electricity supplies, to provide both domestic and foreign consumers with electric power. Co. is also engaged in pursuing effective investment activities. Co. is developing several areas of activity, including: electric power export and import supplies; electricity sales in home and foreign markets; investment activities; and foreign asset management.
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