RusHydro - 2021 IFRS Results and Dividend Plans Above Expectations

RusHydro reported a strong set of 2021 IFRS results, which beat our estimates and the consensus. The company plans to pay a record-high DPS of R0.089 for 2021, which was also above our expectations and the consensus. RusHydro's key challenges this year will likely be refinancing more than R80 bln in debt and heavy capex spending.> 2021 numbers above our estimates and consensus. RusHydro's revenues including subsidies grew 7.1% y-o-y to R460.1 bln, 2% and 1% above our forecast and the consensus. EBITDA rose 1.6% y-o-y to R122.2 bln, 7% above our forecast and 0.5% above the consensus. The beat on our estimates was mainly due to higher subsidies (R2.2 bln higher) and a higher average KOM price (3% higher). > Financials affected by a mix of factors. The main negative factor was a 3.4% decrease in electricity output. The key positive factors included higher electricity prices in the day-ahead market (up 16.1% and 5.6% in price zones 1 and 2), higher KOM prices, increased heat output (up 2.6%) and an increase in subsidies (up 15.7% to R54.1 bln).> Net income dropped due to impairments. Net income dropped by 9.7% y-o-y to R42.1 bln due to a R5.5 bln increase in impairments of PPE and a negative revaluation of the forward contract with VTB (-R15.3 bln). Without the impairments, net income was about flat at R71.7 bln, 14% above our forecast.> Dividends in 2022. RusHydro may distribute a record R39.2 bln for 2021, or R0.089/share (up 57% y-o-y). This is 24% above our forecast and implies a 13% dividend yield as of the February 25 closing price. > 2022 guidance. RusHydro guides revenues of R474 bln, EBITDA of R119 bln, net income of R46 bln and capex of R113 bln (ex-VAT). We see the guidance as a bit conservative, expecting R479 bln in revenues (1% higher), R122 bln in EBITDA (2% higher) and R60 bln in net income (29% higher). The capex plan is 18% lower than our forecast (R137 bln).> Other highlights from the call. RusHydro needs to refinance R80-90 bln of debt in 2022 (it had R72 bln in short-term debt as of end-2021), 47-53% of its total debt. Also, the fate of the Zagorskaya PSPP-2 DPM project will be determined by the end of the year if the realignment of the power plant building is successful. Finally, the GE gas turbines that are to be produced locally by an InterRAO-GE JV do not fall under the current sanctions (however, as we understand, the risk that sanctions will be introduced for the GE turbines remains high). RusHydro plans to install them at its four modernization projects in the Far East, which should launch by 2025.