Unipro - Financial Guidance Lowered, Dividend Plans Reiterated

Unipro has released its 2Q20 IFRS results. The company slightly lowered its EBITDA guidance for 2020, and also revised downward its 2021 EBITDA projection to reflect the delay in the recommissioning of Unit 3 at the Berezovskaya plant. Meanwhile, the guidance for R7 bln in dividends to be paid this December and R20 bln in 2021 remains intact. We expect the lack of a formal revision to the company's dividend outlook to be supportive for the stock, though the risks to the 2021 dividend payout are increasing.> 2020 EBITDA projection lowered, but R7 bln in dividends still guided for this December. The EBITDA guidance for 2020 was lowered from R27-28 bln to R26-27 bln. Despite this, the management reiterated its guidance for a R7 bln tranche of dividends to be distributed in December.> 2021 EBITDA guidance cut to reflect later relaunch of Unit 3 at Berezovskaya, but R20 bln in dividends still expected next year. The company's 2021 EBITDA guidance was lowered from R35 bln to R25-30 bln. The upper end of the new guidance range is based on the assumption that Berezovskaya's Unit 3 will relaunch in 1Q21, with no additional negative impacts from Covid-19 or the OPEC+ deal. Unipro is committed to paying R20 bln in dividends next year should EBITDA come in close to the upper end of the range, while additional risks such as a further delay to the relaunch or a poor performance for existing assets due to weak electricity prices or production could push the company to reconsider these plans. Should the unit start receiving capacity payments on April 1, we would expect EBITDA to be close to the upper end of guidance (roughly R29 bln).> Longer-term dividend policy to be approved next March. The management once again reiterated that the longer-term dividend policy (through 2024) is to be approved next March.> Later relaunch at Berezovskaya increases risks, but reiterated dividend guidance should provide support for the stock. Should Unit 3 relaunch next April, this would shave R4.2 bln off our current 2021 EBITDA forecast, which envisages the unit being relaunched in December 2020. As the CSA contract for Berezovskaya is still set to expire in October 2024, the delay will mean that at least another three months of increased capacity revenues will be lost, which is clearly negative for the company. Moreover, the longer relaunch process could add around R1 bln to capex. Nonetheless, the reiterated dividend guidance for 2021 should provide investors with some comfort and therefore be supportive for the stock, even though the risks to dividends next year have increased.